When Zillow told New York City-based brokerage CORE in December that the price of “featuring” its listings on the portal in 2015 would be four times what it paid in 2014, the company decided to cancel its ad spend.
Instead of paying to feature listings on the site — blocking advertisements for competing agents in the process — the brokerage transitioned to Zillow’s free Zillow Pro for Brokers program. While that move opened up dozens of listings marketed by CORE’s 113 agents on Zillow to ads from other agents, participating in the Pro for Brokers program does provide some additional branding, CORE Executive Vice President of Sales Doug Heddings told Inman.
CORE’s not alone in having to devise a strategy to address rising ad rates on Zillow, Trulia and realtor.com, real estate’s most popular search sites for consumers.
Inman talked to five brokerages that have recently negotiated new contracts with one or more of the big three portals. All of them said ad rates are on the rise — particularly on Zillow and Trulia, which appear to be playing catch-up with realtor.com.
Brokers who find themselves in similar situations can either pay higher prices for exclusivity, accept ads for competing agents alongside of their listings, or pull their listings altogether. Not an easy choice for many.
While real estate agents and brokerages love to complain about the portals, most have been loathe to break off relations entirely, because many sellers expect their homes will be marketed on the sites.
When brokerages pay for their listings to be “featured” on Zillow and Trulia, they prevent ads for buyer’s agents (left) from appearing alongside of those listings. When they pay to “enhance” listings on realtor.com, inquiries submitted through unbranded lead forms that appear next to listings (right) are directed exclusively to the listing broker, and not to competing agents or brokers.
The scale of price increases is hard to pin down. While Inman found only five brokers who say prices are rising, industry scuttlebutt suggests portals are seeking price increases on a more widespread basis.
Zillow Group, which took questions on behalf of both Zillow and Trulia, wouldn’t say if the portals were indeed raising prices across the board for brokerages to feature their listings.
“We develop our product pricing differently in every market depending on a variety of factors,” Zillow Group spokeswoman Amanda Woolley said. “We also have many unique partnerships that are tailored to meet our partners’ specific needs, of which we don’t discuss the terms of.”
If prices are rising, the reasons aren’t clear.
But it’s well documented that the big three search portals can’t sell ads or generate leads for buyer’s agents on a significant chunk of their listings, thanks largely to enterprise-level featured listing deals they’ve signed with brokers and franchisors.
Listing brokers and agents were paying to “enhance” 42 percent of listings on realtor.com, and site operator Move Inc. was looking into raising prices for its Showcase Listing Enhancements ad product, Move CFO Rachel Glaser said last year on a conference call with investors.
Like Zillow, Move declined to answer detailed questions from Inman about its pricing.
“There’s no apples-to-apples comparison when it comes to features and pricing models across the different real estate experiences,” Move spokeswoman Lexie Puckett told Inman. She added: “Realtor.com attracts the most transaction-ready consumers, and as a result provides brokers and agents with the highest-quality leads and conversion rates.”
Between 45 and 55 percent of listings displayed on Zillow don’t display ads for competing buyer’s agents, according to a study conducted last June by PAA Research, a firm that provides insights to stock market investors.
By prying brokerages off of their listings, Zillow could open up more ad inventory for its breadwinners: agents.
The $239 million that agents paid Zillow for exposure on the portal last year accounted for nearly three-fourths of the company’s total revenue. By comparison, display revenue, which includes revenue from broker- and franchisor-level ad deals, totaled just $58.7 million. (Whether ad prices for agents are also headed up will be the subject of a future Inman report.)
There’s a chance that ad products for brokers and agents will look considerably different at the end of the year when the portal landscape’s current upheaval settles down. Zillow Group has been digesting Trulia for less than a month, and News Corp. is still in just its third month of ownership of Move.
In a recent Inman guest column, James Dwiggins, CEO of the new franchise brand NextHome, noted rumors have been flying for months that Zillow Group might discontinue broker- and franchisor-level featured listings altogether later this year.
