Sizing Up the Amazon-Realogy Deal

WSJ: “Struggling Real-Estate Giant Realogy Strikes Deal With Amazon”

[Editor’s Note:  The views expressed here are solely those of Ross Kaplan, and do not represent Edina Realty, Berkshire Hathaway (“Berkshire”), or any other entity referenced. Edina Realty is a subsidiary of Berkshire, and competes with Realogy subsidiary Coldwell Banker Burnet.]

When a fast-growing, trillion dollar retail juggernaut does a deal with a struggling company less than one-thousandth its size — that happens to have lost 80% of its value in the last year — who do you suppose has more leverage?

That’s what I think, too.

Sizing Up the Deal

In essence, Realogy appears to be paying Amazon, big-time, for deal flow.

Specifically, it’s buying access to well-qualified home buyer and sellers prospects (“leads”), which Amazon identifies on its ever-expanding platform, and will now refer (presumably exclusively) to Realogy.

In return, at the end of the transaction, Realogy is agreeing to stock each newly-purchased home with up to $5,000 in Amazon products (Alexa and other “smart home devices”).

Win-Win (for Amazon)

Where does that potential $5,000 come from?

Realogy’s cut of the commission.

Ouch!

Call it, a giant “in-kind” referral fee.

Reaction #2: “exactly what does Realogy get out of of all this?”

Additional business, true, but at what price??

For Amazon, meanwhile, it’s just another way to monetize its vast (and growing) universe of eyeballs users at virtually zero cost.

In fact, less than zero cost, given Realogy’s commitment to buy Amazon products for their “shared” customers.

P.S.: Why wouldn’t Amazon just buy Realogy?

After all, the cost (about $700 million), barely amounts to loose change for Jeff Bezos’ behemoth.

Answer: because it doesn’t need to, to extract maximum value out of the relationship.



from RSSMix.com Mix ID 8230700 https://ift.tt/2y6aANq
via IFTTT

Comments

Post a Comment

Popular posts from this blog

Estimating the Discount for a Busy Street (or Not)

Image
The Art of Comp Selection One of the trickier home features to account for in a Comparative Market Analysis (“CMA”) is a busy street. For a family with little kids, a busy street may very well be a deal breaker — in which case the discount is theoretically infinite. At the other extreme, an investor looking for a rental property may see the location as a plus: free advertising! Of course, not all busy streets are created equal: depending on how far the home is set back; elevation differences; the individual home’s layout; and even landscaping and other topography, and the noise level/loss of privacy can vary significantly. Two Strategies Faced with so many variables, Realtors and Appraisers can always simply choose an average discount — say , 10% off. Strategy #2? Choose as Comp’s (Comparable Sold Properties) only homes that are also located on busy streets. Even better: the same busy street. Then, there’s no need to make any adjustment, because all the home...
Read more

“What’s the Highest Point in Hennepin County?”

Image
There sure seems to be some confusion on that, umm . . . point. I’ve now encountered at least three different properties — none close to one another — that all claimed that status in just the last month. For the record, according to Hennepin County’s website, it’s on Williston Road near High Point Road in Minnetonka — 1,131 feet above sea level. See also , “ Florida’s Tallest Point (and how to get there) .” from RSSMix.com Mix ID 8230700 https://ift.tt/2Pq1ndL via IFTTT
Read more

“Are You a Realtor?” “Why, Yes I Am!”

Image
“There Goes My Realtor!” Admittedly, the intended effect is for clients who see me in and around the neighborhood where I live (by Cedar Lake in Minneapolis) to see my car on the road and say, “There Goes My Realtor!” But, my custom license plate (above) is also a conversation-starter when I’m parked. Like today, in Linden Hills, where a builder who has an upcoming listing saw my car and asked if I was a Realtor. I know what to do from there . . .  from RSSMix.com Mix ID 8230700 http://ift.tt/2glixp5 via IFTTT
Read more