Direct syndication alternatives

On April 8, ListHub data will no longer flow to Zillow Group (ZG) and it’s causing consternation for many. Some of that stress centers around MLSs that have not established a direct feed to ZG. There are, however, alternatives to an MLS direct feed that can give MLS leadership more time to evaluate options or that can serve as a more permanent solution. This post will look at those options and related issues.

A quick side note, this post is Zillow focused because the ZG-ListHub divorce is imminent. However, much of what’s covered here can apply to an MLS’s evaluation of its deals with other portals, such as Realtor.com or Homes.com.

Why look at direct syndication alternatives?

Why might an MLS not be ready or want to seal a direct deal with ZG?

Decision maker split – Maybe the MLS’s decision makers are split on whether ZG is a God-send, a necessary evil, evil, or somewhere in between. That can make deciding how to handle the ListHub cut-off difficult. We feel your pain. No really, we’ve been privy to a lot of those conversations.

Unpalatable terms – Maybe ZG is requesting/requiring terms the MLS just cannot stomach. Perpetual license? Distribution to an ever-changing number of other websites? Use of off-market data? Limited MLS remedies/protection? Risky indemnifications of Zillow by the MLS? Tough decisions (see decision maker split above).

Timeline issues – Maybe the MLS doesn’t want to or can’t play by ZG’s timeline. In addition to unpalatable terms potentially causing a decision maker split, there are other issues that could be causing a timing problem for MLSs. For example, the MLS’s tech solution might not be ready. Or the MLS’s decision-making process simply might not accommodate the current timeline.

Short term agreement – This could fall into the unpalatable terms category, but it deserves its own attention because it provides a different strategic consideration for MLSs. Maybe the short term agreement option presented by ZG to the MLS is simply a stealth attack on the MLS’s negotiation position. If there isn’t incentive for Zillow to want to negotiate a full agreement at the end of the short term agreement, how is the MLS going to negotiate for terms it may want in a complete agreement?

The alternatives below may help an MLS work through some of the issues above.

Direct syndication alternatives

Direct input

MLSs could suggest participants input their listings directly to Zillow. Saul Klein suggests this approach in his post about the April 7 cutoff. He notes:

Participants and Subscribers of an MLS can have their listings displayed on Zillow should they desire, through direct load, with no direct feed contract in place with the MLS. This is the solution to temper the artificial, manufactured urgency, and it is a simple one. This makes more sense than rushing to sign a contract at this point in the current Zillow manufactured “crisis.”

Brokers with 200 or more listings can upload them via an XML feed.

There are a couple potential benefits to MLSs for this approach. First, as noted by Saul, it’s simple. Additionally, it buys the MLS time. This might or might not be a long-term solution, but it certainly allows the MLS to make a decision on the MLS’s timeline. Finally, the broker has ultimate control.

There are some potential drawbacks. This approach increases the likelihood that there is stale data online because a participant might not update listings on Zillow as they update them on the MLS. Also, this creates work for MLSs’ customers. The participants and subscribers are busy, and this approach doesn’t utilize data distribution tech to make the MLS’s customers’ life easier. Finally, the negative aspects of this option could disproportionately impact smaller brokers. Larger brokers are more likely to have broker direct feeds in place; smaller ones are not.

Broker Data Release

The Broker Data Release (BDR) is a way for MLSs to hand over the keys to the broker-participant’s listings. It is an agreement between the MLS and the participant. The MLS does not execute an agreement with the portal. For participants that want access to their listings, the MLS sets up a RETS feed of only that participant’s listings and hands over the credentials to the participant. The participant is free to do what he or she wants with the credentials, including giving ZG access, and the participant releases the MLS from any liability.

The nice part about the BDR is that it puts the participant in complete control of the destiny of his/her listings. The participant can choose where to distribute the listings and negotiate his or her own terms. Additionally, the MLS is out of the mix. The MLS is not impliedly endorsing the portal’s data use or display terms. Finally, dealing with many feeds could create incentives for a portal to negotiate better terms with the MLS for a single direct feed.

A potential drawback is that this could be technically administratively burdensome. What could be served up with a single feed is being provided via many feeds. An MLS’s RETS vendor may advocate against this solution. Additionally, the MLS may have limited success washing its hands of the transaction, as Michael Wurzer notes here.

