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Q4 Quarterly Commentary

Caught your attention? Who doesn’t like to get in on the ground floor of an enterprise with tremendous potential?

To begin, let’s look at Facebook.

You are probably among the more than two billion people who use it. Ever consider its business model? It’s brilliant. As a user, you provide the Facebook database with a never-ending stream of free content. In return, Facebook gets a highly marketable product to sell—

You. Advertisers are their eager customers because users so willingly reveal so much about themselves.The only thing that keeps competitors out is Facebook’s immense network effect. You go there because everyone else is there. And through their efforts, Facebook is now valued at more than $500 billion.

But what if you could be paid for your content instead of Facebook making all the money?

Meet a lesser-known but promising model–Steemit (https://steemit.com). Here creators of content (ranging from photography and travel to tech talk and business insights) are rewarded with a crypto currency called Steem. One Steem is currently worth $6.04. The more an article is read, shared and liked, the more Steem the author earns. And the more Steemit is used, the more their currency is worth.

Instead of shareholders earning revenue from ad sales, the community shares the escalating value of Steem currency. Launched in mid-2016 , valuation is growing as adoption of this service is picking up (wait for it) steam. For a deeper look, here’s a terrific article: https://seekingalpha.com/article/4114405-one-unconvention-al-reason-concerned-facebooks-valuation-cryptocurrencies

Now let’s move toward that $10 billion idea.

Shannon Waltchack is a commercial real estate brokerage firm. When we help people buy, sell or lease, we earn transactions fees. We create value for our customers when we use our expertise and market knowledge to create good outcomes. Because we don’t have every building in the state listed (yet!), we have to cooperate with other brokerage firms to see the full picture of the marketplace. We need their information and they need ours.

Just as residential agents banded together to share listings and compensation to create the MLS (Multiple Listing Service), there’s a need for its equivalent in commercial real estate but thus far, such collaborations have been less successful.

Over the past 20 years, it created opportunities for companies like Loopnet, Xceligent and especially CoStar. CoStar has been wildly successful by resolving the pain-point for data entry. Knowing brokers resist spending time at a keyboard entering information into a database, CoStar said, “No problem, we’ll make weekly phone calls to brokers and support staff to create our own database.” They turned a pain-point into a profit center, charting much faster growth than its peers. In fact, it acquired Loopnet in 2011 and, by the end of 2017, Xceligent declared Chapter 7.

Just as Facebook owns the lion’s share of social media engagement, CoStar now has a monopoly on the United States’ CRE data. In contrast to residential MLS database which is user-owned, this collection of data belongs to them; its holds “our” information and can charge brokers and agents premium prices to access its resources.

Like so many, we benefit from using its platform…but a monopolist position is always detrimental for its customers. So what’s the alternative? I’m glad you asked.

Here’s my $10 Billion idea:

Just as SteemIt utilizes existing Blockchain technology to reward its content suppliers, imagine creating a national, member-owned Commercial MLS (CMLS) of shared information. How would it work? You kick off the process with an ICO (Initial Coin Offering) where you sell utility tokens for the CMLS. These tokens are the equivalent of a membership. You reserve 40% of the total supply of tokens to reward members who upload their data and listings into the system, incentivizing their on-going participation. Office assistants or even new brokers can get paid for data entry.

Because all participants share in the growth and no entity owns it, it’s an easy sell to CRE firms, especially as they consider the costly threat CoStar poses. Once the network effect takes off and everyone in the US starts to use the service, the value of the token increases and it becomes a virtual circle of positive feedback.

“Great idea!” you think. “But isn’t someone already doing this?” Yes and no. Currently rexmls.com, Propy https://tokensale.propy.com, & Bitproperty btptoken.io are in development but they’re either trying to do too much or not exactly pursuing this concept.

 So back to the ground floor. We believe this new platform has tremendous potential and are ready to invest our time and energy in making it happen. But we aren’t kidding ourselves: it will take a large and diverse team with a shared vision to be successful. What role would you like in building a new future for commercial real estate? I look forward to hearing from you: dw@shanwalt.com or on Twitter @dwaltchack.

by Derek Waltchack
02.12.2018