MLS syndication strategy

As MLSs reevaluate their strategic planning going into the New Year, we’ve been getting many questions about how to approach the dynamic world that is listing syndication. We thought it might be useful to those MLSs reevaluating their syndication services to read about our basic framework for thinking about syndication strategy.

In this blog post I will outline general considerations for MLSs evaluating their syndication strategy. I’ll start by looking at why MLSs may choose to not syndicate and then examine the reasons why most do. After that, I’ll break down the three basic models for MLS syndication: using a syndicator service, going direct to publishers (like Zillow, Trulia, Realtor.com, Homes.com, etc.), and a hybrid of the two. The goal of this blog post is to set up a framework for each MLS’s leaders to consider their options in light of their MLS’s goals and the wishes of their participants.

However, before I dig into the meat of this topic it’s important to identify the two basic components of syndication: one, agreements governing use of listing content, and two, the technology that powers the process (which might have its own agreement). Sometimes the two components are intertwined; sometimes they are not. Organizations evaluating syndication strategy occasionally overlook this aspect of listing distribution.

Why not syndicate?

Many analyses of syndication skip over a threshold question – why might an MLS choose to not provide syndication services to its participants. There are two general reasons that an MLS may not help participants syndicate their listings: cost and business objectives.

First, syndication services use a portion of the finite MLS resources.  Syndication requires staff time. The MLS is on the hook to provide education and communication about syndication, and manage the technology solution. Also it’s not free. Even if the technology behind the product is provided to the MLS for free, management and legal review of the service requires an MLS to expend resources. Choosing to syndicate is a prioritization of MLS resources; it is a strategic consideration to divert financial and staff resources from other potential projects and services to syndication.

Second, syndication may not mesh with the MLS’s business objectives. Some MLSs may consider publishers to be competitors to the MLS’s customers, the participants. Leadership at those MLSs may determine that they better serve the participants, and thus the MLS’s business objectives, if they do not take action that benefits publishers. Also, when an MLS provides syndication services, the benefit of those efforts and resources may disproportionately impact some participants over others. Depending on the composition of an MLS’s participants (and local politics), the MLS may choose to spend its resources on products and services that benefit a greater portion of the MLS’s customers so as to not “level the playing field.” (Whatever that means…)

Why syndicate?

So, why do most MLSs choose to syndicate? First, economies of scale. The participants have already paid for the MLS to undertake the aggregation and cleansing of listings, so the MLS is in a unique position to deliver value based on its position as the central hub for accurate listing content. Similarly, participants have already invested in the MLS having a base technological infrastructure, which helps facilitate syndication.

Second, the MLS acts as a clearing-house. It clears the listings for display on publishers (with participant authorization), and importantly, is a centralized point for updates, corrections, and removal of listings. It also can serve as a central source for information and education regarding syndication for participants, reducing confusion in the MLSs marketplace.

Third, the MLS has negotiation power. Because the MLS has already aggregated accurate listings and is the central point for updates to those listings, it can save a syndicator or publisher resources that would otherwise be spent collecting and maintaining the listings from disparate sources. The MLS is in a unique position to potentially negotiate better terms with a syndicator or publisher than an individual participant could alone, which means that the value the MLS can provide to participants is also greater. (For example, an MLS may be able to negotiate better display terms than a participant alone.) Remember, however, that the MLS is negotiating with publishers only for the MLS’s cooperation; brokers are always free to go directly to the publishers, whether the MLS has agreements with them or not.

Finally, and simply put, participants may expect the MLS to provide syndication services. MLSs need to be mindful of the expectations of their customers and work to provide meaningful services, one of which may be syndication.

Syndication models

In our view, there are three general models for syndication. (At the present time, most MLSs fall into the final category; more on that in a moment).

(1) Use a third-party syndicator

An MLS may use a third-party syndicator, such as ListHub, to distribute listings to publishers. The MLS has one agreement with the syndicator, and that’s it. The syndicator does the work of establishing agreements with publishers and negotiating the terms of those agreements. Those agreements are (thus far) confidential, so the MLS does not know what specific restrictions are placed on each publisher. The syndicator also provides the technology to power the syndication. This is a situation where the technology and agreements are intertwined.

The benefit of using a syndicator is that it is less work and cost for the MLS. There is only one agreement to negotiate (the syndicator’s agreement), the syndicator largely takes care of the technical work, and the MLS doesn’t need to negotiate terms with each publisher.

The drawback of using a syndicator is that the MLS has less control. The MLS is in the dark regarding the terms under which a given publisher may use listing content, listing content is updated less frequently on publisher sites than if the MLS has a direct agreement with a publisher, and the MLS may be able to negotiate more favorable terms with publishers on its own.

Most MLS’s think they use this model. They don’t.

(2) Go direct

Alternatively, MLSs can go direct to publishers (e.g., Homes.com, Trulia, Zillow, Realtor.com, elookyloo.com, local sites… you get the idea). Under this model, the MLS establishes an agreement with each publisher to which it wants to send listings and provides a feed of listing content for participants that wish to syndicate to that publisher.

The major benefit to this approach is that the MLS knows and has direct influence on the terms with each publisher. The MLS is no longer in the dark about the license terms, including display requirements, with each publisher. Also, since the MLS is behind the steering wheel, it can work to negotiate terms that are particularly important to its participants.

The drawback to this approach is that it takes more time and expense. MLSs now need to negotiate an agreement with each publisher that will receive listing content, which requires more resources than a single agreement with a syndicator. Also, a direct model may require more staff time on an ongoing basis. Finally, depending on the MLSs current technology, it may want to license different software to facilitate the syndication process and metric reporting. This is a syndication scheme under which the agreements and technology are not intertwined.

There seems to be a trend among MLSs to evaluate a direct syndication model. We’ve fielded more client questions about this than any other individual topic over the past six months.

(3) Hybrid

Finally, there’s the hybrid model. Under this model, an MLS may use a third-party syndicator like ListHub to distribute listings (usually as the primary syndication method) but also may have agreements with strategic publishers. It’s a mix of the above two models.

The benefit of such a model is that the MLS can focus its energy on establishing agreements with a few strategic publishers, but look to the syndicator to establish relationships with other publishers. For example, the MLS could implement agreements with a few heavily trafficked publishers, but if it still wanted to provide a way for participants to syndicate to other less trafficked publishers, it can continue to have an agreement with a syndicator to handle that work (assuming the syndicator will agree to such an arrangement).

The drawback to such a model is, unsurprisingly, a mix of the drawbacks for the syndicator and direct models. The MLS will be in the dark about the terms with sites to which the syndicator sends listings, and the MLS will have increased transaction costs the direct agreements.

To the surprise of some, most MLSs have a hybrid model. Those MLSs tend to use a syndicator, but also have a direct feed to Realtor.com. (Light bulb above head.)

What’s next?

Deciding what model to use will depend on each organization. Trust us, we’ve seen the gamut. And each organization may have fantastic reasons for their decisions that will depend on that organization’s strategic considerations (such as local politics, participant demand, business objectives, syndication participation, syndicated listing metrics etc.), which I’m not going to get into in this post.

However, in a future post, I will take a closer look at the direct syndication model. Why? It’s more complex, it’s more interesting, it gives MLS’s more flexibility, and it’s arguably the trend for the foregoing reasons.

Thanks for reading!

-Mitch