Editor’s note: This open letter to agents with San Francisco Bay Area real estate brokerage Pacific Union International, by brokerage CEO Mark McLaughlin, is reprinted with permission.
Dear Pacific Union colleagues:
An important industry perspective:
Ten years ago Zillow and Trulia did not exist — realtor.com was beginning to rule the roost of our industry. Back then every client wanted to make sure their listing was on realtor.com. Brokerage companies were fighting off the grip that newspaper classified advertisements had on our marketing dollars. The digital world was then becoming a more efficient and cost-effective distribution channel for our listings.
Today, realtor.com, like Lubbock, Texas, is “in the rearview mirror.” Realtor.com has been “rolled” because it rested on industry conventions, legacy and its No. 1 position. In my belief, it was a sense of entitlement and arrogance at realtor.com that created the opportunity for Trulia and Zillow. Realtor.com, controlled by NAR, was friendly to the brokerage industry, but the consumer, our client, demanded more and embraced the newcomers as the incumbent rested on its laurels.
NAR and CAR are strategic entities in our industry. They provide a powerful voice in Washington, D.C., and Sacramento, California. They play a critical role in legal guidance and provide exceptional research for brokers and consumers. Important as this is, we should not be counting on these entities as a nimble source of innovation, vision, energy or execution.
Demanding a higher standard
Our industry is resilient. We must continue to respond to client demands and rapidly changing market dynamics. Consumers have clearly embraced Zillow and it is NOT going away. Our industry can elect to fight the “gorilla” or work with it. The inaccuracy of Zillow’s data and Zestimates are not positive influences on the industry and simply confuse the consumer. In exchange for our data (listings), we should insist that Zillow raise the bar on informational quality and enhance our “bill of rights.” Moreover, Zillow’s advertising clutter is insulting to our “exclusive listing content.”
Vision is required
If we don’t provide the vision and related tools for our real estate professionals, Zillow will. Zillow is holding the equivalent of a franchise-style convention for “their” “Premier Agents” on Oct. 15 & 16 in Las Vegas, Nevada. By way of an example of excellence, Real Living Real Estate/Berkshire Hathaway Home Services seem silent and obscure on industry leadership — watching the world go by.
It’s time our industry “skates to where the puck is going to be.” Pacific Union, small on the USA stage, is 100 percent willing to contribute to thought leadership in our industry.
The finest innovation that I have seen in our industry in the past 15 years is the emergence of DocuSign. The real estate platform that DocuSign is about to launch has the best chance of changing the behavior of real estate professionals and their clients since the “smartphone.” Before this innovation, the last real behavior changing innovation was Adobe’s PDF and the fax machine.
Many articles in the past few days referenced “checkmate” for Zillow. While it may be considered a checkmate for Trulia’s extended life, Zillow still has the hardest part of its journey ahead of itself. Wall Street will soon demand EBITDA [adjusted earnings before interest, taxes, depreciation and amortization] in order to calculate a Z PE [price-to-earnings ratio] that is rationally justifiable. Zillow comparisons were made to Amazon on CNBC on Friday. Amazon, founded in 1994, traded at a PE of 851 last week, enjoys $74 billion in TTM [trailing 12-month] revenue and $500 million in TTM EBITDA. AMZN TTM revenue exceeds the total revenue of the USA residential brokerage business in 2013 (5 million homes, avg. $275,000 times 5 percent). To earn and support an Amazon-like PE, Zillow will need revenues in excess of the entire residential real estate brokerage marketplace.
You, like me, can see where this is heading. AOL comes to mind.
At Pacific Union, we have a solid vision for 2017 that drives strategic decision-making. For the third year in a row, we will invest over $1 million in proprietary technology for our real estate professionals on a hyperlocal level. Investments include: our digital and social media group; award-winning, proprietary digital listing presentation tools; a new website and mobile technologies; and our Chinese Web and mobile sites (pacificunion.com.cn). In addition, we are investing in extraordinary training for our professional support team. Tactically, we focus on market share and margins.
We will not be distracted by the noise in the marketplace. We consider Zillow to be a powerful distribution channel for our exclusive listing content. We can revoke this content from Zillow at any time when a better mousetrap surfaces or if Zillow, in an effort to placate investors (Wall Street), changes its strategy.
Note to U.S. MLSs: If you are reading this, pay attention and fast!
We welcome a think tank or strategy session with like-minded brokerage leaders who share our passion for vision and innovation.
For me, it’s time to get back to work supporting and motivating the finest real estate professionals in the San Francisco Bay Area.
Thank you for your confidence in Pacific Union!
Mark A. McLaughlin is chief executive officer of Pacific Union International Inc., the leading luxury real estate brand in Northern California. Since acquiring Pacific Union in August 2009, McLaughlin has grown the company from $2.2 billion in sales volume to over $5 billion in 2013.