I received a call yesterday from a sage MLS executive. He saw the article in RE Technology about Sandicor adding a new syndication field into their MLS. We had discussed this a few years ago after some broker focus groups. At the time, the brokers did not seem to care too much about syndication, so the idea did not go anywhere. That changed. Adding the field is on the agenda at their next board meeting. He is probably not alone.
Aside from that, he shared with me his vision for how syndication is going to play out in the long run. He said that I could write about it, but could not use his name. The recent outbursts on Facebook and Blogs about MLSs are not worth the aggravation I will leave that topic for a future article. I will try to recount the essence of his vision for the future of syndication. He believes that syndication is going to change in one of 4 major ways within the next 12 months – and it will be painful.
Background of IDX
In many MLS markets, the MLS provider charges a data access fee. Depending on the size of the market, the fee may be as high as $1000 per month per vendor, or as low as free. Any vendor who wants to provide products and services on top of the MLS data must first have broker approval, then enter into a three party data license agreement (broker + MLS + vendor). If a vendor, like Homes.com, Real Estate Digital, Wolfnet, or iHomefinder, etc have hundreds of customers – the fee is a reasonable cost of doing business. Most MLS markets with more than 2500 subscribers have 50 or more vendors paying this license fee.
The MLS data fee covers three primary costs to the MLS. It pays for the bandwidth fees associated with pushing terabytes of data out the door every day. It allows the MLS to fund the legal and administrative fees for processing and enforcing the data agreement. It pays for the support services to data vendors when the feed has service issues. These are all real costs. Syndication has the same real costs, but the service fees are not being recovered by the MLS.
Future developments in Syndication
In most cases, syndication does not have any fees at all. The broker and the publisher get syndication services and support from the MLS as a subscriber benefit. When syndication was an infant, neither the broker nor the MLS saw much harm or cost in syndication – so they turned it on. But today, syndication has become an insolent teen. Change will happen, and it may come in a variety of forms. Here are his thoughts. They are all built on the principle that syndication has costs that are not being covered by the benefactors of the service.
- MLSs could charge for syndication like they charge for IDX. If the 900 MLSs charged $500 per market per month – the resulting $5.4M in fees would effectively end the life of most national publishers of broker data. His feeling is that it is that syndication has the same costs to support as IDX, but the MLS is not recouping the fees. The free pass should go away. Data feeds cost money. Contracts cost money. Support costs money.
Sidebar on implications: NAR could pick up the fee for Realtor.com since that is a member benefit anyway.
- MLSs can simply stop offering syndication as a member benefit. If brokers want to syndicate – they will need to do it on their own. The MLS did not build their print ads for the newspaper. Why should the MLS build a broker’s online ad? Why should the MLS shoulder the cost and the aggravation?
- MLSs will create a paradigm for data sharing that will allow any broker to display listings from any other willing broker in America. Effectively, all brokers will be able to provide consumers with a national property search solution. A huge data repository like CARETS will be built. Alternatively, the service will be provided by one of the companies that already have most of the data on their servers – Homes.com, MOVE, Wolfnet, or iHomefinder. MOVE is the only company that has all of the data. Homes.com has about 99%, Wolfnet and iHomefinder have about 98%.
- MLSs will create a paradigm for data sharing among MLS consumer facing websites. With the drafting of one simple agreement, all MLSs that operate MLS consumer facing websites could share data and create something close to a nationwide property search solution. Take a look at Http://www.mlscloud.com
Change will happen if syndication continues to be viewed as insolent. For certain – the free service offering for syndication will go away. The teenager who has been living in daddy’s house for free is going to learn what the cost are to living alone. Welcome to adulthood.
Does anyone agree or is this MLS executive just an old, out of touch crazy man? Feel free to leave your comment below.
I have one disagreement on the underlying premise: syndication cost. If syndication is done through a national syndicator, such as Point2 or ListHub, syndication incurs substantially less expense for the MLS than IDX does. Instead of managing data feeds for multiple sites, syndication goes into one point then out to the channels. That also reduces bandwidth and support channels. Syndication does use MLS resources, but I really believe, once up and running through a national syndicator, the cost is a fraction of what IDX incurs.
That being said, the limelight focused on syndication is increasing broker awareness of the issues. Their choices for their companies, and as MLS Participants, are going to result in a dynamic shift. I like the four possibilities outlined and think they should be considered by MLSs discussing options. Ultimately, broker/franchise decisions are altering the current the MLS is steering in…. Thanks for putting these options together!
Great point Mike –
This article is really me recanting the perspective of an MLS Executive – I am a big fan of Listhub and Point2, Onboard and Real Estate Digital – they all do a great job of syndicating.
Do you think that some companies build their business model around syndication rather than IDX to avoid IDX fees?
