The giants enter real estate, at last

2017 was the high water mark for venture capital flooding into real estate, along with every other industry. The biggest was the $450 million that Softbank poured into Compass, but let’s not forget that OfferPad raised $260 million in early 2017 as well.

One of the more curious things about real estate is that the technology side of it has long been dominated by startups. Don’t forget, Redfin and Zillow are barely 10 years old.

Sure, you have Move Inc. and CoreLogic and Black Knight (I guess Rapattoni is still around?), but for the most part, we’re talking about relatively small startups. Companies we think of as major, such as BoomTown, Placester — even Opendoor, Compass and OfferPad are all startups.

Given that the real estate industry is gigantic, highly fragmented, and filled with inefficiencies, it’s the perfect target for smart tech guys and gals with a glimmer in their eyes. It explains the flood of VC money into real estate.

Just the real estate brokerage market is a $158 billion a year industry, including commercial. Just the advertising piece is, according to Zillow’s IPO filing back in the day, $6.2 billion.

There are maybe 2 million people with real estate licenses, and 1.3 million or so are dues-paying Realtors. There may be as many as 857,492 business connected to real estate sales and brokerage, which might include commercial, property management, appraisers and the like.

So where are the real big guys? The giants of Silicon Valley?

Well, they began dipping their toes in the water in 2017. I think they’ll start to arrive in earnest in 2018.

First up, Facebook, which launched two major updates to its real estate advertising platform. (Most of the insights here comes from Mike DelPrete’s awesome site. Check out the post in full.)

One is expanding the Marketplace by adding thousands of rental listings. This wasn’t a small change: it involved an overhaul of the search experience as well as taking feeds from Zumper and Apartment List, two major rental websites. Here’s DelPrete’s commentary on the changes:

“On the rental front, the product refresh and accompanying listing partnerships are game changers. Syndicating listings from established rental sites — and improving the user experience for renters — will make rental search far more useful on Facebook, attracting users who will ultimately incentivize more landlords to post inventory directly to Facebook.

“Facebook isn’t settling for feature parity with powerful incumbents like Craigslist, encouraging landlords to post 360-degree photos to provide a better sense for what a listing is like.

“Facebook is smart to focus on rentals, which are an ideal entry point into residential real estate because competition is fragmented: there is no MLS or single source of truth for rental inventory. By supercharging its network effect through listing syndication and user-side tweaks, Facebook has a shot at replacing Craigslist as the most comprehensive database of rental listings in America.”

The other product is the new “Dynamic Ads for Real Estate” product, which launched in September. It not only allows brokers and agents to upload listings directly to Facebook, but it also allows for far more finely targeted advertising.

Again, DelPrete wrote:

“Until now, agents could only target broad audiences, capturing leads with less intent than users actively surfing a real estate portal for homes. By allowing brokerages to upload a catalog of live listings and target users based on their past interaction with specific listings, Facebook lets agents market to users who directly demonstrate affinity for their homes for sale, which should improve lead quality and ROI.”

Facebook has already been a big marketing channel for some real estate agents and brokers. The early adopters have been seeing incredible ROI. Inman reported that one agent spent $750 on a listing ad that yielded six contracts and hundreds of leads by targeting first-time homebuyers in her local market.

Even though Facebook ad prices have risen, the new Dynamic Ads for Real Estate allows for finer targeting, and the ability to upload listings will be huge. I mean, it is actually kind of frightening how much Facebook knows about me, especially once it has sucked in all kinds of data from my phone, Google searches and every device connected to Facebook — which is pretty much all of them.

I once walked through a mall in Japan, stopped for a hot second to look at an ultrasonic diffuser, and the next day, Facebook was serving up ads for an ultrasonic diffuser. I think they might be following me.

So yes, Facebook advertising for real estate could be amazing. Not for consumers, necessarily, but for brokers and agents? Ab-so-lute-ly.

DelPrete thinks Facebook could end up creating major problems for Zillow and other portals, especially once brokerages, franchises and even MLSs start syndicating to Facebook:

“The more precise targeting options available to agents, the stronger a case Facebook can make to brokers that they should syndicate listings directly to Facebook. This is when things get interesting: if enough agents use Facebook real estate ads in a given market, we can even imagine progressive MLS boards — who have been eager for more leverage against the portals — syndicating listings directly to Facebook.”

It’s a great analysis, and I could see that new reality coming to be. Because Zillow is huge and dominant in the real estate vertical, but let’s face it — it ain’t Facebook.

So I agree with DelPrete; these changes by Facebook could be a game changer.

But if Facebook gets in the game, it isn’t as if the other giants — particularly Google and Amazon — are likely to sit on the sidelines and watch Facebook dominate the $158 billion a year real estate brokerage space.

In fact, Inman reported back in July that Amazon was planning to enter the real estate space. Inman found a placeholder webpage that says, “Hire a Realtor” and spoke with a source who said “they were approached by a person who was looking for help with integrating agents into Amazon’s professional services marketplace.”

Amazon has since taken down that webpage, but it got the industry talking for a while about the prospect with a mix of fear and anticipation.

Was it just a test? Or is Amazon making preparations for a push into real estate? To add to the rumor mill, I heard from a source that Amazon recently recruited a significant number of people away from Redfin. Given that they’re both in Seattle, that may be nothing. Or it may be something. Who knows?

And then we have Google, who completely dominates search. Even today, when Zillow, realtor.com and Redfin have mobile apps that drive the majority of traffic to them, Google is the actual place where property search begins. The portals, franchises, brokers and agents are all still spending millions in maximizing search. The competition is fierce, but the rewards are worth it.

Google used to have a department that looked at real estate closely, and offered a way to put listings directly onto Google Maps. But it dropped that in 2011 and more or less exited focusing on real estate at all.

Turns out that it didn’t need to bother, as brokers, agents, franchises and portals all spent plenty of money on paid search ads as well as on optimizing organic search. They’ve been happy with the status quo.

Facebook’s entrance changes things. Facebook isn’t Zillow, as large as Zillow is. Facebook isn’t all that concerned about trying to optimize for search, and it’s certainly not going to spend on Google Adwords.

Will Google sit by and let Facebook take the lead in advertising solutions for real estate? Maybe, but I doubt it.

That means 2018 is shaping up to be the year when the real giants enter real estate.

I expect to see Amazon launch its “Hire a Realtor” service in some form or fashion, perhaps in limited markets as a test. I expect to see Google start to ramp up some sort of an advertising solution, again perhaps as a test, to get back into the waters it exited six years ago.

All of the competition will be good for real estate. Zillow and the portals will need to up their game significantly, while brokers and agents will have options for advertising, and consumers will, well, benefit if they’re in the market, and suffer through endless ads if they’re not.

But competition is good for everyone in the long run with lower prices and more choices.

Unless you’re Zillow, Move Inc. or (maybe) Redfin, all this attention by the giants of the internet economy is good news. Brokers and agents should start to feel love, to feel love, to feel love.