Zillow & Trulia’s “Free” Content (Or, You Could Call it What it Should Be: “Copyright Infringement”)

Double Whammy:  Zillow’s Revenue, Realtors’ Expense*

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

One of the biggest reasons that Zillow and Trulia — Websites that aggregate real estate listings and whose stocks are publicly-traded — make a lot of money is that they don’t have a lot of costs.

Or, to put a finer point on it:  their costs are borne by others.

Like Realtors.

So, in addition to having none of the usual expenses associated with traditional “bricks-and-mortar” entities (rent, utilities, property taxes, etc.), Zillow gets its online content basically free.

Not least of which is the tens of millions of home photos that accompany its millions of online real estate listings.

In economists’ parlance, the websites are “free riders” (what you and I might call “parasites” or “deadbeats,” if not for their even more egregious behavior; see below).

$200 Per House . . . x 5 million(!)

What’s the big deal?

Just this:  all those photos were paid for — and staged, supervised, etc. — by the nation’s 1+ million Realtors, in the course of getting their listings on the market.

Depending on the home’s size and the photographer’s fee schedule, the cost to professionally shoot a home can be anywhere from $150 to $1,000 per listing.

Or more, for listings with lots of high-definition shots; when a drone is used to take aerial photos; or when there are significant post-production expenses (adding a digital blue sky, filtering out glare, etc.).

Multiply that by the 5 million or so existing homes that sell in the U.S. annually, and you’re quickly talking about real money:  as much as $1 billion annually, all paid for by Realtors.

Subtract that amount from Zillow’s revenues, and suddenly its bottom line doesn’t look so good.

In fact, given that its annual revenues are only half that (around $500 million), you might even say it should be bleeding money.

Adding Insult to Injury, or, Getting Realtors Coming & Going

But it actually gets worse for the Realtors.

Not only don’t they get compensated for the millions they spend on photography, agents actually get hit up (shaken down?) by Zillow, Trulia, etc. to be “re-associated” with their listings.

Yup, the aggregators’ business model is to be free to consumers, but to sell ads to vendors who want to be in front of home buyers and sellers.

Like real estate agents.

So, to have their name next to their listing, accompanied by photos they paid for, Realtors need to — incredibly — pay Zillow.

Long Overdue:  Paying Realtors a Licensing Fee

How about this instead:

Zillow pays the nation’s one million Realtors a monthly licensing fee to use all those photos.

Or, an annual royalty on its sales.

It could even be called “expense reimbursement” (which is exactly what it is).

I dunno — let Zillow pick.

But, appropriating Realtors’ work product for free — while charging them to have their names added back to that same work product (their listings) — doesn’t cut it anymore.

P.S.:  Conceptually, it doesn’t really matter if Zillow is in fact licensing its data from the brokers and local MLS’s.

In that case, it’s the latter who should be remitting a licensing fee to the agents.

If they don’t want to do that, I’m sure all those dues-paying agents would be happy to accept a rebate on their annual membership fees or other passed-through expenses.

*Alternate title for this post:  “The Online Kings Have No Clothes Costs.”