Competing Business Models:  Referral Fees vs. Advertising (Wanna Guess From Whom??)

[Editor’s Note:  The views expressed here are solely those of Ross Kaplan, and do not represent Edina Realty, Berkshire Hathaway (“Berkshire”), or any other entity referenced. Edina Realty is a subsidiary of Berkshire.]

With artificial intelligence gaining momentum, it was only a matter of time before Alexa, Siri, or another digital personal assistant was asked — and answered — the question, “How much is my house worth?

At least in the YouTube video I saw, once the user provides an address, Alexa actually gives a specific dollar amount (with the inevitable qualifier, “approximately”).

Better Than a “Zestimate?” 

So, how close did Alexa come?

Since I don’t know anything about either the home in question or location (Aurora, Colorado), I have no way of knowing whether the amount is remotely accurate.

But then, neither does Alexa.

Instead, it quickly became clear that Amazon’s business model (at least for now) is to use Alexa as a vehicle to generate referral fees from Realtors.

Which is why, after haphazardly tossing out a dollar amount, Alexa immediately asks the user “whether they’d like to be contacted by a real estate agent.”

Business Model: Collect Fees From Realtors

By contrast, the business model for Zillow, Trulia, etc. is all about aggregating online eyeballs that they can turn around and sell to advertisers.

Wanna guess which group gets solicited the most to advertise on Zillow, Trulia, etc.?

Meanwhile, savvy consumers will note that neither Zillow nor Amazon’s mission includes this objective:  “[to] estimate any given home’s fair market value with a reasonable degree of accuracy.”

I call the contrasting business models “bait & switch (to an actual Realtor)” vs. “hook & hold (online).”**

**Zillow’s out is that its estimated price (“Zestimate”) is only a suggested “starting point.”

See also, “Why Realtors Hate Zillow“; “Zillow CEO Sells Home For 40% Less Than “Zestimate.””; and “Edina Realty Steals a Page From Southwest Airlines, the NFL, etc.”

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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