{"id":1278,"date":"2015-10-04T21:23:35","date_gmt":"2015-10-05T01:23:35","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/yougotlistings-enhancing-the-network-fx-of-a-broken-system-wont-fix-it\/"},"modified":"2015-10-04T21:23:35","modified_gmt":"2015-10-05T01:23:35","slug":"yougotlistings-enhancing-the-network-fx-of-a-broken-system-wont-fix-it","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/yougotlistings-enhancing-the-network-fx-of-a-broken-system-wont-fix-it\/","title":{"rendered":"YouGotListings – Enhancing the Network FX of a Broken System Won’t Fix It"},"content":{"rendered":"

There are three places in the modern economy where a customer walks away after spending money feeling positively dirty: \u00a0car dealerships, Tough Mudder, and apartment brokers in cities where renters pay the fees. \u00a0The first is being disrupted, the second will probably fade away as most trends do, but the last seems here to stay.<\/p>\n

To understand why, and to make sense of the title of this post, it’s first necessary to understand the structure of the apartment rental system in Boston. \u00a0Let’s take a look at the life of an apartment listing, from womb-to-tomb.<\/p>\n

A property owner has a vacancy coming up, as a tenant has declared he\/she’ll move at lease’s end. \u00a0This owner has three choices<\/p>\n

    \n
  1. Find tenants on their own – this is pretty simple. \u00a0Throw up a few Craigslist ads, sort thru emails, run some credit checks–maybe a few dozen hours work in total.<\/li>\n
  2. Hire one broker to take care of it – usually, a single broker will simply take care of all of the things that the landlord would have. \u00a0Some brokers, however, use “co-brokers.” \u00a0This is essentially posting the listing on a kind of Craigslist-for-Brokers, and allowing\u00a0any<\/em> other broker to post an ad, show the apartment, and submit a tenant’s application.<\/li>\n
  3. Syndicate the listing to anyone with a broker license – the landlord posts the listing on the aforementioned Craigslist-for-Brokers, and takes the first application he likes. \u00a0\u00a0Let’s look at\u00a0what\u00a0madness<\/strong> this can turn into:<\/li>\n<\/ol>\n

    Let’s say Apartment A has been co-brokered. \u00a0On any given day, a few dozen brokers might peruse listing sites, find this listing, and post it themselves on Craigslist, Zillow, Trulia, etc. \u00a0This means that one apartment might be listed dozens of times<\/b> by different agents, all of varying levels of credibility & reliability (becoming an agent takes 40 hours and a few hundred bucks–many enter the business to make a quick buck, and return customers aren’t common).<\/p>\n

    Let’s say Apartment A gets 3 very qualified & interested renters who want to apply through three different brokers. \u00a0They’ll run the credit checks (affecting their scores), write the rent checks, provide references, etc., and\u00a0then<\/em> the agent will reach out to the landlord. \u00a0Of course, by this time, the apartment may be gone, and all of this was for nothing.<\/p>\n

    It was into this tumult that YouGotListings (YGL) entered circa 2009. \u00a0The idea was that by inserting a layer between the disparate players on the supply side, and the platforms that funnelled consumers in (Craigslist et al.), YGL could solve some of these problems with tools like a more real-time inventory.<\/p>\n

    It didn’t go badly. \u00a0YGL soon became the de facto place for property owners and brokers to meet and syndicate their listings to other professionals. \u00a0YGL eventually went on to add services for brokers (credit checks, apartment listings, etc.). \u00a0The number of brokers grew, as did the number of landlords, thanks in part to YGL’s referral bonus for clients able to bring in new clients.<\/p>\n

    From this platform, YGL syndicates listings across a multitude of listing sites using APIs. \u00a0To this, they added a website building service for agents to polish their presentation to clients.<\/p>\n

    So, by YGL’s standards, the network effects are working: \u00a0the more agents the have, the more landlords they’ll bring. \u00a0The more landlords they have, the more agents will sign-up. \u00a0At critical mass, leaving the platform for another is risky (though multi-homing is still an option).<\/p>\n

    But in all of this, what about the renter? \u00a0YGL does little to ensure that the brokers using its services are reliable and credible, and their model actually encourages the gold-rush-style listing syndication described above. \u00a0Effectively, the ‘pain point’ YGL solved was apartment brokers’ inability to\u00a0truly<\/em> bombard customers with listings lacking any quality-control.<\/p>\n

    Strictly speaking, this isn’t YGL’s fault. \u00a0The misalignment of incentives in the Boston market mean that the renter has no advocate in the apartment ecosystem (in fact, legally, agents are representatives of the\u00a0landlord<\/em>, not the renter). \u00a0That’s frustrating. \u00a0What’s more frustrating: \u00a0in most transactions, the renter is the one who pays the agents and, by extension, sites like YGL.<\/p>\n

    This is taxation without representation. \u00a0Ask the British: \u00a0that ain’t the Boston way.<\/p>\n

    Compounding YGL’s network effect, and further entrenching this system, is the fact that any broker who wishes to encourage exclusive-listings and avoid this Wild West co-broker system, has no way of differentiating themselves to an ever-more-inundated renter market. \u00a0The lesson here is that network effects are direction-agnostic. \u00a0Since the strength of the current system never optimized for\u00a0renters, a platform that supercharges that system only\u00a0worsens this.<\/p>\n","protected":false},"excerpt":{"rendered":"

    A network effect can make a broken market broker.<\/p>\n","protected":false},"author":68,"featured_media":1279,"comment_status":"open","ping_status":"closed","template":"","categories":[553,16],"class_list":["post-1278","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-apartments","category-real-estate"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/competing-with-network-effects\/","yoast_head":"\nYouGotListings - Enhancing the Network FX of a Broken System Won't Fix It - Digital Innovation and Transformation<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-digit\/submission\/yougotlistings-enhancing-the-network-fx-of-a-broken-system-wont-fix-it\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"YouGotListings - 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