Unlike travel, most real estate in the US still involves an agent. As a result, product offerings often have to involve a real estate agent. This creates an interesting ecosystem of approaches:
Products focused on consumers are often a translation of offline process to online. To be fully consumer-focused, a company has to either buy or sell homes and/or run a brokerage. This enables the company to offer an end-to-end experience, and the company can get paid for it. If the company doesn't buy/sell homes directly or act as a brokerage, it's virtually impossible to get paid working only with consumers.
Some customer problems being solved and a corresponding example:
The most popular online real estate products help consumers find homes. Because agents capture commissions from home sales, they are essential to monetization. Agents want to generate more leads from buyers. They also want to market their listings for sellers better. Companies focused on consumers and agents bridge home search needs of consumers with marketing needs of agents.
Most of the companies in this category are real estate portals. They showcase data on homes easily for consumers. Before Zillow and Trulia, it was virtually impossible for consumers to access home inventory and pricing data. This data was only available to agents in the multiple listing service (MLS). Portals have removed the agent data advantage over time. But these platforms rely on agents to post listing data and pay for marketing. Other products have recognized that customers also want to search for agents separately from homes and focus on that need.
Some customer problems being solved and a corresponding example:
Many products focus on helping agents. These can either help agents grow their revenue or save on time or costs. These products target one or multiple stages of what agents do every day. Because these tools are only marketed to agents, they are often less well-known. That said, they are still capturing a portion of the $70B in commissions, just simply after agents get paid. There are a lot of different categories here which I will discuss in more detail later.
Some customer problems being solved and a corresponding example:
There are a number of different ways that real estate products generate revenue. The approach is closely attached to the audience they target and the problem they solve.
Companies that drive consumer interest but are not brokerages often charge agents for marketing. They usually rely on one of three payment methods:
Many agent-focused tools charge monthly or annual subscriptions. The pricing is usually based on the number of users (agents) or the amount of business the agent/brokerage does (volume). This is common for tools that don’t have measurable performance impact but help an agents save time or win more business. This model is often broadly associated with Software-as-a-Service (SaaS) companies. SaaS refers to companies that deliver products digitally through subscription licenses.
Many companies that solve consumer problems end-to-end charge a fee per transaction. Often this is simply the commission a real estate brokerage would get. But sometimes it’s a flat rate instead.
These companies can also make money by reselling on a marketplace or selling leads to other services. For example, a company that buys homes from consumers may make money from fees initially. But they then increase the price of the home and sell it to a buyer. Afterwards, they may sell that buyer title insurance. Title insurance would be an ancillary revenue line. This is because it is not related to the core real estate commission. Finally they may sell the buyer lead to a moving company, and generate affiliate revenue. This would be affiliate revenue because the moving company is only paying for traffic for confirmed moves. Many new brokerage and iBuyer models are based on capturing revenue from initial fees and these ancillary revenue lines.
