It was a business model doomed to failure -- paying MLSs for aggregated listings while paying traffic partners to expose the listings to consumers. Finally, Realtor.com has pulled the plug -- no more payments to MLSs. How will the real estate industry react?

Since 1997, Realtor.com has paid MLSs to aggregate publication-friendly listings so that Realtor.com could expose them to consumers using its trademarked name and its unique relationships with traffic partners such as AOL. To assure dominance in online housing listings, Realtor.com paid many MLSs for exclusive rights to publish -- as much as $3 a listing -- through "Gold Alliance" agreements. Listings remained on the site free of charge to individual brokers until they were sold and/or removed from the MLS feed, making online exposure a bargain compared to the one-day exposure provided by local newspapers.

Brokers were rewarded for giving exclusives, too. Some cashed in with Homestore stock. Most agreed that having their listings online for free was a good thing. It helped solidify the Realtor brand, improved the profitability of their MLSs, who provided the feed to Realtor.com and were compensated for doing so, and it gave brokers a way to capture free leads which they could pass on to their agents in the form of referrals.

But this was back in the heady days when Realtor.com's operator Homestore was flush with millions in venture capital and the stock was going nowhere but up. At the time, a business model based on paying Realtors for their content must have made sense. How else would a company gain traction in a new medium, the Internet? Then came the dotcom market crash of 2001 and all the lessons of the new economy were suddenly very hard-earned.

You can't promote the potential for profit forever. You have to make a profit sooner or later.

Promoting Realtors through their own branded portal was a good idea, but paying them to promote their listings is no longer a good idea. And that's because Realtor.com can't do it anymore for lower than free -- and paying for listings is lower than free.

The "new economy" Homestore management was forced out by 2002, and new management came in with the formidable task of making a company profitable with a spoiled-rotten customer base fat with freebies, low-cost marketing tools and an incredible sense of entitlement. Some Realtors still believe that their not-for-profit NAR should be able to magically create the number one real estate portal in the world without costing members any money.

Some brokers began to feel that Realtor.com was a competitor -- a place for consumers to go other than the broker's Web site. Brokers banded together and arranged to have their MLSs enable them with listing feeds, too. Internet Data Display and virtual office Websites were born. And the reason Realtor.com was paying $3 a listing for exclusivity went out the window, but Realtor.com was still tethered to contracts, some of which don't expire until 2005.

Most brokers, however, appreciate Realtor.com for its exposure value, but they want both free Realtor.com feeds and Websites with direct MLS listings feeds -- the best of both worlds.

So, the moral to the story is that the support of the largest trade association in the world and unprecedented access to its members didn't guarantee profitability. Realtor.com valiantly swam but could do little but sink with two anchors around its ankles -- paying MLSs as much as eight to $12 million a year (and perhaps more) as well as millions in traffic-building fees to portals like AOL and Earthlink.

Something had to give.

While individual Realtors could see their listings posted online for free, they were charged for "personal" listing enhancements like Websites and other tools which enticed consumers to contact them directly instead of the brokerage which is always listed for free. This year, Realtor.com raised its prices to be more in line with what newspaper classifieds charge for exposure, a move which shocked some Realtors. Others applauded the change, believing that their local newspapers had the upper hand for too long. In fact, one of the largest franchise brokers in the nation told Realty Times he hasn't bought a newspaper ad in his local market in years.

Now, Realtor.com is changing its deal with MLSs, which could impact the bottom lines of most MLSs, whose listing fee agreements with Realtor.com haven't already expired. Remaining Gold Alliance partner MLSs will no longer be getting premiums per listing for exclusivity once their contracts run out, which could mean as much as several thousand dollars a month or a quarter. Other MLSs which were on revenue-share deals with Realtor.com are welcome to still share revenues, but they won't be attached to listing feeds any longer.

Instead Realtor.com has a whole new deal to offer.

Find out Realtor.com's new deal with MLSs on tomorrow's edition of Agent News.

Published: September 16, 2003

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.