FSBO Madison

the New York Times:

Across the country, the National Association of Realtors and the 6 percent commission that most of its members charge to sell a house are under assault by government officials, consumer advocates, lawyers and ambitious entrepreneurs. But the most effective challenge so far emanates from a spare bedroom in the modest home here of Christie Miller.

Ms. Miller, 38, a former social worker who favors fuzzy slippers, and her cousin, Mary Clare Murphy, 51, operate what real estate professionals believe to be the largest for-sale-by-owner Web site in the country.

They have turned Madison, a city of 208,000 known for its liberal politics, into one of the most active for-sale-by-owner markets in the country. And their success suggests that, in challenging the Realtor association's dominance of home sales, they may have hit on a winning formula that has eluded many other upstarts. Their site, FsboMadison.com (pronounced FIZZ-boh) holds a nearly 20 percent share of the Dane County market for residential real estate listings.

The site, which charges just $150 to list a home and throws in a teal blue yard sign, draws more Internet traffic than the traditional multiple listing service controlled by real estate agents.

Madison is home to the University of Wisconsin and a city where the percentage of residents who graduated from college is twice the national level. It is also a hotbed of antibusiness sentiment, which turns out to be the perfect place for a free-market real estate revolution. Bucking the system is a civic pastime here.

Elsewhere, the Justice Department, free-market scholars, plaintiffs' lawyers and countless entrepreneurs are vowing to make real estate more competitive and to bring down sales commissions. To do that, they advocate forcing the Realtors' association to share control of its established listing services. Those critics seem to view the listings as an unassailable monopoly.

And who can blame them? Those 800-plus local listing services, controlled by local branches of the Realtors' association, help dole out about $60 billion a year in commissions to real estate agents and the firms that employ them. Despite numerous attacks, the association has been remarkably successful to date at protecting its turf. Through lobbying, litigation and legislation, the Realtors' group has managed to keep control of the crucial listings.

Ms. Miller and Ms. Murphy, however, built a separate and alternative listing service - a parallel market, much like the Nasdaq, which rose in recent decades to challenge the New York Stock Exchange's dominance and sparked competition that eventually reduced transaction costs for all stock investors.

The price competition is startling. FsboMadison listed about 2,000 homes in 2005 and said that about 72 percent of its listings sell. If those 1,440 houses averaged $200,000 per sale, the real estate commissions under the 6 percent system would have been about $17.3 million. Ms. Miller and Ms. Murphy collected about $300,000.

...

William A. Black, a lawyer for the Wisconsin Department of Regulation and Licensing, says he does not think consumers who bypass real estate agents are missing much. "The majority of residential transactions are very simple: 99 percent can be done without a broker. And the 1 percent screwed up - the broker couldn't have prevented it."

Alternative listing services would need to reach a combined 50 percent to 60 percent of a market to topple a multiple listing service, Steve Murray, an industry consultant, guessed.

That is what David B. Zwiefelhofer, Webmaster for FsboMadison, would like to see, and he constantly encourages Ms. Miller and Ms. Murphy to expand. "I think this is the one place in the country where FSBO could overtake" the multiple listing service, he said.

His clients, not surprisingly for a social worker and a nurse, are embarrassed by their success, Mr. Zwiefelhofer said. "It bugs me to no end," he said. "The Web site still looks like it was designed by some high school student five years ago."

This is the future. The 6% that realtors have been raking in is what economists call "economic rent." And it's a bad thing. Economic rent is basically when consumers are paying more than they should be because of a lack of competition.

Real estate agents simply collect more than they should, and somehow the market hasn't yet adjusted. But it will.

Sometimes, luck is good.

I find this totally unconvincing:

Richard Rainwater doesn't want to sound like a kook. But he's about as worried as a happily married guy with more than $2 billion and a home in Pebble Beach can get. Americans are "in the kind of trouble people shouldn't find themselves in," he says. He's just wary about being the one to sound the alarm.

Rainwater is something of a behind-the-scenes type—at least as far as alpha-male billionaires go. He counts President Bush as a personal friend but dislikes politics, and frankly, when he gets worked up, he says some pretty far-out things that could easily be taken out of context. Such as: An economic tsunami is about to hit the global economy as the world runs out of oil. Or a coalition of communist and Islamic states may decide to stop selling their precious crude to Americans any day now. Or food shortages may soon hit the U.S. Or he read on a blog last night that there's this one gargantuan chunk of ice sitting on a precipice in Antarctica that, if it falls off, will raise sea levels worldwide by two feet—and it's getting closer to the edge.... And then he'll interrupt himself: "Look, I'm not predicting anything," he'll say. "That's when you get a little kooky-sounding."

Rainwater is no crackpot. But you don't get to be a multibillionaire investor—one who's more than doubled his net worth in a decade—through incremental gains on little stock trades. You have to push way past conventional thinking, test the boundaries of chaos, see events in a bigger context. You have to look at all the scenarios, from "A to friggin' Z," as he says, and not be afraid to focus on Z. Only when you've vacuumed up as much information as possible and you know the world is at a major inflection point do you put a hell of a lot of money behind your conviction.

