You’ve likely heard the news that as of June 22, 2015, Rogers is getting out of the online brokerage business. They’re shutting down Zoocasa.com after an alleged loss of almost $25M over the last two years.
Given the record-breaking sales in Zoocasa’s top two markets - Toronto and Vancouver - how does a brokerage lose so much money and fail so quickly with the behemoth Rogers’ engine fueling it? Simple. They didn’t deliver on their promises.
My colleague wrote a piece on our sister company’s blog on Condos.ca about the lack of any real value proposition in the Zoocasa business model. That’s the key underlying issue here – there was nothing in it for consumers beyond a small cash rebate, which is a terrible business strategy in an industry where consumers consistently place quality of service, expertise and results at the top of their wish lists.
But I’ll go a step further than this and say that it’s not just a lack of value that resulted in revenue losses, it’s that Zoocasa made brand promises they couldn’t keep and in fact claimed there was value where there was not. Both consumers and Realtors are savvy and could spot the holes a mile away.
The first broken promise was to consumers in delivering what Zoocasa refers to as “preferred agents”. After many years working in the Toronto real estate industry, you get to know who the top Realtors are by neighbourhood and by specialty (residential lofts, condos, houses and commercial real estate). I can honestly say that I’ve never seen any of the agents that I would deem as the top in the city listed on Zoocasa. I’m confident in saying that customers were highly unlikely to be matched with the best Realtor in the area because “the best” simply isn’t on the Zoocasa roster.
Why? Well, this leads us to the second broken promise which is the one made to Realtors. Zoocasa claims it matches Realtors with their ideal clients. But top Realtors (heck, most Realtors) just didn’t buy into it. If a quick interview was a successful means of making ideal matches, every online dating story would end in success.
Zoocasa tells agents that: “We do the homework for you by interviewing consumers ready to buy or sell a home. We uncover all the things that make them unique, including their wants, needs and goals, their neighbourhood, budget, property preferences, and many more of the finer details we feel are important to making the ideal match between agent and consumer.”
Here’s the thing. That initial interview, getting to know you stuff? It’s highly critical for a Realtor and customer to spend that time together directly. That’s how you both know if there’s a good fit or not. Zoocasa can’t broker an “ideal match” because the two parties need to meet to establish that. And so at best, they’re a basic lead generating platform which may or may not lead to a successful "happily ever after" real estate tale.
Most top Realtors don’t see value in a third party lead generation service disguised as a brokerage. It’s not because first-rate Realtors don’t want or need new leads – even the best agents have dry spells, particularly with sales listings in the current Toronto real estate market which is low on inventory in comparison to demand. It’s because the top Realtors tend to have their own, proven lead generation tools in place already (either personally-managed or they get leads through their parent brokerage) and when leads are in short supply, they’d rather spend their money on generating new, quality leads that they have control over and that help to build their own brand equity versus paying Rogers more to do it for them.
In other words, the value that Zoocasa promises to Realtors in order to recruit “top agents” isn’t all that valuable. To most successful Realtors, they represented an unnecessary middle man eating into commissions.
The third big mistake in my eyes isn’t so much a broken promise as bad business planning. Zoocasa’s revenue model was completely unproven in Canada. They relied on referral fees and they didn't have Realtor desk fees coming in to generate a continual flow of revenue. They had no guarantees that they could grow their Realtor and client roster to the degree required to even begin to break even. The problem with this model isn't that it's new or untested (if no one tried new things, there would be no innovation in the industry), it's that Zoocasa grew too big, too fast on that unproven model with no Plan B to adapt to market needs (specifically, that there wasn't a big enough market demand for referal services).
They also appeared to spend millions in advertising to launch. To be fair, a good chunk of this may have been in-kind Rogers’ media but you still have to pay for creative and production even if the media space is gifted. And that’s not cheap. The Zoocasa model launched too strong and too splashy in my opinion, before they knew if the model itself would resonate and be sustainable. Let alone profitable.
Our experience shows that, while we love a little bling here and there, substance will always trump flash. Our brokerage Property.ca focuses on the cultivation of loft experts by neighbourhood and building level for our highly-experienced MrLOFT team. The promise of connecting customers with a Toronto loft expert is something we take very seriously and our Property.ca Realtors are truly among the most knowledgeable in the city.
The era of the generalist Realtor is over – consumers are more knowledgeable than ever and they want real-world expertise, experience, results and quality service from their Realtors. Not a virtual matchmaking service that is just as likely to pair you with a dud.
Lead image © Daniel Padavona, Shutterstock.