CoStar CEO's 'super simple business concept': Support agents
“You do not want to think you're smarter than your customers,” Florance said on CoStar’s strategy of building Homes.com as a platform for agents and consumers.
- Florance discussed CoStar's latest moves, including the decision to merge Homesnap into Homes.com and rebrand it as Homes Pro.
- CoStar is a friend, not a foe of NAR and MLSs, said Florance. And it's creating value for agents.
- Homes.com will differentiate itself in part by offering content that is "the most robust documenting and storytelling about all the communities in the U.S."
With a market cap of $32 billion, CoStar Group has the resources to take on industry heavyweights Zillow, Realtor.com and Redfin, and the company is making a valiant effort with its Homes.com platform. It's an ambitious challenge, especially at a time when listings are down and technology is changing rapidly.
In an exclusive in-person interview with Real Estate News, CEO Andy Florance shared his thoughts on how the top real estate portals stack up, his strategy to win with Homes.com, CoStar's relationship with NAR and MLSs — and why agents shouldn't fear the industry giant.
This is the second part of a two-part series with Florance. Read part one here. (This interview has been edited for length and clarity.)
You've said Homes.com is seeking to build a platform that is friendlier to agents, but what is CoStar's relationship with NAR and other associations?
Look at other industries — there isn't really a commercial real estate association and there never really has been one. But there is one for retail and there's a strong one for the apartment industry. We have a fantastic relationship with the apartment industry and with the association.
In no way do we compete with associations. We recognize that people want to belong to these associations and find value in them. And there's important lobbying and legislative issues that they need to do, as well as professional development and licensing. So there's no conflict with the associations whatsoever, and obviously, we don't want to be an association.
But if you take all politics aside, what we're doing is absolutely something the associations should be supporting and be pushing out there because this is a super positive for their membership.
And what about MLSs?
The MLSs have been a huge benefit to us and will continue to be a huge benefit. It's a system in which the agents are collaborating, cooperating to produce high-quality, reliable information to help market their sellers properties, and also to help facilitate the connection with the buyer. So that system works extremely well. We love the MLSs. We would love to see the system work forever because on the commercial side, we have 1000 people that have to replicate that at a huge cost and huge effort.
We're spending hundreds of millions of dollars in creating new content — new content that's different — but we wouldn't be able to create that content if we had spent hundreds of millions of dollars trying to [recreate the MLS]. The industry is able to produce a higher net product to the consumers and the agents. Having a solid MLS is good for us, it's good for the agents, and good for consumers.
Can you tell us more about this big content push for Homes.com?
A high percent of consumers — about 80% of consumers — move between neighborhoods, so people are going into a new area, and they are going to be experiencing a new life in that neighborhood and the house itself isn't a really important component of what they're buying, but it exists in a neighborhood. And that neighborhood is comprised of parks where they walk the dog, schools where their kids will get educated, shopping and dining and a grocery store, and new neighbors.
So we are providing basically a Google for life in the United States. And it is the most robust documenting and storytelling about all the communities — like 20,000 communities — in the United States. It's tens of thousands of parks, hundreds of thousands of schools, tens of thousands of condominium buildings. What I found is, say I play a video about the neighborhood that you grew up in, you light up.
What is the future for Homesnap?
Homesnap's original core value was that MLSs were not mobile, so Homesnap was an affordable way for agents or MLSs to gain mobile access to their MLS systems. And that's pretty fundamental because agents are on the road all the time. Since Homesnap wasn't trying to cater to the consumer, it built functionality that is specific to the agent, like being able to see broker or agent-only notes, confidential documents, who lives in a house, and being able to schedule a tour.
Homesnap tried to build several revenue models around marketing, but they were largely based on Facebook look-alike audiences. Those are generally very low-quality leads, so I'm not a big believer in it. I believe in marketing to people who are in an environment where they're specifically looking for a home — especially if they're represented by an agent.
So we're taking all of the functionality that agents actually used in Homesnap and we're putting it into Homes.com as Homes Pro. And it's free. If you think about the net experience for the agent, it's a 10x upgrade because now you're going to have a lot of your consumers and you're going to have tools to interact with your consumers — with your buyers and your sellers — in a safe environment that doesn't sell agency.
We won't monetize it by trying to sell tools. We monetize it by much more sophisticated marketing: driving frequency, reach, and extreme exposure.
There are those who may be fearful of CoStar and whether it is a friend or foe. What is your message to them?
We are the most established and the most successful digital real estate player in the world, by any number of measures. And for decades, we have thrived on a "your listing, your lead" model that is co-starring with the agent, not starring. And I get it. The agents have been through a number of scenarios with these poor technologies. They have no reason to be particularly paranoid, but I think it's really important to look at the track record.
There was a moment, many years ago before Zilltorfin [Zillow, Realtor.com and Redfin] existed, and I was sitting there looking at LoopNet and I'm like, you know, some people don't advertise. In theory, we could put their listings — the people who don't advertise — put their listings up, and then we could sell the contact information to other agents. We thought about it and were like, "Hmm, I'm sure a lot of people would buy that," you know? And then, it took us about ten minutes, and we're like, "That's unethical," and we walked away from it.
This is a super simple business concept. You want to support your customers — you do not want to think you're smarter than your customers. We can be much more successful by resonating with our clients and looking at who the agents are than by trying to be trickier than them.