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MLS OUTLOOK: Rethinking MLS revenue

January 1, 2006

Data for Dollars?
Uses for MLS data run the gamut, but who’s selling what to whome these days?

Rarely does a day go by that Jim Harrison doesn’t get a phone call from an organization such as Google, Microsoft, or Zillow.com asking to purchase his company’s highly coveted MLS data. “My phone rings off the wall with third-party vendors dying to have our data,” says Harrison, president and CEO at Campbell, California-based RE InfoLink Inc., a 21,000-subscriber regional MLS that’s owned by seven Realtor® associations.

What’s motivating those third parties, explains Harrison, is the promise of real-time transaction information that companies from movers to data marketers can use to build their own businesses. Dashing their hopes is an MLS that is committed to working only for its subscribers and as such refuses to sell the data. Although they’re not willing to sell data for profit, RE InfoLink does license its MLS data with a handful of business partners, including one firm that provides wireless applications for member use.

“We’re not in the business to be packaging and selling data,” says Harrison, who sees privacy and intellectual property rights issues coming into play for those MLSs that do “sell” the data. “It’s outside of our core purpose, and something that most brokers wouldn’t appreciate.”

Changing Tides

Harrison’s shares his sentiments withmany MLSs that just a few years ago were hot on the idea of selling and packaging data as a way to generate revenue. In a 2003 report, for example, Gregg Larson, president of the Scottsdale, Arizona-based Clareity Consulting, called data licensing “a business with great, untapped potential."

At the time, he saw national and regional listing advertising portals, local listing advertising sites, Automated Valuation Models (AVMs), IDX and VOW sites, and transaction management systems as viable sales channels for MLSs. Potential customers included appraisers, attorneys, credit bureaus, insurance firms, and direct marketers, among others.

Although the opportunity still exists, Larson says the environment in 2006 is decidedly different than it was just three years ago. “It has taken a turn for the conservative side, with MLSs trimming back on the licensing of data over the last couple of years,” he explains. “Most of it has been done at the request of the broker-members, many of whom have sent the message that they would like to be careful and cautious about whom the data is licensed to.”

Also impacting the trend was a well-publicized row over the Chicago-area company called REBIG, an aggregator and licensor of MLS data to national buyers that ceased operations in late 2004. Brokers whose data was being sold claimed they weren’t informed and didn’t receive a cut of the profits. Brian Larson, Minneapolis attorney who worked for the outfit, says that since it closed up shop there has been “comparatively little discussion about licensing MLS data to third parties for financial gain.”

Instead, Brian Larson says, MLSs have set their sights on data licensing that returns value in terms of leads for their members, such as those involving local newspapers and publications. Northeast Florida MLS in Jacksonville, for example, has an arrangement with its local newspaper through which the publication offers services (such as advertising) to the group’s 6,100 members in exchange for the MLS data.

Ron Stephan, the association’s executive vice president, says the organization has more than 500 data distribution channels (up from just three in 2003). This includes the newspaper, member IDX sites, and vendors who provide back-office applications to local brokers. Before entering any such arrangements, Stephan says the MLS issues a licensing agreement that outlines the contractual obligation to use the data “only in the manner in which it was intended.”

“We make it very clear that it’s not for resale, nor is it to be used by another business,” says Stephan.

Baby Steps

With 48,000 members, Lisle, Illinois-based Multiple Listing Service of Northern Illinois stands as a large target for third parties looking to get their hands on MLS data. Although Brad Tertell, vice president and general manager, gets frequent calls from banks and investment companies such as Fidelity and First American, (like Harrison) he always turns them away at the door. “It’s not even something we could consider at this point,” he says, noting that MLSNI at one point had an agreement with REBIG for data sales.

MLSNI does license data to various third-party vendors who earn the right to use the group’s data to provide products and services (particularly those outside the realm of what the MLS typically would provide) to its members. Those services include customizable IDX and VOW Web sites, and CMAs. But the buck stops there, Tertell explains. “There’s value in the data and as long as we can keep it somewhat under lock and key, we will.”

Even with that “close to the vest” philosophy, Tertell sees potential revenue opportunities in the MLS data. Tapping it, however, depends on the individual organization’s philosophy. “We’ve always looked at it as being the ‘broker’s data,’” says Tertell. “If they want us to do something with it, we will. But we would never do anything without their permission.”

Gregg Larson also sees much potential ahead, based on the sheer number of people who are interested in the real estate data. Many are looking for national data feeds, he says, and are disappointed to learn that in REBIG’s absence, no such thing exists. Going forward, he sees the data becoming less commoditized and accessible to third parties as MLSs crack down on those who are using the data without express permission to do so.

“The industry is really clamping down on the gray market, where data is being bought and sold by unauthorized parties,” says Larson, who sees brokers continuing to play a key role in MLS’s ability to sell and package their data.

Brian Larson also sees MLSs facing “strong opposition” from brokers when it comes to marketing data licenses outside of the basic newspaper-type arrangements. “Brokers are very concerned about how their inventory gets used, and about someone else deriving financial benefit from that inventory,” says Gregg Larson. “That trend is going to continue. If I were in the business of licensing data from MLSs, I would probably be despairing right now.”


Data to local newspapers

The popular practice of supplying MLS data to local newspapers has come under scrutiny recently in reaction to some newspapers’ practice of reselling the data and selling leads back to brokers.

Before Stephen Snell, rce, of the Realtors® Association of York & Adams Counties (Penn.) leased data to his local newspaper, he had lengthy contract negotiations on what data his associationwould provide and how the newspaper could use it. “This was not a giveaway of information,” says Snell. “Our contract also stipulates that the newspaper provides us with ad space in its weekly homes section for association editorial content.”

The Northern Ohio Regional MLS’s Board of Governors rejected sending listing data to the local newspaper because it would be competition for brokers’ Web sites, says President and CEO Carl DeMusz. The newspaper has since developed an online advertising section and the brokers pay to have their listings appear—no lead generation or unfair competition.