Introduction

To the seasoned, well-affiliated Realtor with hundreds of clients in her pipeline, the Trulia/Zillow merger is just another business move being made between publicly traded companies; it is an incidental headline on the homepage of Yahoo! Finance while sipping one’s morning coffee.

Successful Realtors move with the currents and stay afloat in rapidly changing times like these; they possess timeless and fundamental skills in customer service, follow up, and local expertise that keep them constantly in the mind’s eye of their client base.

Heraclitus of Ephesus remarked that one cannot step in the same river twice. So too do we find the real estate industry constantly changing, demanding vigilance and adjustment when needed. Even veteran Realtors need to adjust to the changes; no one is immune to the ever-changing frontier.

However, for the newer Realtors of the industry, the merger could mean something different. Newer Realtors need to organize their schedule and decide on paying or not paying for advertising commitments. It is critical that they execute the best choices in filling their pipeline with quality deals; newer Realtors need to buckle down and carefully survey this new, technological landscape and pick out what works for them.

Several weeks have passed since the Zillow/Trulia merger and the business move has set the internet ablaze with speculation over the consequences of the two largest real estate websites coming together.

In this article, we look at the possible consequences of the merger in relation to the real estate market and discuss what new agents can do to make sound choices in advertising. We conclude by discussing Zillow/Trulia’s business model to determine whether Realtors are still in control of their marketing efforts. We find that they are.

The Main Concern

Let us start with the main concern: Some say the merger could result in anti-trust violations. This may include “per se” illegalities such as price-fixing between Zillow and Trulia that could increase the cost of advertising to the Realtor. Some argue that the increased cost will be passed on to the consumers and will create an undue burden on the consumer.

Responses to the Main Concern

In response to this concern, it is very possible that advertising prices could rise as a consequence of the merger, but price-fixing may not be involved because Zillow and Trulia continue to remain as separate companies, but Trulia now reports to Zillow on a regular basis to come up with new strategies. The difference in the benefits they can offer Realtors will vary their pricing, so price-fixing is possible, but unlikely.

While their intra-company intelligence has improved and overhead lowered, the responsibilities of choosing which real estate advertising to go with as part of one’s marketing mix largely remain unchanged. In other words, we need to value the Realtor’s autonomy here. The Realtor still calls the shots of how much advertising budget should be spent yearly.

If the merger causes advertising costs to increase but yields enough new business to turn a profit after expenses and paves the road for repeat business, then it is clear that the Realtor is voluntarily consenting to the increased advertising costs because it is valuable. If at any time the advertising is not working, the subscription can be canceled and the costs can either be refunded if the Realtor is persuasive enough or the sunk costs can be absorbed and become tax deductible. “Nothing ventured, nothing gained”, as some might say.

The second response to this concern is that these costs will be passed on the consumer, however I find this to be unlikely. Repeat business is rewarded to the tireless, professional, and ethical efforts of the Realtor who helps to achieve her client’s goals. Any ethical Realtor will not pass her advertising costs to the client because it does not create a good environment for repeat business.

While some Realtors may provide additional services separately for a separate fee, such as staging or cleaning, those fees are justified and transparent. By taking advertising costs and masking it as another fee, the Realtor puts herself in red flag territory. What is this extra fee on the final HUD and Good Faith Estimate and won’t the lender and escrow have something to say about it? I’m not even sure how Realtors can pitch the fee to a client: “Oh by the way, Trulia helped me find you but it cost me more money. Do you think you can pay it? Or how about we go halfsies on it?” How unreal!

It is possible that the client will often place her trust in the Realtor and overlook the fee, but if the additional advertising fee is questioned by the client and the Realtor cannot give an adequate answer, the bond of trust between fiduciary and principal can be undone rather quickly.

Is the Advertising Fee Overpriced?

