What Would Google Do_ - Jeff Jarvis [39]
Agents say they market your home. Pshaw. They used to advertise a selection of homes in the Sunday paper, but those ads promoted their agencies as much as marketing specific properties. Real-estate ads are like grocery ads that entice you to come in because flank steak is on sale or because one house caught your eye. Now, thanks to the internet, there’s less need for agencies to advertise in papers. Real-estate agents can save money by putting listings on their own web sites or even on craigslist and Zillow. They rarely pass those savings on to homeowners.
Agents say they bring their expertise to buyers, not just sellers. When I bought homes, I went to agents so I could see the multiple-listing service and pick out my prospects. The only real service the agent provided was hauling me around and letting me into homes.
“A real-estate agent may see you not so much as an ally but as a mark,” Steven D. Levitt and Stephen J. Dubner wrote in their 2005 paean to seeing things differently, Freakonomics. They cited a study that found that real-estate agents keep their own homes on the market an average of 10 days longer than homes they represent—and agents sell their own homes at prices 3 percent higher. Levitt and Dubner explained that it’s more efficient for agents if they can get you to sell quickly, even if for a few dollars less. “Here,” they wrote, “is the agent’s main weapon: the conversion of information into fear.” In the long run, Zillow and similar services will become smarter than the smartest agent. On the internet, more information equals more power and value. (In the next section of the book, I’ll outline how I propose to replace real-estate agents.)
In the early 1990s, when I worked with newspapers, I predicted that real-estate agents would desert papers for online. I advised newspapers to get into the real-estate business themselves, becoming agents just so they could get access to the multiple-listing data. Newspapers are not in the publishing business but are in the information business, and the MLS is the key to the information that mattered. God no, the publishers said, we don’t want to rock the boat with agents and lose that ad revenue. But papers were bound to lose it anyway.
Newspapers didn’t know what business they were in and didn’t know who their true customers were. They thought they were in the business of selling real-estate ads, not serving homeowners (aka readers). Newspapers even tried to discourage homeowners from posting their own for-sale-by-owner ads because agents saw those homeowners as competition. Staying loyal to real-estate agents over readers did newspapers no good. The agents didn’t return the loyalty. Newspaper classified revenue in real estate, jobs, and cars fell from $19.6 billion in 2000 to $14.2 billion in 2007 (adjusted for inflation, that’s a drop of about 40 percent). If newspapers had seen just how dire their future was, they might have gone around the agents they had protected and freed up information for readers. But soon it was too late. Though real-estate ads increased as home prices rose, the home bubble eventually burst in 2008, and papers’ last gravy train derailed.
Real-estate agents and papers are not alone as middlemen, the proprietors of inefficient marketplaces. The monopolies, duopolies, oligopolies, cartels, and controlled marketplaces enjoyed by cable companies, phone companies, broadcasters, advertising agencies, health-care companies, and government are challenged by the internet’s open marketplace of information. Google isn’t their competitor. Google is the weapon their competitors wield.
Free is a business model
Free is impossible to compete against. The most efficient marketplace is a free marketplace. Money gets in the way. It costs money to market and to acquire customers so you can sell things to them. It costs money to take payments. Charging customers stops