Just raising prices could have unintended consequence for the portals, Brian Boero, the founding partner of real estate design and consulting firm 1000watt, noted in a recent blog post. If the price of featured listings on Zillow, Trulia and realtor.com goes up, that could push brokers to search for a new outlet, such as a national broker portal project currently in development.
Responding to rising prices
In all, Inman spoke to five firms that have recently negotiated renewals of their featured listing ad contracts with at least one of the big three portals.
Executives at all of the firms except CORE asked that their firms remain anonymous because they were either in negotiations with one or more of the portals, or expected to be soon.
The firms that recently negotiated ad contracts with Zillow or Trulia began those talks before Zillow completed its acquisition of Trulia last month — the price increases they agreed to don’t cover both sites. Some of the firms are still in negotiations with Zillow or Trulia.
At some point later this year, Zillow Group, the new entity that houses both Zillow and Trulia, will begin offering a single set of ad products to brokers and agents that will cover both portals, but the firm declined to specify whether new contracts Zillow or Trulia sign with brokerages now cover listings on both portals.
| Brokerage | Zillow | Trulia | realtor.com |
| CORE, based in New York City with 113 agents and an average of approximately 65 listings | Was on an annual contract to feature listings that expired in December. Presented with a fourfold rate increase, switched to Zillow Pro for Brokers. |
On a two-year deal to feature listings, which expires at the end of 2015. | Feeds listings to realtor.com, but doesn’t advertise. |
| Large brokerage in New York with more than 500 agents | Annual contract to feature listings. Set to negotiate new contract with Zillow soon. |
Annual contract to feature listings. Negotiated new 12-month contract late last year. Will pull listings if Trulia follows through on promise of further price increases. | On a two-year contract, which expires later this year. Realtor.com is the most expensive of the three, but owner feels allegiance to realtor.com, afraid of what others would say. |
| Large broker in the U.S. | Annual contract to feature listings. Negotiated new contract earlier this year. Prices did not go up. |
Annual contract to feature listings. Negotiated new contract earlier this year — prices increased fourfold from 2014. Resigned to new price point. | Annual contract to feature listings. Negotiated new contract earlier this year. Price doubled from 2014 to 2015. Resigned to new price point. |
| Large brokerage in California with over 1,300 agents | Annual contract to feature listings. Negotiated new contract earlier this year. Prices were 50 percent higher this year, and told by Zillow to expect 2016 rates to be up more than fivefold over 2014. |
Annual contract to feature listings has expired. Hasn’t renegotiated contract yet. | On a two-year contract to “Showcase” listings, which expires later this year. Cost to enhance listings on realtor.com is two to three times as much as Zillow and five times what the firm currently spends to feature listings on Trulia. |
| Large brokerage in Florida with more than 500 agents | Doesn’t feature listings on Zillow. | Annual contract to feature listings. Negotiated new contract late last year: Prices jumped twofold over previous contract. | Two-year contract to feature listings, signed late last year. No change in pricing from previous contract. |
Even after the reported price increases for featured listings on Zillow and Trulia, realtor.com’s listing enhancement ad product, Showcase Listing Enhancements, is still the most expensive of the three, according to executives with four brokerages who advertise their listings on both realtor.com and at least one of the other two big portals.
The industry received hints of a rate increase for Showcase Listing Enhancements last May during Move’s investor day, when Glaser said the company was looking at raising rates.
As recently as last July, brokerages had another option on realtor.com. They could opt out of the portal’s lead-gen program, Connection for Co-Brokerage, at no charge. If they chose to opt out, their listings would have fewer photos and limited descriptions. Move would not say whether brokerages still have this option.
For firms that subscribe to the philosophy of “your listings, your leads,” the rising price to protect their listings from competitors’ ads on the portals may lead them to choose to advertise with only a single portal. They could keep sending their listings to the other portals, or stick to their guns and pull them altogether.
A New York brokerage with more than 500 agents expects to face that choice later this year, and the firm’s leaders already know what they will do.
In negotiating a new 12-month contract with Trulia late last year, the brokerage was told that the cost to feature its listings would double. Although the brokerage was able to avoid being hit with the entire price increase originally proposed — an executive at the brokerage characterized the negotiations as “brutal” — Trulia would agree only to a 12-month contract. The executive said Trulia representatives warned that the price would “substantially increase” again next year.