So are Realtors getting squeezed by real estate online advertisers trying to make a quick buck? I think it is OK to have a healthy skepticism about the merger, and their advertising solutions sold at a premium may not be the shoe that fits all, but we cannot avoid the fact that site traffic for these sites accounts for about 48% of all site traffic for real estate searches on the web.[1] That kind of site of traffic is valuable and Realtors can pay for value that yields them more business.

We are sometimes tempted to take a commission check and subtract away the advertising costs required to procure that commission. If we do that, then clearly the merger has decreased the net income of the Realtor. But there is more to the analysis than that. The advertising can also provide repeat business and word of mouth that will get more business into your pipeline. If we consider these sources of business, the advertising becomes more and more attractive.

Before we move on, let me say this: I am not defending price increases of Zillow/Trulia, but I do believe they have a valuable product that Realtors can use. Some Realtors pay for advertising online, only to have the company tell them proudly that 300 (un)qualified visitors looked at their profile, but not a single one sent an email or a phone call. When something does not work or will not have long-term payout, it is time to get out. But if something works, it is time to milk it. There is some internet gossip out there that Zillow/Trulia is more promising than the rest. But don’t listen to me; look around and see for yourself.

What Should New Realtors Do?

New Realtors need to make a decision about whether to purchase advertising from Zillow/Trulia or not, even if it will be at a premium. When just starting out, a new agent has 6 months of reserves in her bank account to pay for business and living expenses. Every penny counts. Performing an all-out advertising campaign on Zillow/Trulia could be costly, but it could be the push one needs to become the go-to agent of that particular service area. New Realtors need to check their Zillow/Trulia leads regularly, see how many people check their profiles, and see what outputs were procured as a direct result from the advertising.

I think new Realtors need to be well-versed in projecting future earnings. It could be the case that no commissions will come during months 0-4, but maybe there will be a great payday in month 5 that will make online advertising worth it. In those first few months of uncertainty, experimentation is a must. New Realtors need to handle and cope with the pressure of being in the red for a few months, focusing keenly on the light of the end of the tunnel that will reward their efforts.

Going Low Tech; Returning to the Fundamentals

For those who will not dabble in Zillow/Trulia’s methods to capture potential homebuyers, and for those who want their 6 months of reserves to be stretched even further, there is no shame in going low-tech and hi-touch. “Walking the farm”, or passing out fliers and knocking on doors in one’s service area could be valuable as part of the marketing mix, with free sunshine and exercise included with every outing. Those belonging to church groups or volunteer groups can flourish by helping friends who want to buy and sell in real estate.

Who Gave Zillow/Trulia Our Listings? We Did

When reviewing Zillow/Trulia’s merger and its consequences, we recall the not-so-discussed origin of the success of their business model: us. At the bottom of every MLS input sheet, we place checks in boxes that ask us if we want the full address of our listing to appear on the internet.

To many Realtors, it is a no-brainer to check all these boxes because we care about the listing getting maximum exposure on all media platforms—including the internet. Excluding the listing from Zillow/Trulia calls into question whether we are servicing the listing properly and acting in the best interests of our client (the same argument is used for pocket listings). In short, we are indebted to these websites for giving Realtors more outlets to market the listing, and these websites are indebted to us for feeding them listings which gives them exceptional site traffic.

Conclusion: Everybody Wins and We are Still in Control

Our client’s desire to receive maximum exposure on the listing to get the maximum sale price and Zillow/Trulia’s promise to “empower consumers with information and tools to make smart decisions about homes, real estate and mortgages”[2] are consistent with one another. The two work hand in hand and Realtors can take advantage of this technological frontier without sacrificing their duties as a Realtor. Our relationship with Zillow/Trulia is not parasitic, but symbiotic. And even after the dust has settled after the merger, we Realtors are still in full control and in the driver’s seat of our marketing efforts, whether they are offline or online, or both. We are still in control of the marketing mix in a world where Zillow and Trulia have merged.

[1] time.com/money/3047329/zillow–trulia-merger-consumers. Accessed August 16 2014.

[2] http://www.zillow.com/corp/About.htm Accessed August 15 2014.