Last week Facebook rolled out a new feature in their Marketplace section: the ability to list apartments and homes for rent or purchase.
This is potentially a significant development for the multifamily industry. That said, it is still very early so at this point there isn't much we can say with certainty, though there is much we can speculate about. In this post, we're going to cover four things we know already about this new feature and three things we don't know yet.
First, Facebook has always been interested in becoming more of a commercial presence.
Several years ago we published an article explaining why Google has generally been a better marketing platform in multifamily than Facebook. The answer was that generally speaking social media handled interest-based industries really well but search was far better on intent.
This is what we meant by that: Your social media profiles are the way you present yourself to people online. So they reflect who you are and what you are interested in. So if you are interested in soccer, that's going to show up on your profile and you will probably want to look at things that reflect your interest in soccer.
For businesses who make money from soccer, this is a great advertising and marketing platform. Soccer teams can market to fans on there, TV networks can too. If you sell soccer equipment, you've just identified a potential customer base.
That said, most of our commercial activity is not about general interest, but rather is about specific intent. I don't have a general interest in homes, but I have purchased a home. I am not generally interested in kids playground equipment or car parts or bluetooth speakers either. But I have bought all of those things in the past couple of years. I just never used Facebook when I was making the purchases. I used Google for that.
This is how things typically worked in the past. If you had an interest or hobby, Facebook was a natural place to do commercial research. If you had a very specific one-time need, it was less useful.
That said, there was one exception: You could ask for recommendations on your page. Looking for a car? You could ask your friends if they had a recommended dealer. Needing a dentist? Your Facebook connections can help. It's this easy, straightforward authentication—I know I can trust this result because my friends suggested it—that social can achieve in ways that are hard for Google to replicate in search.
Second, this is another very bad blow to Craigslist.
We've talked before about how Craigslist seems to be on the decline in multifamily. Many of our clients are not as dependent on Craigslist for traffic as in the past. We have also seen fewer people reading our Craigslist posts on this blog. The data we have also suggests that listing services—and Craigslist is really just a huge, free listing service with crummy design—are on the decline. So all of these things would point to Craigslist being less of a factor in the future.
Facebook is going to make this even worse while also providing answers to an interesting question: Do apartment shoppers use search because that's what they want or because it's a better option relative to lousy listing services and Craigslist? And if the answer is the latter, then we could see some interesting shifts happening in the apartment marketing world in the future.
Why might prospective residents do their shopping on Facebook? Well, while online directories are not great, there's enough interest in them that they're still a significant part of our industry. With Facebook, you have the benefits of the directory—a large database located on a single site—but you also have other significant benefits:
- People are already using Facebook so you don't have to get them to take a significant step to start using Marketplace.
- The functionality and information is similar to what you find in existing directories.
- The network of users is both larger and much more active.
- Finally, each listing is posted by a Facebook user so you can message the person directly and also see their Facebook profile—which is a huge step up in terms of building trust between buyer and seller compared to the occasionally creepy world of Craigslist.
Craigslist appears to be declining already in our industry. And even if Facebook Marketplace doesn't become a major player, it's not hard to imagine them at least stealing the shoppers who typically use Craigslist right now.
Third, this could also be a blow to Google.
We referenced this above. The overall momentum in apartment marketing for some time has been away from online directories and toward search engines. Search can look at a wider range of data than online directories and is often more precise in returning results. It's not a surprise to see more people drifting toward it in our industry.
That said, Facebook is an interesting player in this. One of the challenges facing online directories is that many users find them via a search engine in the first place. Put another way, you don't have people who just browse For Rent every day for fun. If For Rent or Apartment Guide want to help a user find an apartment, they have to first find a way to get that user to the website—and often that is going to happen through search.
Facebook is another matter. They expect to hit 207 million users in the USA alone by next year. Overall, they have two billion monthly users and 66% of them are daily users. People are already using Facebook—so they don't have to take some significant extra, intentional step to use Marketplace. They can just click a button inside the social media network that they are already actively using.
Indeed, given the amount of tasks Facebook is now trying to take over—and given the ongoing debates surrounding net neutrality—it is entirely possible that Facebook is trying to position itself as almost being synonymous with "the internet."
In other words, Facebook is interested in allowing its users to do anything they do "online" in Facebook. We'll need to keep an eye on this, but for now it definitely is a live possibility that Facebook would become a major player in apartment marketing, even relative to Google.
Fourth, we know that Facebook is large enough that this could work.
The tech writer Ben Thompson has invented something called the aggregation theory. The idea of it is simple enough: In any consumer economy, there are three parties:
Traditionally, there are two ways you gain a competitive advantage: You either become the only supplier (think of US Steel or Standard Oil) or you play the part of supplier and distributor (think of newspapers).
