freemium Archives - SVN® International

Kevin Maggiacomo, President & CEO of Sperry Van Ness International Corp.

I’m often asked why we give away some of the (otherwise proprietary) Sperry Van Ness® systems, tools and resources. I’m further asked why SVN is investing in the development of new tools if only to hand some of them out to the brokerage community at large. “Aren’t we aiding our competitors?” “Are we losing pieces of our differentiated value proposition in doing so?” These are a few of the questions often posed to me.

While losing market share and eroding gross margin are obviously not the extirpative goals of the aforementioned strategy, in this post I’ll attempt to clarify why we have taken our culture of collaboration up a notch, and how doing so is facilitating growth across all key performance indicators while helping to improve the fractured state of the commercial real estate (CRE) industry.

By way of background, SVN was founded on the premise that proactively cooperating and collaborating with our brokerage brethren – sharing our fees 50/50 in the process – is the right thing to do for the client and is the only way to ensure maximum value for a property. Debating the merits of that ethos is a topic for another day, and last month we released the SVN Difference Video, which scrutinized the CRE industry and its asset disposition practices, and was met with strong emotional reaction.

In terms of opening-up and creating new SVN products for the benefit of the brokerage community, we’ve rolled out the following in the past 12 months, which can be categorized and described as follows:

Compensated Cooperation: The SVN Monday Morning Sales call is now open to the public. There, we showcase new listings procured by our SVN Advisors over the previous 7 days. Every listing includes a buy-side commission which is always ½ of what the SVN Advisor stands to earn as a matter of policy.
Education: We collaborated with more than 10 commercial real estate firms and industry organizations to launch www.CREvine.com, an open resource platform for CRE professionals to acquire new skills, gain knowledge, and “level-up” their practices.
Marketing: Lastly, and as a BETA test, we’ve opened up a good portion of our (now retired) OnlinePublisherTM system. Called CRElaunch, owners and brokers alike can use the tool to create brochures and market their properties (a word of caution here – the product is in BETA and has a long way to go).

But back to the topic at hand.

We collaborate not to merely suggest that “we’re the good guys,” but because we truly believe that making the otherwise dysfunctional commercial real estate market more efficient will benefit all stakeholders, including Sperry Van Ness.

Simply put, collaborating – harnessing the power of broad horizontal networks of participants to achieve a better outcome – will drive market efficiency and liquidity, while simultaneously increasing revenue and profitability to those who collaborate. At SVN, we’ve aggressively grown our business by subscribing to this ethos and receive direct benefit in the following manner:

Recruiting: As a CRE advisory, one of our biggest economic generators is recruiting talented, ethical and productive advisors. Our opening-up certain components of SVN has allowed us to create relationships with thousands of brokers and we’ve recruited or awarded a brokerage position or SVN franchise to a small percentage of this new constituency.
Retention: Just as strong as recruiting is a vital key performance indicator of growth, attrition (of producing Advisors) can have devastating consequences for an organization. Through thought leadership, the contemporary nature of our collaborative growth strategy, and via a transparent business model, our attrition rate is at a 5-year low.
Sales: When one harnesses the power of the entire brokerage community to market a for sale asset, organized competition is generated, multiple offers are posited, the market speaks, and the highest price is achieved. Our compensated cooperation strategy, coupled with our core covenants, define SVN while moving inventory faster and at a higher price.
New Business Development: It’s tough to argue against the growth strategies of the likes of Google, Skype, and Innocentive in suggesting that their “Freemium” business models don’t create raving fans, loyal customers, and a myriad of cross-selling opportunities (each of these companies offer a free “attraction” product while simultaneously offering paid premium products). As described above, the SVN story – rooted in harnessing the power of collaboration to affect a better outcome – has been kicked-up a notch, shared with clients/prospects, has enhanced our point of differentiation, increased our “batting average,” and reduced the cost of sales. We are winning new listings, doing more business – all while putting the clients interests’ first.

Mass collaboration, while not ubiquitous in CRE brokerage, is now a staple of the new economy and it’s here to stay. As the members of Generation X & Y grow to positions of increasing power and control, collaboration and Freemium business strategies will become the norm in CRE as well. Until then, I’ll continue to invest in the creation of new products and to share some of those we previously created.

