Willard Says...

June 28, 2018

The Automated Bully

By Jonathan Zimmerman

In almost every industry, price increases are typical from time to time. Most people, while never happy about it, generally understand that there are a lot of reasons for nominal increases–improved features or products, the rate of inflation, etc.

Earlier this month, however, I received an email from Costar Group announcing that my firm’s LoopNet membership fee was increasing by 385%. 385%! Imagine what you could do if you were selling a product, able to implement that very price hike, and get away with it. I sure wish I could do that with my fees.

CoStar’s reason for the increase? “It has been several years since there has been a price adjustment” and “to more accurately reflect the value listers receive from exposure to 83% of all people searching for commercial real estate online as well as 95% of the top 1,000 brokerage firms.” I am not totally sure what that means, but I can definitely state that despite this alleged exposure, the number of leads LoopNet has generated for my office has increased 0%.

It gets worse. With my CoStar contract set to expire, I inquired about removing one of our users, since this individual is essentially moving towards retirement and has not logged onto the site in over 6 months. Of course, the almighty cyber-tyrant nixed that and told me that if I am holding this person’s license, he or she MUST have a CoStar account. Because I am sure that this extra $300 a month from my firm is what is keeping their $15 billion dollar organization afloat.

Willard Jones Real Estate is very small business and once the new fees kick in, CoStar/LoopNet costs will be greater than what I pay for the salaries and rent. While the CBREs and JLLs of the world can handle these increases without problem due to their size and profitability, it is much more difficult for a firm of my size to absorb this.

I have complained and complained to CoStar about their overbearing fees to no avail and the sad truth remains that in spite of it all, as brokers, it is very difficult to effectively do our jobs without CoStar and LoopNet–and they know it. Whenever a legitimate competitor emerges, they throw their billions of dollars around to either buy them out or sue them to death until they have no choice but to fold (see Xceligent).

Many, including myself, were excited when Xceligent announced their intention to enter into the Chicago market, hopeful that there would finally be a viable alternative. Honestly, I was strongly considering switching over. The data appeared to be adequate, the advertised price was substantially less, and management was much more flexible and willing to structure their programs on a company-by-company basis. Then, the big bully sued sent out an embarrassing mailing that made sophomoric accusations and ultimately drove Xceligent to fold like a house of cards.

To this day, I wonder why a legitimate competitor cannot emerge. Why can’t someone finally stand up to the CoStar Group bully and send a message that enough is enough? Sure, no one is forcing me to remain a customer; I could walk away tomorrow but all that would do is inhibit my ability to do my job.

Still, I dream of the day a more equitable marketplace will emerge; but until then, saps like me have no choice but to sit back and take it. Well, CoStar, all I can say is that if I am going to be spending this additional money every month, your 385% worth of improvements better damn well give me about 385% more business.