Who said 'never say never'?
The Walt Disney Company announced this week that it is launching Disney and ESPN branded direct-to-consumer content services — potentially striking a blow to consumer-facing tech giant Netflix.
Would real estate franchise giant Realogy ever consider such a risky move? Maybe.
Twenty years ago, it abandoned its strategy to go consumer direct when it sold Move.com for a whopping $760 million in stock to HomeStore, the operator of realtor.com at the time. HomeStore’s CEO turned the interesting listing site into a portal powerhouse but crossed the legal line and went to prison for a variety of white collar crimes.
At the time, Realogy got itself wrapped up in that dirty diaper in ways that it regrets.
Was abandoning the consumer strategy a mistake? Over the years, nearly $10 billion in market value was created by Realogy’s frenemies — Zillow and realtor.com. In the last five years, the real estate franchisor with a $3.55 market cap lost $1.5 billion in market value. Zillow’s market cap is $7.2 billion.
Plus, Realogy and the rest of the industry lost control of its core asset — home listings — and it completely missed the consumer moment.
Retiring Realogy CEO Richard Smith has chosen to partner with the real estate portals and stick to the franchise business. He has been reluctant to get back into the fight over who owns the data and he has resisted starting another consumer site. His disciplined focus saved the company through a dreadful downturn, but much has changed in the last 10 years and opportunity seems to be passing it by.
Realogy has a new CEO with a strong consumer bent. Talk about perfect timing. Ryan Schneider is a former executive at credit card giant Capital One, which was one of the first companies to systematically scour analytics to understand consumer spending habits. Data insights informed decisions on creating a variety of consumer credit cards — brilliant numbers-driven execution.
You must imagine he is eyeballing the consumer opportunity for Realogy. If he isn’t, then I am not a man who was born in Illinois.
The similarities to Disney are unmistakable.
Like Realogy’s home listings, Disney’s content was hijacked by consumer powerhouses Netflix and Amazon — making the media company a content vendor for the streaming services. Realogy is the largest content vendor for Zillow and realtor.com. (My pejorative description, not theirs).
Disney is taking a big swing at the ball, investing $1.6 billion in a technology platform for its new consumer products. The ESPN-branded video streaming service will be its first initiative, followed by a Disney-branded experience.
Like Disney with cable operators, Realogy is stuck with a weak link in the real estate value chain. It sells franchises to real estate brokerages, many of which are struggling and threatened by disruption, a predicament that’s forcing Realogy to finance many losing businesses.
A proportion of brokers today are like house rich, cash poor homeowners. They have the listings but little net income.
And they’re up against a major marketing challenge. The old rules of franchise branding have in some ways become obsolete when you consider most consumers go to the real estate portals first. Century 21 has brand awareness, but Zillow, like Netflix, is a habit.
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