Consumerism
REALonomics understands the real estate industry, both its abstract side and its empirical dimensions.
We have been inside, outside and throughout the industry for quite some time. Our vantage point has changed, enabling us to see what we heretofore could not. In the world of business development and economic analysis one’s vantage point can bring the kind of insight that frankly, changes one’s faulty fundamental assumptions while confirming sound precept.
REALonomics now realizes, without further equivocation, analysis or debate, that our industry’s real estate genie has been released from its bottle and is fresh out of wishes!
Pushing the Vapor Back into the Leaky Bottle
From here on out, all attempts to capture the vapor, return it to its confines and cork the RE bottle will fail.
The Genie that once belonged to us, obeyed us, served us and made us what we once were is loose and fresh out of wishes.
The bottle is tarnished. Rubbing the bottle produces nothing. Our Genie is loose and now serving multiple masters simultaneously, none of whom, save one, the consumer, has sway over the Genie’s capacity to grant new wishes.
It’s impossible to bottle this kind of vapor; its seepage passes through the tiniest of spaces, spilling into the open atmosphere, moving where it wills to go. Where does the Genie go? It ALWAYS takes the path of least resistance, shunning confines, rejecting control and moving to open expanse where it finds its ultimate economic freedom.
Bottling the vapor no longer creates reliable “RE Economic Tonic” for the industry. The vapor is meant to be breathed, not bottled.
RGB, NGB and NGCs
Retail Generation Brokerage (RGB) used the bottle to control the Genie in vertical markets where the consumer was required to submit to the model in order to invest in real estate. Net Generation Brokerage (NGB) is the post 2000 freedom model where horizontal peer collaboration is replacing hierarchal control models.
The real estate industry is now the most vulnerable mainline industry to peer-to-peer models where the consumer and the Genie meet up for property inventory data exchanges and local community collaboration. The context is different and the conversation is different. Both the Genie (property and community information) and the consumer have reached agreement…FREEDOM Rules, open space ROCKS!
Vertical (retail, local style bricks and mortar) real estate brokerage models are being quickly replaced with a viral model, spread by a Genie on the loose and fresh out of wishes.
Two dangers to the industry and its economic models occur in this environment. First, there is the danger of complacency, of not re-tooling our economic ship so that it can operate fluidly in a viral, horizontal world where profitability is defined by open, collaborative peer models facilitated by the real estate industry.
Secondly, and perhaps more importantly, there are now signs of the emergence of what REALonomics calls “self brokering” whereby and wherein the consumer creates their own economic reality, ignores real estate professionals, only calling on them if they must and when they so desire for services they define for themselves.
The next generation of “consumer-buyers-sellers-clients” that will fuel the recovery and beyond will be Next Generation Consumer (NGCs) whose informational points of reference are alltogether dissimilar to old line retail brokerages.
Great News and More Great News!
Great news! The Genie, once our beckoned servant, existing only to accomplishing our economic wishes, rather than rejecting us, invites us to follow into new the new economic space of opportunity…to collaborate, to join the viral horizontal world of the consumer with new approaches to property information management and peer-to-peer community information services.
More great news! Never before has the industry and its adherents been afforded the opportunity to engage in a kind of real estate information alchemy, where our old lead bottle can be turned to a golden horizontal field of freedom for both us and our partner, the consumer.
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In a previous post (Nori’s Leaky World) we spoke about the real estate industry being built, in part, on a control model.
Throughout our history we have deployed control-based business models. Like the real game of Monopoly® our industry has created its own market game board governed by a set of rules we wrote and occasionally edited to extend our control.
During previous eras an owner’s business model was based largely on mechanisms designed to control information, markets, brands and for a long time we even tried to control the real estate agents who were part of companies.
It is equally important important to note and to admit that the real estate industry has historically attempted to control the consumer with respect to our business models utilizing our clever control over access to property information as the primary mechanism for doing so.
Control and Dominance
Large segments of the real estate industry and its core service providers still engage in Realonopoly, a game about market control and dominance. In the game of Realonopoly we carve out spots within defined markets…we then seek to control our position, until, as we have all experienced in the game of Monopoly®, we can no longer pay the rent; a position in which too many owners find themselves today.
Within real estate, mortgage and title companies, creating one’s board is the first initial step; everything flows from there. Position on the board can mean power and power typically equates to a kind of control measured by muscle flexing. Control has historically been everything in the real estate industry.
The ultimate control was consumer control.
Losing control creates a depression and a void…a crack where others can slip in. Yet, it is the contention of REALonomics that each era in the historical timeline of the real estate industry unravels when control is challenged and the challenge typically stems from a change in informational technology…the means by which people gain access to real property data.
Collaboration and Community Forcing Change
Business models typically change when the old models are confronted by new technologies and people empowered by concepts of innovation. Most of the change in business modeling is induced by innovation driven primarily by advances in technology. These advances in real estate technology create a “democratizing” of information, which then empowers others to innovate and challenge the control status of the prevailing models.
This is precisely what has taken place in the real estate industry. REALonomics has presented this as the Democratization of Real Estate, a time where the industry loses its grip on the game of Realonopoly and finally is forced to abandon its position in favor of a new board game. Think of this concept as three distinct eras as follows and notice how transitions occur when new technology is introduced…then, notice how control is relinquished as information is decentralized and ultimately democratized.
