Are App Stores the Next Zillow or Trulia?

by Mike Audet on May 16, 2012

I have been giving a lot of thought lately to the idea of App Stores in the real estate technology industry and it has raised a number of questions that I want to put out there to inspire a conversation with the industry. Let me say right up front that I am not neutral in this discussion, as I am one of the founders of RE Technology which has, as an option, the ability to create an eCommerce store which is different, but related to, an App store.

My partner Victor did a great job of discussing the differences in his post titled: “Explaining an MLS App Store”.

So, while I may not be unbiased in my perception of the the whole concept of an app store I welcome any and all feedback on the questions I am raising because the more I think about this approach the more concern I have on multiple levels.

As Victor explained, the three typical components of an App Store are:

  • A common platform (like the iPhone)
  • Online delivery
  • eCommerce enabled

The process goes like this; a user sees something they like in the store, they click the button and presto, they are ready to install and use the technology product. This all sounds good at first blush.

The App Store that is creating the buzz at present is the FBS “Spark Platform” Their website puts it this way:

“The Spark Platform connects software developers with Multiple Listing Services to provide innovative tools for brokers, agents and their customers.”

The idea behind Spark, as I understand it, is to allow vendors to develop to their API (Application Product Interface) in order to access the MLS data to use in their product. Ideally this would make it easier for vendors who now have to navigate many different interface requirements from MLS to MLS and endure the costs this brings with it. It also would help the MLS with the issue of not having to send their data out to work with vendors. Rather, the vendors would create products that work with the FBS (Spark) API to pull data as they need it.

Users would come to a store, pick their software, purchase it, install it and the software would get loaded on the “Spark Bar” for easy use.

Here’s where things get a little tricky in my mind. When the users pay for the software or service a percentage, let’s say 30% of the actual price, will go to the App Store (FBS) who will share a percentage with the MLS. Users, in essence may be paying a “tax” to the MLS and the App Store provider. We’re not sure what the exact split looks like but that is the basic model.

This is really different from the approach we took with RE Technology and our eCommerce platform we call the “ Success Store“. Victor explained in his post that straight eCommerce platforms simply allow users to purchase or subscribe to a service-they don’t control how the vendor delivers their services and they may or may not take a piece of the selling price. Some, like RE Technology’s “Success Store”, charge a straight technology fee, in essence a license to use the software with no additional tariffs or sales commissions. A MLS or Brokerage using the “Success Store” negotiates its own revenue share deals with the vendors of their choice and collects its own revenues. The eCommerce provider does not take anything “off the top”.

The key difference is this: the eCommerce platform provides a vehicle to license or purchase products online but it does not force the vendors to change the way their products work. The App Store does this at a fundamental level.   Just like the App Store, this may simplify the process of purchasing a technology. At the same time, it may increase the price the end user pays for a technology while cutting into the margins of the technology vendors providing the technologies.

The Questions

As I was thinking about these two different approaches to online technology transactions, a number of questions came to mind. Some of these have to do with how the App Store is rolled out. Will it be voluntary or will MLSs try to FORCE its use upon technology companies? With an eCommerce store like Success Store, technology companies continue to deploy their products in the method that is easiest for their customers and most appropriate for their technology. It does not dictate the distribution method. An MLS could provide the opportunity to purchase products through an eCommerce platform, but it would not change how the product is developed or how it operates.

I work with MLSs all the time and realize they are looking for ways to create non-dues revenue.  I am in no way against that happening, even if it is through an App Store.  Before we go too fast down that path, however, I think we should ask ourselves some questions. Here are a few that came to mind that I want to share:

Will an App Store be an optional approach for vendors to use or a forced approach?

Today, vendors are spending huge amounts of money developing technology using RETS and other feeds.  An API will require them to totally change the way their products work in many cases. There is no guarantee this will be a benefit to them from a functional standpoint and in many cases may be a definite hurdle for them. Will these vendors be offered the option of the API or will MLSs try to force them to use the API to reach their members?

Today, less than a handful of software vendors have developed products for API use (CloudCMA and Z57 are known). Existing vendors would need to redevelop their application to work – specifically for those markets offering Spark. Other markets would use the existing RETS schema. Still others would require some integration between the API and the RETS schema – creating some potentially complex development tasks. Unless everyone used the API this would actually create much more work for vendors who would have to maintain multiple integration versions.

Will the App Store continue to level the MLS Playing Field?

As we all know, there is a fine line between what brokers want the MLS to do and what they want to do themselves. The concerns about leveling the playing field are alive and well, especially among larger brokers. Will they want MLSs to be promoting products so overtly within a tool that agents pay for as a core “utility”? Many brokers are promoting their own products and services. We recognized that many large companies supply their own technology and don’t want the MLS to try to sell products to their agents. Will they perceive an App store to be competitive?

RE Technology’s Success Store eCommerce platform, was designed to address this issue. The Success Store provides the ability for an MLS to allow for multiple permission levels and views. This allows regional MLSs to allow each Association, and even each brokerage, to display only the products they would like to promote to their members and agents. So the question remains, what will Brokers think about this approach though an MLS? Will they have control of what their agents see? Will Associations within an MLS be able to have control for their members? We know there are times when this is very important.

What impact will the cost of an App Store have on the members in terms of technology costs?

When you add a 30% charge to a product, and you force a vendor to incur new development costs under your rules, vendors are going to have to recoup those costs in some way. Will this ultimately be a good thing for the MLSs members? Who will end up paying and who will end up benefitting? We already hear stories where MLS vendors tell their customers they have to pass along an additional fee to cover the cost of MLS IDX fees. Will the App Store exacerbate this problem?

