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Bernice Ross
When Gary Keller declared that his company was a technology company, most industry experts thought this was aspirational – they were utterly wrong.
I recently was Keller’s guest at his team leader meeting. What he unveiled during this meeting was a sophisticated technology platform that will rival anything Zillow, Redfin, or anyone else in our industry has built. My biggest takeaway from this meeting was that the changes ahead will be so profound that how we transact today may soon be as antiquated as doing business before the internet.
The Platform Revolution
If you want to understand why a company like Redfin that had never made a profit could be more valuable than Realogy, read the book “Platform Revolution” by Geoffery Parker, Marshal Van Alstyne and Sangret Choudary, which Keller urges all his team leaders to read.
The book describes the traditional system employed by most business models as a pipeline model. A pipeline business “employs a step-by-step arrangement for creating and transferring value, with producers at one end and consumers at the other.”
This is the case for virtually all real estate brokerages today. Sellers offer their houses for sale, brokerages take the listings and market them through the MLS, print and online marketing, and buyers show up to purchase. The authors call the pipeline business model a “linear value chain.”
A “platform,” in contrast, is “a new business model that uses technology to connect people, organizations, and resources in an interactive ecosystem in which amazing amounts of value can be created and exchanged” like Amazon, Facebook and Google.
In the platform model, value is determined by the community that participates in the platform. This is why Zillow and Redfin have such high valuations in contrast to pipeline models such as Realogy and RE/MAX – it’s the number of people who participate on their platform that drives value, not the number of sales or the profitability as in the pipeline model.
The bulk of the real estate industry is still running on a pipeline model. In fact, this is the very reason that Compass is missing the boat – they’re recruiting agents into a pipeline model.
KW Building a Platform
Keller shared a spreadsheet one of his top team leaders had created to manage the numerous “bolt-on” technologies the agent uses to run his team like a CRM system, a lead generation platform, transaction tracking platform, print and online marketing systems and video. These systems are often incompatible. The result is that users are stuck creating elaborate workarounds just to cope with this stitched together, hodgepodge of “bolt-on” services.
In February of last year, Keller Williams launched an AI-powered virtual assistant for its agents, called Kelle. The assistant helps agents access neighborhood market reports, built using KW data, and helps them manage referrals and monitor their progress toward goals.
Building an AI-based platform is a daunting effort. You not only have to build the technology – you must also allow a minimum of two years to train the AI. KW’s AI is now sophisticated enough that they can roll out the key components of their platform including Kelle, their CRM and other back office functions.
In Pursuit of Real Estate’s Holy Grail
Many experts have described creating a seamless consumer experience from point of contact to well after closing as the Holy Grail of real estate.
“People think that we’re just talking about building Kelle, a CRM or a marketing platform, but what we’re really marching towards is a seamless transaction,” said Josh Team, president of Keller Williams. “This is why we have been building data alliances with companies like Google, Nextdoor, Porch and dozens of others. In addition, we’ve been building ancillary companies around mortgage, insurance, plus many others so that everything works together creating one unified experience for the consumer.”
Couple this with the size of the platform that KW begins with – 160,000 agents and their clients – detailed transaction history dating back to 1983 which can train its AI plus the ability to drive 100 percent adoption because every transaction will ultimately be conducted on its platform, KW is well on the road to creating a user experience akin to what consumers experience on Netflix or Amazon.
Today, the bottom line is not whether a company is a technology company, but whether it is doing business using a platform versus a pipeline model, the size of the community it creates, the strength of the data upon which its AI is built and to what degree the company can provide the most valuable experience to consumers. Zillow, Realtor.com, and Redfin have built powerful consumer platforms. The next round this battle will be won by those companies who nail the end-to-end consumer experience.
Bernice Ross is a nationally syndicated columnist, author, trainer and speaker on real estate topics. She can be reached at bernice@realestatecoach.com.
