author This last fall at CMLS in Vegas, Rob Hahn made a presentation about the future of MLSs. I meant to write a reply back then, but it slipped my mind, so I’m thankful that he revived his presentation just yesterday in a blog post entitled, “The MLS Is Not Doomed! But Most of Them Are“.
In his post, Rob states another tired piece of propaganda about MLSs, especially smaller ones (i.e., the ones he thinks are doomed):
. . . the tiny MLSs are doomed because they don’t make enough money. Therefore, they cannot offer enough value to their customers.
There are multiple errors in this conclusion:
- First and most importantly, the core value of MLS is cooperation, which doesn’t require lots of money, it requires trust from the competitive participants and an organization able to maintain that trust.
- Second, as I wrote about ten years ago, MLS Is More Than Technology.
- Third, the analysis Rob provides to back up this conclusion compares an MLS organization to media companies like Zillow, etc., which make significant R&D investments in technology. The problem with this comparison is that an MLS and their broker participants and agent subscribers are purchasers of technology, not creators. As purchasers, they will benefit from technology investments made by others, not be hurt by them. As before, technology doesn’t create cooperation and so it doesn’t threaten the MLS, it can only help.
- Last, the conclusion ignores the significant standards effort from MLSs through RESO, which address many of the technical challenges posed by bordering MLS organizations.
Lastly, as a way to summarize the first three points, let me respond more directly to this fuller quote from Rob’s post:
The total annual revenues of a 150-person MLS, if they’re charging around the industry average of $30/mo for the MLS, is $54,000. Can it even afford a part-time CEO? Or a couple of paid interns, for that matter?
I mean, seriously, how could that MLS offer anything other than the barest of bare minimums on old, outdated systems with barely any customer support? What about compliance? Web API’s? Mobile access? On some fraction of $54,000 per year? How?
This argument is one that particularly shows a lack of understanding of how MLS organizations and their vendor partners work together. FBS serves hundreds of MLS organizations, from mega MLSs like Arizona Regional to the super tiny in Williston, ND. Regardless of size, FBS provides everything Rob mentions, including the most robust and standards-compliant APIs in the industry, a full mobile suite, customer portals, and much more.
Further, we do all this profitably and sustainably. FBS has been a software vendor in the real estate industry for 40 years, which proves pretty well that the business model is sustainable. FBS reinvests almost all of its profits in continual improvements to our products. For example, well before the industry was thinking about APIs, FBS was busy investing capital to create them. The result of that investment is that, today, we can offer any of the brokers participating in MLSs using Flexmls a standard API access through a single set of credentials to all the MLSs in which they participate, including both the tiny and mega-MLSs.
And, of course, the APIs we provide enable hundreds of other companies to invest in technology to serve the broker participants and agent subscribers for both the tiny and mega MLSs, which means that they have many, many choices of how to invest their money to build their business and compete effectively in their market. So, how exactly are the tiny MLSs doomed again? Is it because of technology? I don’t think so.
What could doom MLS organizations, large or small, is a failure to implement standards. Let’s imagine, for example, that we get to one of the mega-regional structures postulated at conferences, such as 30 MLSs by 2030 or whatever. If those MLS organizations don’t adopt and follow standards, then the brokers on the borders will be just as frustrated as they might be today, if not more so. The point is that the number and size of the MLS organizations is not what’s going to determine success of the organization, but rather cooperation through local participation and standards implementation.
Lastly, let me make another point I’ve made before that I think bears repeating: Market forces ultimately will determine the optimal size of MLS organizations, not a consultant or other high overlord trying to configure the industry from the distant heavens. Having been in this business for a long time, I’ve seen consolidation efforts come and go and I applaud them every step of the way. But the core focus always will be on doing what’s necessary to sustain cooperation in the local market, and sometimes that means an MLS needs to pull away from a regional and sometimes it means they need to form a bigger one. The importance of standards is they help erase differences even as the need for local cooperation requires changes to the size of the MLS, from tiny to mega or vice versa.