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The Hidden Cost of Premium Listings
Many MLSs and Listing Syndication Sites earn a large percentage of their revenues by selling premium listing positioning. This amounts to a huge hidden cost to agents while delivering ZERO net value to them. In our mind this completely goes against everything an MLS is supposed to stand for--promoting cooperation between agents—by forcing them to compete. This sounds good initially. Agents feel as though they have a choice to pay. Unfortunately, they’re wrong. Everybody pays. Let me show you how this scam works. WARNING: Some math involved.
Many MLSs and Listing Syndication Sites earn a large percentage of their revenues by selling premium listing positioning. This amounts to a huge hidden cost to agents while delivering ZERO net value to them. In our mind this completely goes against everything an MLS is supposed to stand for--promoting cooperation between agents—by forcing them to compete. This sounds good initially. Agents feel as though they have a choice to pay.
Unfortunately, they’re wrong. Everybody pays. Let me show you how this scam works. WARNING: Some math involved.
PART I (all listings treated equally)
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Imagine an international real estate website with 1 million property listings from around the world, drawn from 50,000 agents. Each agent pays a membership fee of $250 to list their properties on the website. This website receives 5 million visitors each year, and on average, each one of these visitors view 10 property listings while on the site. With these assumptions, we can determine how much the agent pays, on average, for each person who views one of their listings (i.e. the cost-per-impression). |
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We can calculate the total # of times each listing is viewed by multiplying the total visitors the site receives each year by the average number of listings each visitors views when visiting the site (listings per visit) for a sum of 50million. We then can divide by the # of properties listed to get 50. We then multiply this number by the average number of listings each agency submits (1million ÷ 50,000 = 10listings/agency) to see that each agent receives on average 500 listing views for all his listings.
Now we can calculate the effective cost of each one of those listing views by dividing the Membership Price by the # of views for all agents listings. We find that the agent is paying on average $0.50 each time one of his listings is viewed. Not bad, when weighed again a possible sales commission.
PART II (When MLS Provider offers Premium Listings)
Now lets assume that that the MLS offers agents the opportunity to make 5 of their listings premium for $60 dollars. Lets say that 35% (or 17,500) of our agents think this is a good idea, generating 87,500 premium listings on the system.
On a system this size, placement is everything. 85% of all listings viewed are premium listings as buyers rarely navigate past the fourth or fifth page of listings within their search results. In other words, premium placement makes a listing approximately 5.5 times more likely to be clicked on. Lets take a closer look at the numbers to find out the hidden cost to agents.
What we see from this analysis is that when the MLS does not charge for premium listing placement, our price conscious agent is paying, on average, $0.50 for each time his property listing is viewed. When premium listings are offered, even if the agent decides he does not want to spend any more money on marketing, we find that he is now paying on average $3.04 each time one of his listings is viewed. A 600% price increase!!
(Or, more accurately, a 600% decrease in the quality of the service being provided)
So what happens if everyone realizes the value of this premium listing placement and elects to pay for them? Well, everyone is out $60 and is back where they started!