Ack, I could write a full post on that…. I asked a CMLS panel last year if they thought Syndication would wind up trumping IDX and have raised the point a couple of other times. I would be very surprised if some companies didn’t start (aren’t already) developing their technologies along those lines. If a company focused on syndication, especially with other franchises ala REN, and withdrew from local IDX, it could create a pretty big shift.
Victor – first and foremost, great to read some thoughtful perspective without the holy war, fire & brimstone.
So much to say – but I’ll try and keep focused. As you point out, syndication is not a business model unto itself. The MLS’s could easily fold that responsibility under their “stewardship of the data” role, just as they do with participant IDX and the many other data feeds (hundreds) many manage on a daily basis.
The two biggest syndicators themselves have different models. Listhub gives away syndication, but charges for access to most useful insight into the usage of the data. Point2 uses free syndication as a method for exposing agents to their wide array of products. Both obviously sound models so far, as both companies have been successful enough to get gobbled up in the recent past.
To your question on IDX avoidance – I don’t think the IDX fees really play into the decision of choosing one data source over the other. Remember, most users of IDX data receive virtually all of the MLS data and are MLS participants. Most users of syndicated data receive a portion of the listings (roughly half in any given market?) and aren’t participants. So the typical user of IDX wouldn’t likely be interested in syndicated data which is often used as a fallback when you can’t get access to IDX, e.g. REN. And the typical syndicated data feed user can’t get IDX data even if they wanted to.
However more and more, MLS’s are working directly with the big publishers to offer their members the best of both worlds – distribution control with maximum quality. I promise we’ll see more of that as the year evolves.
Lastly, just one correction. Here at Onboard we don’t offer data syndication services. Our 360 Insight Platform provides MLS’s & Members with visibility into how the listings data is being searched by consumers wherever & however it might be distributed/accessed.
Great article and the comments were all well worth the read. There are some changes that have to come, and it is helpful to hear your ideas as we are getting ready to consider our local Rules and Regs to deal with how the syndication sites are operating.
I would strongly urge you to follow a good process for gathering broker and agent feedback before considering any rules modifications.
WAV Group suggests doing a series of phone calls to the top brokers and agents to understand their feelings about the current rules and regs. Ask questions about changes that they would like to see. Get feedback on ideas that are under consideration. It is better to hear from them now rather than later <3
I would also suggest that you survey the entire membership and collect their opinions.
Once you have the survey results, publish them to the brokers and agents for feedback. Hold a town hall meeting if necessary and gain consensus.
At the end of all of that, pass the new rules.
WAV Group provides support for this activity as a service to MLSs and Associations.
Many of the MLSs I have talked to recently are taking themselves out of the process. They are simply discontinuing their offer to distribute data on behalf of their brokers. While this doesn’t some of the fundamental concerns or allow brokers to tap into the benefits of syndication it does abdicate the MLSs responsibility for participating in the process and thus contributing to the risks and rewards. It will be interesting to see how MLSs respond to the concerns surrounding syndication in the next few months.
Here is some data that may help this discussion.
Brokers who syndicate their data and do not enhance (pay) publisher services receive about 1 listing detail page view per listing per month per publisher. The top online publishers like Zillow Network, MOVE Network, Trulia Network, Homes.com, and Homefinder account for more than 85% of the traffic to publisher sites. The other 290 or so syndication sites divide up the other 15%.
Anyone who pays for reports from Listhub can see how they perform against this benchmark – and see their exact data. Any broker may also look at their Google Analytics or other web analytics program to measure their impact. There are plenty of brokers who perform better than this, and plenty of others who perform worse.
If you enhance your listings (pay), it is a whole different story. Enhancing listings on leading third party websites is a proven and effective online marketing strategy. It costs most brokers about $1 – $2 per listing per month per site for advertising – hardly a bank buster. The top sites mentioned above will then become lead generation engines and traffic engines to the broker. Some brokers get as much as 12% of their overall traffic from a single publisher from the list above.
Your results will vary. But suffice it to say that non-paying brokers get little more than a lottery ticket to a transaction from listing syndication. But there is a winner every day!
Paying advertisers get what they pay for.
It is up to each broker to make a strategic decision about their online strategy. I think that for the first time since syndication began, brokers have their head in the game. They are carefully considering their options, looking at online performance, considering short term and long term benefits, weighing risks. Its all good. There is no single answer.
Victor, very interesting perspective. Thank for you sharing.
“I think that for the first time since syndication began, brokers have their head in the game.
The ride ahead will be very interesting.
Some good points in the MLS exec’s take on this. But I think his opinion’s value the MLS position too highly.
If you look at the 4 main players in the game, the agent, the broker, the MLS and the portal. My guess is that if asked which 2 of these 4 will survive the average consumer will answer the agent and the portal. They need the agent to open doors, show homes, be local etc. and they need unfettered access to real estate information online, which is only being offered by the portal if web traffic is the true measure.
We are writing web based software for brokers / agents so we are a bit biased. But of the 4 groups the first to die out, it looks to me like the MLS should be most worried.