Kevin Maggiacomo is the President and CEO of Sperry Van Ness International Corp.

*All Sperry Van Ness® offices are independently owned and operated.

How do you feel when you get something for free? Does the hair stand up on the back of your neck as if you’re being set-up for a bait-and-switch, or do you feel like you’ve received something of value at no cost for which you’re appreciative? If you’re anything like me, I’ve experienced both of the aforementioned scenarios. In my opinion there is definitely a right and a wrong approach to “Free.” In today’s post I’ll examine “Freemium” offers and how they might play a part in redefining the commercial real estate industry.

The reality is that nowadays most of us are accustomed to receiving certain services (information and data) free of charge, and on the surface, with no strings attached and for nothing in return. Not a marketing gimmick like “Buy two get one free” (which is often the same as marking down a 2x marked-up product by 50% if you buy two), or the classic ad supported online newspaper and content model, but an increasingly important economic model whose genuinely free offerings are changing the ways in which consumers use (and purchase) products and services.

Coined “Freemium,” by venture capitalist Fred Wilson (@FredWilson), the word is a portmanteau, which combines the words “Free,” and “Premium,” to describe a business model which follows one basic principle: Give a core product away for free to a critical mass of consumers, and sell a small percentage of them a premium product.

Not Gillette, which practically gives their blades away for free, charging through the nose for their razors, or cell phone companies “giving” away the phone and charging for a data plan and two year commitment, but something, which, according to Peter Froberg (@PeterFroberg), a growth consultant with whom I work, “can be used in and of itself, without necessarily buying something else.” He likens the model to the fruit stand operator who offers free, sweet, sliced apples to entice his customers not to buy apples, “that’s fake free,” he says, but to buy pears instead.

For most, the Freemium model best resonates when discussing Skype. To date, Sykpe’s free VoIP product has provided more than 1B downloads, and provided more than 16B call minutes of “Skype-to-Skype” calls. During that same time period, “Skype-Out” call minutes, Skype’s premium product, has accounted for only 2.2B of those minutes. A low percentage, of paying users, indeed, but enough to generate $21M in operating profit in 2010 (a big swing from their $352M growth related loss of 2009). Other emerging Freemium companies which feature ten’s of thousand’s of users include Evernote, Boardsuite, Linkedin, Pandora, Google (not exactly an “emerging” company), and more.

Closer to my (industry) home, we find that LoopNet has been operating with a Freemium model for years – Free to post, free to search but with a paywall over Premium Search (access to newly listed properties), and Premium Lister access, which features more prominent portal placement and access to leads. Like them or not, the Freemium model has served them well…they are a profitable, $750M company recently acquired by CoStar.

Hundreds of businesses, most of which are in technology or in the Web 2.0 space are utilizing Freemium models to generate profits – giving something away for free, and charging for another, often completely different product in the process. And in the course of my researching the Freemium space, it occurred to me that commercial and residential real estate brokers alike have for years been operating with a Freemium model.

Peruse any national brokerage’s website, and you will find an abundance of free, well written subject matter, like market overview’s, reason’s to buy, reason’s to sell, and so on (at SVN, we just released our annual “Top Market’s To Watch” report). For some of the same reason’s I’m blogging, which include strengthening my personal brand, establishing credibility by demonstrating my ability to think critically, these companies work to create valuable content and strengthen their brands in the hopes that the reader will buy something else – their premium products.

However, just as Freemium is emerging as a legitimate business model supported by empirical data, I’m hearing more about the brokerage best practice of charging for everything one does – no more free advice, abstracts, surveys and reports. So for those of us who are CRE practitioners, I ask you – Is the aforementioned “best practice” yet another example of the brokerage industry operating in the stone ages…a little slow on the uptake, or does the Freemium concept represent what leadership and strategy advisor Mike Myatt (@MikeMyatt) refers to as a “next practice” capable of creating a disruptive change in an industry prone to herd mentality? While I believe there to be truth in the old saying “free is a very good price,” I’d be interested your opinions – please do share.

– Kevin Maggiacomo, CEO & President, Sperry Van Ness International Corporation

*All Sperry Van Ness® offices are independently owned and operated.

Tag: freemium

Why We Collaborate

Freemium by Kevin Maggiacomo