What will the App Store offer in the way of merchandising?

eCommerce is not just about putting a product online and letting people download it. Think about platforms like CNET. They merchandise the products for their clients. CNET, like RE Technlogy, educate their readers about the key trends in technology. CNET also helps its readers learn about what elements they should look for when purchasing a product. RE Technology provides daily education about how to use technologies in your real estate business. While an app store is a channel for purchasing a product, it takes a lot more than simply an eCommerce store to sell products, especially complicated technology products.

This phenomenon is complicated by the demographics of the real estate market. The average 54-year-old agent is NOT an early adopter. For them, technology is often a “necessary evil”. The last thing they want to do is make a technology decision without any guidance or advice. While the app store concept may make it easier for agents to purchase a product, it is not going to address the key issue; deciding which product to buy and why. Is that really going to happen with a product like Spark? Will a company that is in business to sell their own Broker/Agent products really be motivated to merchandise another company’s products?

What happens if the API is a real bottleneck?

I believe that FBS will do everything they can to provide a good product in Spark. They are bright, fair, high integrity people, and I have always liked the way they do business. That being said, it is very possible their API will handicap some products. The API may put restrictions on development that do not allow vendors to find better ways to deliver their products and to integrate with MLS data. Is that a good thing?

If the API approach is a good thing, should a vendor that sells products be the one to deliver it?

This goes back to why we created RE Technology. We believed, and still do,that the industry needed a neutral technology resource to help vendors distribute their information to the industry. RE Technology makes money from vendor ads but not from product sales. On RE Technology there is no motivation to push a product or rate a product higher than another, etc. We have created a level playing field that vendors can utilize to market their products on their own.  Moreover, it follows the local business rules supporting Agents and MLSs, and Associations without causing conflicts of interest.

What happens if a vendor doesn’t want to use the API and they still want to deliver their services to brokers and agents? Will they be restricted in some way? Will they be denied a feed?

Think about this one because it is really important. I know of many large brokers that have full data feeds today feeding their broker enterprise systems. They bring in data across multiple MLSs and create forms and marketing materials for their agents on all of their markets delivered through their system. These enterprise systems rely on access to a complete set of the data. They will not function the same way through an API.    What happens if a big broker says they don’t want to use the API? Will the MLS allow them to?   What happens if one MLS uses the App Store and API and another doesn’t? How will a vendor manage that? Will they need to build two methods to deploy their product? What if a small broker wants to work with a vendor that doesn’t want to use the API? Can they still get a full feed for their vendor? These are tangible and important issues that are likely to surface.

Is the App Store model, going to create unintended consequences just like third party websites have?  Only this time, the problems will be created for vendors and ultimately the agents and brokers they serve?

Think about this: Say every vendor was forced to deliver their products through an App Store, then they had to use another vendor’s API to get data to be used within their products, and then had to pay that vendor a lot of money every time they do it. Sounds like a monopoly to me…also sounds like a familiar business model. Remember, with 3rdparty portals, brokers provide their hard-earned listings data free, and then the 3rd party sites sell back the rights to display that data. In fact, they make money from the Brokers that give them the data by charging them for products, etc.

Is this new model that different? The App Store is getting something for “free”, i.e. the control of MLS data and connecting to the vendor products, all under their terms and they want to charge the vendors for this privilege and control the way those vendors develop and operate their products. Won’t this ultimately hurt the agents and brokers who rely on technology vendors to serve the needs of their clients?

If App Stores are voluntary, is there a problem?

No, all of the questions I have raised are really only a problem if the use of App Stores, whether is it the FBS store or any future store, are mandatory. Making them a mandatory channel, in my opinion, could cost members money, restrict innovation and unfairly force vendors to deliver products in ways they may not want to, and that is not good for the members. But, if the App Store is voluntary, those vendors that want to use and are willing to pay the participation fee can do so.

Conclusions

I am putting these questions to the industry to see what you think. I am honestly not seeing this just as a founder of RE Technology, but as someone who worked in the technology industry for many years. I firmly believe that anything that is going to restrict vendors this much needs to be looked at very, very carefully. We already know what can happen when we take our eye of the ball. We already know that nothing is free. So let’s have a discussion and think this one through.

 

{ 3 comments… read them below or add one }

Kevin McQueen May 17, 2012 at 4:23 am

Mike, good job of framing up some of the key questions. Here is a perspective from Mike Sparr with Goomzee. Mike is very bright and has experience which I believe is quite relevant. I’m all in favor of making third-party products easier to plug-in and purchase and hope that your post generates hundreds of comments from all camps. Thanks for doing this Mike and Mike. Kevin – Focus Forward

http://blog.goomzee.com/2012/05/03/should-mlss-invest-in-an-app-store/

Reply

Michael Wurzer May 18, 2012 at 7:30 am

Mike, the Spark Platform is voluntary, which, as you say, answers all your questions.

Reply

Mike Audet May 22, 2012 at 6:53 am

Mike, thanks for your comment. I think with voluntary participation, which is great, there will be still be questions about how vendors respond, how brokers respond, etc. but that’s fine, the product will stand on it’s own and be a choice. If vendors like it, great! If brokers like it, great. if not, that is fine too, we’ll just have see how things progress. I know how hard you have personally pushed standards in our industry over the years and I applaud you for taking action. I look forward to seeing how it goes.

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