Examine the following illustration, extracted from our archives. It demonstrates the evolution of the real estate industry’s business models.
Control works well in business model climates where informational access and free exchange are blunted, where collaboration is limited to the controllers and where the rules only change when the controllers are finally confronted by free thinking people who are initially labeled as rebellious fringe lunatics.
We have now entered an economic era with a new personality being formed by collaboration and communities, rather than control and corporate bureaucracies. Each consumer who is empowered with Internet access is empowered to shape our business models and help us write the rules that will govern The New Real Estate Economy.
There is a new board game emerging that will redefine how we will play the real estate game tomorrow, next month, next year and for quite some time in the future. It’s now a game without many rules, one of collaboration and community, of open, free-flowing dialogue where one person is just as powerful as a group. How do our current models stack up to his new reality.
The question we ask is “Does anyone still want to play the old game, Realonopoly, a game in which we predict there will be no winners?”
Wikinomics is a book by Don Tapscott and Anthony Williams. If you haven’t read it yet, do yourself a favor and get it. It is a good interesting read on how the Web is no longer about idly surfing and passively reading or watching, but how it has evolved into a new dynamic form of community and creative expression, one of sharing, socializing, collaborating and creating communities.
Participation has, according to a Wikinomics, reached a tipping point where new forms of mass collaboration are changing how goods and services and invented, produced, marketed, and distributed on a global basis. Now the perfect storm of technology, demographics and global economics is an unrelenting force for change and innovation.
They pinpoint 2006 has been the year when the programmable Web eclipse the static Web, on every level. For example:
- Flickr beat out webshots
- Wikipedia beat out Britannica
- Blogger beat out CNN
- Epinions beat out Consumer Reports
- Google Maps beat out MapQuest
- MySpace beat out Friendster
- Craigslist beat out Monster
The losers were websites. The winners were communities.
Wikinomics believes that profound changes in the world of technology are giving rise to power new tools based on community and collaboration. We are a new economy – a vast global network of connected people that swap and exchanging ideas, information and an endless list of other services.
And from where I stand I can see it happening to our industry as well. The real estate industry is changing and the thousands of blogs, social networks and the wikis are already laying the foundation for the new world. New business models are already being born, new paths already being charted and new leaders already being groomed.
Real estate over the next decade will change forever and Wikinomics may shed some light as to the path.
Below are a couple of examples of social networking in action:
Do you remember this woman? She is the one who filed a lawsuit against a RE/Max agent named Michael Little who she and her husband accused of selling them a $1.2 million home they say was worth substantially less.
See our previous posts entitled Ummel’s Talk, You Decide and Ummels VS Re/Max.
Marty Ummel appeared on national television news programs such as the Today show claiming that she and her husband, Vernon, were deceived by Little in the process of making their purchase.
A jury of twelve (10 women, 2 men) were not convinced and delivered a unanimous decision after a quick two hour deliberation declaring that Little did not breach his duties and was not negligent in his actions on behalf of the Ummels.
Wendi Brick, jury forewoman, explained the verdict by saying, “We felt that yes, he had acted on their behalf, and we felt he met his fiduciary duties as defined…In any kind of purchase, especially one that big – and most of us have had our own situations we’d been through – the bottom line really stops with you. Whose final responsibility is it to sign a contract? It’s yours…”
Little described his feelings by saying, “I feel incredibly relieved and vindicated…it has been more than two years of quite problematic times for me, and I’m happy to get it behind me.”
As firmly as IBM ruled mainframe computing and Microsoft the personal computer age for many years, so currently Google today rules the Internet. Originally nicknamed “BackRub” in 1998 by Stanford University buddies, Serge Brin and Larry Page, Google has not only become one of the most admired companies of the modern day but has found itself into our every day language, with the verb “google†being added to the Oxford dictionary in 2006.
The stock price rocketed after its initial public offering price of $85 dollars in August of 2004 to over $720 in November 2007. At that time only Exxon Mobil Corp., General Electric Co., Microsoft Corp. and AT&T Inc. had a higher market capitalization among U.S. companies. Today at around $470, nearly 40% from its high, Google still commands a market capitalization of over $110 billion and continues to battle with giants such as News Corp. and Microsoft.
Google, with its network composed of hundreds of thousands of servers, Google’s system never ages. When its individual pieces die, engineers just pluck them out and replace them with new, faster boxes. This means the “Google cloud†regenerates as it grows, almost like a living organism.
At the same time Google at some accounts has become the gatekeeper of all information. Google also advises us that “real estate†is the most searched category on the Web – with the 2000-05 housing boom and the subsequent sub-prime and foreclosure catastrophe, this is maybe not that all surprising. But let’s look beyond that for a second.
With some 141 million individually identified pieces of property in the U.S., real estate is at the very center of the American way of life – whether living, working, sport or entertainment. As Google conducts more real estate searches it aggregates more real estate information. Potentially with each new property search, each new listing added to its “deep search†database, each virtual street tour completed, each foreclosure filed, and so on Google gains more knowledge of the real estate industry.
It actually is becoming increasingly harder to wrap your mind around just what exactly Google is – and more importantly what it may become.
Could Google become the best advertising vehicle of all time to find and to market a house for sale?
And if it does, could that reduce the need for various traditional real estate brokerage services?
And if yes, to what extent and in what way, could Google influence the fundamental re-engineering of one of the oldest sales professions?
What are your thoughts?
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