IDX makes sense for brokers, even those who won’t syndicate

Rob Hahn has said there is no meaningful difference between IDX and syndication and that he thinks brokers pulling out of syndication are a harbinger of IDX’s demise; but I think he’s dead wrong. I’ll try to make my point here in a post considerably shorter than one of Rob’s Notoriously long ones 😉 You can see Rob’s post claiming (erroneously, I think) the equivalence of IDX to syndication here; regarding the Austin “kerfuffle” as evidence of the impending demise of IDX here; and offering further comments about Austin and IDX here.

IDX is a critical service for brokers, and it’s likely to remain one for at least the next couple of years, for at least four reasons. First, IDX offers listing brokers a different exchange of values than syndication; second, brokers who want to have viable consumer-facing listings sites need IDX, because VOWs are not a viable option at present from the consumer’s standpoint; third, the listing broker gains absolutely nothing from withdrawing listings from IDX; and finally, if listing brokers withdraw from IDX, the only possible winners will be the very syndicators with whom some listing brokers are unhappy.

Listing brokers get something from IDX they don’t get from syndication—other brokers’ listings. A broker deciding whether to send her listings to Zillow or Trulia is considering an exchange, which in highly simplified form sounds like this: “Should I allow Zillow to use my listings to attract consumers to its site in return for the exposure my listings will get there?” With IDX, the equation is different: “Should I allow other brokers to use my listings to attract consumers to their sites in return for the exposure my listings will get there and in return for the right to display their listings on my site?” This reciprocal nature of IDX was reflected in one of the first names given to the concept: “Broker Reciprocity.” The IDX rules provide for a flexible way for brokers to display each other’s listings; the rules are relatively simple, well-understood, and they do not require much of the consumers visiting sites; i.e., they don’t need to register, click through disclosures and agreements, etc. But Rob has suggested that VOWs are just as good.

I disagree: VOWs are not a satisfactory substitute (so far) for IDX. Consumers don’t like to sign up on brokers’ sites. Talk to the brokers, and ask them how many consumers sign up for accounts on their sites. Despite the fact that many MLSs have highly restricted IDX data sets that include too few fields and no off-market statuses, few brokers are opting to build VOW infrastructure on their sites to provide the additional information they could under the VOW rules. The reasons are two-fold: First, the VOW rules are more complicated, less well understood, and much more expensive (practically) to comply with. Second, consumers are reluctant to register and accept all the legal mumbo-jumbo required to establish the brokerage relationships on VOWs, including in some states, detailed agency disclosures. (BTW: This may change as mobile becomes more dominant. Many mobile apps just are not that useful until you’ve signed up for an account on the app-provider’s website, and I think many consumers will overcome shyness about this issue. On the other hand… well, more on that another time.) These facts make VOWs the less attractive second choice to IDX for brokers who want to deliver compelling consumer experiences on their websites.

But VOWs would become a last resort if big brokers started pulling out of IDX. After all, anyone the listing broker prohibits from using his listings by pulling out of IDX would still be able to use the listings in a VOW. For example, if you are Big Broker LLC, with a 30% market share in bustling East Overshoe, Minnesota, pulling out of IDX means neither you nor your competitors can have very effective IDX sites; you either have to operate a VOW (which consumers don’t like) or operate a public site with only your 30% of the listings. (We know from consumer research that consumers don’t like sites where the displaying broker puts its own listings first on search results; imagine how they’d feel about a site where only the displaying broker’s listings appear?) The result is that Big Broker, to have a viable consumer site, will have to operate a VOW, and so will every other broker in the market. But then, any broker willing to spend the money on a site will have the same listing content as Big Broker. It seems to me that Big Broker has just gone through a complicated and expensive procedure to achieve exactly nothing.

The syndication channels can’t be harmed by brokers pulling out of IDX, and they may actually benefit from it. In the IDX-less world that Rob imagines, the only places to get relatively comprehensive listing information without registering as a broker’s customer will be sites like Realtor.com and Zillow.com. They won’t have all the listings, of course, because the likes of Big Broker have stopped sending them listings. And some consumers will prefer the local broker VOWs, overcoming shyness about registration in return for comprehensive content. But the big syndication channels will still attract traffic because they’ll end up with many of the listings; most listing brokers will continue to provide them listings in an effort to get a marketing ‘edge.’ Brokers’ withdrawing from IDX will not make big syndication channels less successful, and it may actually help them. Will the listing brokers be better off than they would have if they had just pulled content from the syndication channels and stayed in IDX? It’s difficult for me to see how.

Finally, I expect that Rob could point to the Austin dust-up over IDX as evidence of the trend he foresees. However, I know of no other markets where similar discussions are happening, and a single data point cannot indicate a trend.

Of course, the arguments I’ve set out here might be wrong, and the passage of time will likely change much. For example, Rob and I both agree that mobile listings access will be a critical development—one that could undermine the IDX logic. Nevertheless, that day has not yet come, and I don’t expect it to do so this year or next.

I welcome your thoughts.

-Brian

Disclosure: I’ve advised some large brokers regarding their online listings strategies, so I’m probably biased in a whole bunch of ways on this issue.