For example, newspapers gained a competitive advantage in media because not only did they supply news, they also owned all the best distribution channels. So they were making money by selling the product that they supplied to consumers and by selling access to their distribution network to advertisers.
Here's where things get tricky: In the internet era, distribution costs are roughly zero. If I wanted to, I could set up a WordPress site in five minutes and start distributing whatever I want to anyone with an internet connection. This, in effect, cuts out the distributor piece of the puzzle, leaving only supplier and consumer. Also, because of the reach of the internet, the consumer base is dramatically larger.
For suppliers, then, you don't really need to worry about distribution in the same way. You can distribute for virtually nothing and to a much larger audience.
So, in today's world everything turns on the experience that a supplier gives a consumer. The supplier who offers the best experience wins more business. And from here we get into a cycle: The supplier who offers the best experience also gets more customers, which means more money. They can use that money to further enhance the experience. That, of course, will attract more customers and... you get the idea. The bigger you get, the easier it is to attract more customers, who will provide additional revenue which allows you to get even bigger, and attract more customers, and so on.
This is why new social media networks struggle to break through. Thanks to Facebook's user base they have enormous resources at their hands that no start-up can match. So they have an enormous competitive advantage. Thompson calls this aggregation theory because, essentially, it explains how in the digital era the best aggregator—of content (Google), products (Amazon), people (Facebook), or trust (Airbnb)—will usually win.
In other words, Facebook has an advantage here that ILS's and even Craigslist have not possessed: They are so huge that they can easily and cheaply acquire an enormous number of users. Because of Facebook's clout, you can't simply ignore things like this Marketplace experiment of theirs.
All that being said, there are also a number of things we do not know.
First, we have no idea if people will use it.
Facebook has been trying to break into these kind of areas for years. Remember Graph Search? It's OK if you don't. No one else does either.
This is something we always need to remember when it comes to innovations from big tech companies. Sometimes their big ideas fail. Google has tons of big ideas that have failed. So we should never assume that just because a big company rolls out something that could be major that it will be major.
In this case, we don't know as of yet if Facebook's extremely large user base will use Marketplace to search for apartments.
Moreover, the nice thing about search and especially a search strategy premised around dominating your branded keywords, is that it's a relatively universal, intuitive way to find an apartment. With Marketplace, the service is only valuable if a critical mass of shoppers and multifamily communities in your area both adopt the service. And we don't know if that will happen or not. So even though there is a plausible path to success here for Facebook, it's not a sure thing.
Second, we don't know how Facebook might choose to monetize the new platform.
One thing we've learned from observing Google over the years is that they are constantly looking to monetize as many of their services and as much of their platform as they can get away with. So AdWords ads become less obvious, moving from a solid yellow background on ads to a small green label that says "Ad." Ads also start showing up in Google Maps and when you search for products.
Likewise, we also know that both Google and Facebook are not terribly keen to link for free to web properties that are not on their platform. That's why Facebook's organic reach has fallen off a cliff in recent years. These days if you want to be visible on Facebook, you need to pay up.
So: It is not hard to imagine a not-that-distant future where Facebook takes advantage of their popular Marketplace for Apartments feature and starts introducing adds into the Marketplace. Indeed, they could even introduce a tiered model in which certain payment levels guarantee certain levels of visibility. This is, after all, what they are doing with ads that show up in the News Feed. It's not weird to think it'd show up in the Marketplace too.
This means that you should be careful about adopting this new marketing channel and never become too dependent on it alone. Effective marketing is diversified marketing. If you put all your eggs in the Facebook basket, don't be surprised if at some point you get hurt in a significant way as Facebook continues to move toward pay-to-play models of treating users and advertisers.
Third, we don't know how Facebook will integrate with other platforms.
We know that Facebook scrapes listings from a couple databases right now. But what we don't know is what else they may or may not integrate with in the future. Here we need to understand the incentives for Facebook. Facebook only needs other partners to the extent that those partners provide Facebook with something they can't get on their own. Facebook has a user base. If people actually use Marketplace and start posting apartments in there, then they will also have inventory for people to browse. But at this point it is so early in the process that we can't really say with any confidence how people will or will not interact with this new marketing platform nor can we say how Facebook will choose to use the platform. It's simply much too early.
We will be observing this development closely. Our read on the apartment marketing scene has, for some time, been that it's Google's world and the people who win will be the ones who play by Google's rules. There are not many companies in the world that can disrupt things once Google has become ascendant. Apple and Amazon can. Maybe Microsoft, but probably not. The only other potential disruptor is Facebook. So with this new Marketplace feature we are potentially looking at something significant. But at this point it is far too soon to say if this will change things in our industry or not. We'll be keeping an eye on it though and will keep our readers up-to-date on what we find.