As an MLS vendor providing support to MLSs, we know all too well that MLSs, as service organizations, are dragged into these problems whether they have legal responsibility for it or not. Pointing to some legal agreement absolving the MLS of their responsibility doesn’t go a long way toward solving the actual problem, which is the data being sent far and wide with no one really knowing where or who is using it or for what purpose.

Then there are security issues with the BDR option. There are two ways to approach this concern. One, the MLS could take a more active role (albeit, against the spirit of this approach) and have participants report data recipients. Alternatively, the BDR approach enables the participant to send their own listings where they choose. The MLS could take the position that it’s not the MLS’s place to exert oversight on the participant’s control.

Three Party Portal Agreement

Finally, an MLS could provide a Three Party Portal Agreement (TPPA) that is executed by the participant, the MLS, and the portal. I’ll admit, this is the least baked in my mind of the alternatives, but this may present an option for MLSs.

The driving principle behind this approach, like the BDR, is that the MLS is enabling the participant to make his or her own data distribution decisions. The MLS is simply the facilitator of a pipe of data – as portals have sometimes argued – so the MLS takes on no liability. The participant and portal will both be on the hook for potential problems. The participant and the portal can hammer out risk allocation in their own separate agreement.

The MLS would take a hands-off approach on the data display and license terms, which could be negotiated by each participant, similar to the BDR option above. The TPPA could reference the participant-portal agreement to acknowledge there are separate data license and display terms.

This option could result in multiple RETS feeds like the BDR option above or MLS’s could group listings together for a single RETS feed to the portal.

So, what are the potential benefits? The MLS is getting the legal protection it wants and is (somewhat) washing its hands of the business transaction by leaving data license and display terms to the participant. For example, maybe the participant wants the portal to have the broker’s off-market data to create more accurate estimates; maybe he or she doesn’t. That can be a business decision for the participant. This approach provides more granularity for participant decision-making.

The drawbacks? The MLS is still part of the transaction, but without the potential benefits of an MLS direct agreement. Also, this is going to take time. The MLS will need to determine what it wants in the agreement and get the agreements executed with the participant and ZG. It might not be a viable alternative to get in place prior to April 7, if that’s the MLS’s goal. Finally, the portal may reject this approach.

Negotiation of a direct agreement and the alternatives

If the MLS wants a direct syndication deal, the alternatives above could strengthen the MLS’s negotiation position. With alternatives in mind or implemented, MLS leadership can make a reasoned decision about what terms are necessary for a direct feed and know the threshold at which the MLS would rather pursue or continue an alternative strategy. Then if direct syndication negotiations fail, the MLS can pursue one of the above alternatives, and it does not need to impliedly endorse the portal’s data use.

However, sticking to one of the alternatives could negatively impact listing displays on the portal. The MLS may be able to negotiate better data license terms than the participant alone because the MLS has economies of scale and acts as a clearing-house of quality data. Following one of the alternatives above means that it might be less likely that data displays will be as beneficial to participants. Also, the participant may accept terms with a portal that make business harder for the MLS.

On communication

Each MLS will need to evaluate its position, resources, and strategic objectives when determining whether to go direct to a portal, use one of the alternatives above, or do something else. One thing is certain, though – MLS leadership must communicate with their customers. MLS leadership will want input from participants and subscribers. Marilyn Wilson has some wise comments on that process here. Similarly, MLS’s must articulate what they’re doing and why. Matt Cohen has some great thoughts on targeted communication here.

A couple closing notes

Are things uncomfortable for some MLSs, participants, and subscribers? Yes. But the world will keep spinning, homes will keep selling, and the MLSs’, participants’, and subscribers’ primary value propositions will remain intact.

The lessons learned from brokers that have experimented with not providing listings to portals can serve as evidence that everything will probably be fine. Edina Realty stopped syndicating a couple years ago and as far as I know it remained one of the strongest brokerages in the Twin Cities area. Yes, Edina Realty reversed course on that decision, but the sequence of events serves as evidence that if an MLS direct feed is not established by April 7, everything will likely be fine on April 8, May 8, etc.

The Edina example provides another lesson – these decisions are not permanent. This is a dynamic area for MLS and broker strategic considerations. There are likely to be more changes in the coming months that could cause MLSs and participants to reevaluate their positions. MLSs should keep their eye on their strategic goals.

Finally, the alternatives to a direct feed presented in this post are not an exhaustive list by any means. If any readers have other ideas, please sound off below. And as always, comments, questions, concerns, gripes, shameless plugs, and general musings are welcomed.

Thanks for reading!
-Mitch