How Zillow’s pre-marketing move shifts the competitive landscape 

Thinking big about residential real estate success requires a big-picture perspective. Industry Decoded features industry experts who can enrich your understanding of issues affecting the industry as a whole.

When Compass and Rocket announced that Compass' 3-Phased Marketing listings would gain exposure on Redfin, it was only a matter of time before Zillow had to make a countermove. 

Zillow's answer arrived this week in the form of Zillow Preview, a new program that will allow "coming soon" listings from launch partners Keller Williams, REMAX, HomeServices of America, Side and United Real Estate to appear on Zillow and Trulia before they hit the active market. Participating agents are being offered enhanced listing visibility, direct consumer connections and potential financial incentives.

Zillow and its launch partners are selling this as a pro-consumer, pro-transparency and even an MLS-friendly move, something that Compass has not been very good at. On one level, that is true: Consumers will see more inventory sooner, public exposure is preferable to listings disappearing into closed networks, and participants are told they have to comply with MLS "coming soon" rules. 

But let's not pretend that's all this is really about.

This is about brokerage economics. The first wave of industry recalibration following the Compass-Anywhere combination is now in full swing, and Zillow Preview fits squarely within that new competitive landscape. Brokerage firms succeed when they do three things well: recruit productive agents, retain them, and help them close more transactions. Simple in concept, difficult in execution, and absolutely central to the economics of the business.

Just hours after Zillow's announcement, a senior executive from one of the participating firms posted on social media:

"More Exposure, More Marketing, More Opportunity, More Leads, More Engagement, More Transparency, More Listings = (Brokerage Name). Are you aligned with the right brand?"

That, in one post, is the entire story.

A recruiting win for brokerages; an inventory win for Zillow

So, who won?

Clearly, the firms that signed on first.

For those brokerages and franchisors, Zillow Preview is not just another marketing channel. It is a recruiting tool, a retention tool and a productivity tool. If I am a productive agent deciding where to affiliate, and one firm can credibly tell me, "We can get your sellers pre-market exposure on Zillow and Trulia, create demand earlier, and give you another consumer touchpoint before the listing ever reaches the MLS," that is a meaningful competitive advantage.

That is why the recruiting angle matters so much. These firms are not merely getting a new feature. They are getting a new value proposition to take into recruiting meetings and to sellers' kitchen tables. In a brokerage industry obsessed with attracting top producers and winning more listings, that matters.

Zillow is also a winner.

The company gets to preserve its public pro-transparency posture while still meeting the market where it is heading. More importantly, Zillow now gets broker-direct inventory flowing into its ecosystem before MLS activation. That is a major strategic win. Zillow is no longer simply reacting to broker-led, off-MLS innovation. It is productizing it and, in doing so, trying to control the next phase of listing distribution on its own terms. 

We just might look back on this one day as the beginning of the Zillow national MLS (more on that later).

Rocket/Redfin deserve some credit here too. The partnership with Compass appears to have accelerated the market. Once Redfin agreed that Compass' pre-market inventory could have a home on its platform, Zillow had every reason to respond with its own competing answer.

Where this leaves the rest of the brokerages

Now for the losers.

The first losers are the major brokerage firms not in the launch group — other than those, like Compass and Howard Hanna, that have already charted their own pre-listing exposure path. Whether they were not invited or chose not to participate, they are now outside a competitive lane that matters. 

This includes eXp, which today announced a separate deal with Realtor.com and Homes.com. Based on the language in the announcement, it appears that the Zillow deal required some form of exclusivity to Zillow, and eXp indicated a philosophy against such exclusivity. But if one is looking at the broadest exposure, it makes you wonder why they would not choose Zillow.

Agents at the non-Zillow partner brokerage firms will see rival firms using "preview" exposure on the largest real estate portal in the country as a recruiting and listing-winning message. That creates internal pressure immediately and recruiting pressure soon after.  If I were an agent at these firms, I'd be asking my leaders, "Hey, what about us?"

Some of those firms will likely be invited later. If they control meaningful listing share, Zillow will eventually have reason to widen the tent. But for now, they are outside looking in.

Small, independent firms have the most to lose

The bigger losers, though, are small and midsize brokers that are not affiliated with participating firms.

Large firms will turn this into a recruiting weapon. Smaller firms will have to defend against it without having the same toolset. The moment an agent loses a listing because a seller wants pre-market exposure on Zillow or Redfin, that agent will start asking whether their current brokerage is still giving them the best platform to compete. And while Zillow may eventually expand access to additional large firms, there is little reason to believe smaller independents will be first in line. 

If there is one lesson from the latest wave of industry consolidation, it's that scale matters.

And while it may not be "fair" to exclude firms from the program, a federal judge recently denied Compass' request for a preliminary injunction against Zillow, finding that Zillow did not possess monopoly power in online home listings. That finding certainly gives Zillow more room, at least for now, to make differentiated partner choices without an immediate legal concern.

MLS-friendly? Not so much

And then there are the MLSs (and the associations that depend on them for revenue).

Despite Zillow's language about agent's having to ensure MLS rule compliance, this is anything but MLS-friendly. The critical fact is that these preview listings do not have to originate in the MLS. They can, and will, originate at the brokerage level and be pushed directly to Zillow, as I suspect that all of the initial participants either have or will have a means to provide that to their agents. 

That means the MLS is not the first point of entry for what could be a meaningful slice of listing inventory. Quite soon, this is going to present a serious strategic problem for the MLS.

First, how do MLSs ensure that these listings eventually find their way into the MLS? There is a compliance issue that needs to be addressed. Zillow says that preview listings must comply with MLS rules — but who, exactly, is going to police that?

More importantly, this feels a bit like Upstream 2.0. Project Upstream was built around a simple idea: broker-controlled data entry and broker-controlled distribution. Its promise was a single entry point and greater broker control over where and how listings were displayed. Zillow Preview is not literally Upstream, of course. But it advances a similar end state through market incentives instead of industry politics. Brokers do not need to win a governance fight. They just need a platform partner and a competitive reason to move.

That should be the real wake-up call for MLSs. 

The MLS is moving from a central system of entry to one node in a broader distribution network. Denying that reality will not help. MLS leaders need to decide how they remain relevant when they are no longer the first place many listings begin. One answer may be hiding in plain sight: provide more value to the many small and midsize brokerages that will need help competing in a market increasingly tilted toward firms with scale.  

What we don't need are MLS leaders who react to this by posting on social media that everyone should use the MLS cooperative systems in place and sing MLS kumbaya. That's good for board member pats on the back, but bad for the implementation of any meaningful strategy. 

The new battleground

The bigger takeaway is this: The battle over listing transparency is no longer just a policy debate. It is now a distribution war tied directly to brokerage economics.

Consumers will hear the rhetoric about fairness. Brokerages will see the real prize: recruiting leverage, better retention and greater control over listing flow before the MLS ever touches it.

That is why Zillow Preview matters.

Not because it settles the debate, but because it proves the debate has moved. The portal wars, the brokerage wars and the MLS relevance debate are now all the same fight.

Russ Cofano is the co-founder and principal of Alloy Advisors. He has more than 30 years of senior leadership experience in brokerage, technology, MLS, associations and affiliated businesses. Previous roles include president and general counsel of eXp World Holdings and SVP of industry relations at Move, Inc. The views expressed in this column are solely those of the author.