Google listing ads raise questions about IDX licensing

“This is not going to go over well with the brokers or the MLSs because the IDX was designed as a reciprocal display license between cooperating brokerages. It was never an advertising license. So, the minute you display the listing becomes a paid media inventory on a global ad network like Google, you have completely changed the deal that the brokers originally agreed to. This is a seismic shift in the entire industry.” 

Competing for intent

In Sterbcow’s view, instead of providing consumers with links to places to find listings, Google has completely shifted things by becoming the one to actually surface those listings and even monetizing leads before a consumer even reaches a listing portal. 

“They aren’t even going to be competing with the portals. Instead, they are competing for this moment of consumer intent,” he said. “I feel it is a much bigger deal in the broader scope of what is going on than what people realize. We have a situation where Google isn’t just entering the portal wars, they have moved the entire field.” 

Like Sterbcow, Amit Kulkarni, a co-founder of Alloy Advisors, also feels like Google’s expansion of this program is bigger than the world of real estate.

In the past, consumers went to Google to receive a list of links to information or products relevant to their search, but that has changed with the widespread use and adoption of AI.

“I think what they are trying to do is figure out what they can do to still have search results come up on Google, as AI is starting to erode and take traction away from the legacy ‘blue link’ search business,” Kulkarni said.

What about the portals?

Although Kulkarni does not believe Google’s expansion of this pilot program nationwide is a sign that the firm wants to get heavily involved in the real estate industry, Kulkarni does believe this will have an impact on the portals, many of whom have spent a lot of time on search engine optimization.

“The portals are going to have to start thinking about how to optimize their AI search so they can get discovered,” Kulkarni said. “They are generally going to have a hard time existing in their current business model form if they can’t rely on the funnel that Google provides them with.”

Industry analysts, however, are not quite as certain about how Google’s move will impact listing portals. 

“While incumbent portals retain several defensive advantages — including strong direct traffic from brand awareness, domain expertise, and vertical integration of downstream services — Google’s more formal entry into home listings is clearly an incremental negative,” Ryan Tomasello, Bose George and Jade Rahmani, analysts at Keefe, Bruyette and Woods, wrote in a note published on Thursday. “Given its top-of-funnel search dominance, Google is positioned to capture traffic earlier in the homeshopper journey, potentially eroding portal traffic share and economics over time.”

The analysts say Zillow is the most exposed to potential downside by this move as Google’s monetization of the product appears focused on buyer agent lead generation, like the Zillow Flex or Zillow Preferred lead generation programs. In contrast, they feel that CoStar’s Homes.com portal, which is more oriented toward listing agents, may feel less of an impact. 

While they do see ways in which the expansion of these listing advertisements could pose challenges for the portals, the analysts note that with just three MLSs powering HouseCanary’s listing feed, Google will not have access to full coverage of national for-sale listings. 

“This isn’t an immediate threat given [the] lack of coverage and mobile-only visibility, but Google is targeting the same buyside agent budget. We’ve seen it play the long game before and having access to listings as AI begins to reshape top-of-funnel activity is a worry,” Jake Fuller, an analyst at BTIG, wrote in a note on Thursday. 

He also noted that for Zillow, since it gets roughly 80% of its traffic organically, Google’s mobile-only listing product with a limited geographic distribution “isn’t likely to undermine traffic.” 

An opportunity for brokerages

Although Google’s expansion of its listing ads may pose a problem for portals, Kulkarni and Sterbcow see it as a potential opportunity for brokerages. 

According to Kulkarni this is a good opportunity for brokers to take back control of their business and their listing data. 

“Brokers are always complaining about portals, but a lot of them feel they can’t do business without portals, but this is where things like Cotality’s Broker Listing Exchange (BLX) come into play. Google needs the listing data and brokers are the originators of that data,” Kulkarni said. “With BLX, brokers can now bypass portals and sites that monetize their data and work directly with Google, and now they have better control of what happens with their listings and the data that their agents are working hard to win from sellers. This is now a moment in time where brokers can actually take back control of their data feeds and start to dictate who uses their data and for what purposes.” 

While things may get messier for homebuyers if brokerages pull their listings from IDX feeds or if MLSs shut IDX feed off to prevent vendors from using the feeds in ways they weren’t intended, Sterbcow doesn’t believe it to be the catastrophe some may claim this scenario would be thanks to AI. 

“I think the AI companies themselves are going to open up and buy the data directly from the brokerages and that will actually help to even the playing field for brokerages both large and small across the United States. Consumers will be able to surface all the available inventory through AI searches,” Sterbcow said. “That is really where we are headed — AI will be the new search model.”