If Trulia stays true to its promise to seek further price increases later this year, the executive said the brokerage will pull its listings from the site. If by that time Zillow and Trulia are sharing a single listing database, that means the brokerage’s listings would disappear from both portals.
The New York brokerage in question currently pays more to feature its listings on realtor.com than Zillow and Trulia. It accepts that pricing because it views realtor.com as the industry’s consumer website, and fears blowback from industry peers if it doesn’t support the site, the executive said.
But an executive at another large brokerage said the company will have no qualms about pulling the firm’s listings from realtor.com if prices on the portals rise and it’s forced to make a choice about whom to partner with. The brokerage is currently paying to feature its listings on Zillow, Trulia and realtor.com.
As ad prices rise, “there’s going to be a real battle” between not only the portals and brokerages, but among brokerages themselves, as they look to outdo each other with placement on the sites, this executive said.
“The portals are putting us in a position to choose the sites where we’ll enhance our listings and which we’ll pull from,” the executive said.
In new 12-month contracts it signed with the three portals earlier this year, Trulia’s prices quadrupled over last year’s, Zillow’s stayed flat and realtor.com’s doubled. Realtor.com is the most expensive of the three.
The brokerage felt that Trulia’s price increase was tied to the portal’s desire to push the firm away from featuring its listings, this executive said.
Leaders of a large brokerage in Florida got the same impression in its negotiations with Trulia late last year.
Trulia’s stance implied that long-term prices would keep going up, and that it wanted to open up the firm’s listings to advertising from other agents, an executive at the Florida brokerage said.
In a contract negotiation earlier this year, a large brokerage in California with more than 1,300 agents said Zillow was more explicit about its desire to open up the ad inventory currently locked up by the firm’s ad deal. The parties are still in negotiations.
Zillow was “pretty clearly stating that it is their goal to free up our listings to sell the space to other agents,” the California brokerage executive told Inman.
This executive said the California brokerage was informed that it would pay 50 percent more to feature all of its listings on Zillow in 2015 than it did last year, and that it would pay five times as much in 2016 as it did last year.
The California brokerage executive said that the comparatively smaller 2015 price increase felt like a one-year grace period before the large increase in 2016.
One way that Zillow is looking to sway brokers away from enhancing their listings but still getting them to share their feed with the portal is by pitching its updated Zillow Pro for Brokers program.
Firms who sign up for the direct feed program will get more branding around their listings, the opportunity to include a video about their firm at the bottom of their listings’ detail pages, and other perks Zillow announced in January.
To help entice the California brokerage to give up its ad deal with the portal, Zillow also offered the firm a display ad credit in the five figures that it could use on the portal, the executive said.
Hedding said Zillow offered CORE a $2,300 display ad credit to sweeten the firm’s transition from listing enhancements to Zillow Pro for Brokers.
What to do if you’re negotiating with the portals
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Many possibilities and an uncertain future
The ads that Zillow and Trulia have traditionally sold agents appear not only alongside for-sale listings, but on landing pages for the many homes in their databases that are currently not on the market. The search portals are popular not only with homebuyers, but with homeowners who may scoping out market conditions because they are thinking about selling.
If Zillow Group is able to free up more for-sale listings for buyer’s agent ads, it might be able to segment its ad inventory into two flavors: one that shows up alongside of for-sale listings targeting buyers, and a new ad product around off-market listings that could help agents target sellers.
Zillow Group CEO Spencer Rascoff teased that idea on Zillow’s third-quarter earnings call with investors.
Trulia has also talked about changing its core ad product. Adding a fourth agent advertiser slot to Trulia’s query box next year “could make sense for us,” Trulia’s then-CEO Pete Flint told an analyst who asked whether such a move might be in the cards on the firm’s third-quarter earnings call in October.
Editor’s note: PAA Research estimated that between 45 and 55 percent of listings in Zillow’s database were “featured” based on a June study, not a lower percent range that a previous version of this story incorrectly stated. This article has also been updated to note that CORE does feed its listings to realtor.com.