Such insights have allowed Rainwater to turn moments of cataclysm into gigantic paydays before. In the mid-1990s he saw panic selling in Houston real estate and bought some 15 million square feet; now the properties are selling for three times his purchase price. In the late '90s, when oil seemed plentiful and its price had fallen to the low teens, he bet hundreds of millions—by investing in oil stocks and futures—that it would rise. A billion dollars later, that move is still paying off. "Most people invest and then sit around worrying what the next blowup will be," he says. "I do the opposite. I wait for the blowup, then invest."

The next blowup, however, looms so large that it scares and confuses him. For the past few months he's been holed up in hard-core research mode—reading books, academic studies, and, yes, blogs. Every morning he rises before dawn at one of his houses in Texas or South Carolina or California (he actually owns a piece of Pebble Beach Resorts) and spends four or five hours reading sites like LifeAftertheOilCrash.net or DieOff.org, obsessively following links and sifting through data. How worried is he? He has some $500 million of his $2.5 billion fortune in cash, more than ever before. "I'm long oil and I'm liquid," he says. "I've put myself in a position that if the end of the world came tomorrow I'd kind of be prepared." He's also ready to move fast if he spots an opening.

Very smart people often do very foolish things. Quite frankly, I think this guy is about to jump off the deep end. I'd love to explain to him why, but I know he wouldn't believe me anyway.

Furthermore, just because someone has made a couple billion doesn't mean that his gambles were made for the right reasons. Later in the article, it appears that Rainwater got lucky on his 94-95 oil and gas gamble. It certainly doesn't sound like he gambled for the right reasons.

People always underestimate the role of luck in success. Luck is a huge, huge part of success. This guy has put himself in the position where luck would make him very wealthy, and congratulations to him.

I think he's about to put himself in the position where luck will make him very UNwealthy. I hope he saves a few million to live on.

Trying to bring it back, yo:
I think I may start writing here again.

I haven't started any businesses lately, but I've kept the dream alive. It will happen one day. Right now I'm trying to decide whether to stay in law school or try to do something entrepreneurial right now. Law school will always be there, but the opportunity to start something unencumbered by wife and family may not.

But I think I may just start writing about whatever is going on in life. It'll be good for me to write occasionally, and their should be some business talk as well.

**In case you didn't catch it, the reference is from some show back in the early 90s. In Living Colour, maybe? Yo no se.

Something that amuses me -- Budweiser Select

This blog is still 18th in Yahoo for Budweiser Select. It probably wouldn't take much work at all to be top 10.

11 months

Eleven months since I posted. That's a long time.

Not much has changed, except that I pay more in tuition now.

Como arena en el vaso de la hora

así son los dias de nuestras vidas. Se pasó de nuevo.

yikes

I moved and forgot about my blog.

More Budweiser Select

I've been posting on Budweiser Select a few times now.

As I predicted, Budweiser Select is being tagged as a low carb beer, even though Budweiser (or Anheuser Busch, rather) isn't marketing it as a low carb beer. They have Michelob Ultra for that already.

Edit several years later: actually, they were sorta marketing it as a lowcarb beer, they just didn't seem to be clear on it at first.

Malcolm Gladwell has a new book on the way

The author who inspired the current viral marketing/customer evangelism/whatever-else-people-are-calling-it is coming out with a new book: Blink.

Malcolm Gladwell, whose first book The Tipping Point was a surprise bestseller, is now seeking to understand how people make snap judgments.

From a review

Utilizing case studies as diverse as speed dating, pop music, and the shooting of Amadou Diallo, Gladwell reveals that what we think of as decisions made in the blink of an eye are much more complicated than assumed. Drawing on cutting-edge neuroscience and psychology, he shows how the difference between good decision-making and bad has nothing to do with how much information we can process quickly, but on the few particular details on which we focus.

If the book is anything like The Tipping Point, it will be well-written and provoking. Which I think is really all anyone can ask for in a business book.

Blink's release date? January 11th, 2005.

I have opened a currency trading account...

and I am not afraid to use it. That is all.

Merry Christmas!

Budweiser Select

I've been getting alot of hits for searches Budweiser Select, Bud Select, or other variations on the theme. This means there must be some buzz going around, as I'm not even that high in the search engine rankings.

I'd been travelling for the past few days, so I haven't bought Budweiser Select to try it out. I intend to buy some Bud Select after Christmas and give some sort of review.

In the meantime, if anyone has tried out Budweiser Select, I'm interested in hearing from you. Let me know your thoughts.

Budweiser Select and viral marketing

I often cruise down the beer aisle at my local HEB (best supermarket ever!), though I purchase only extremely rarely. [Extremely rarely = whenever a 12pack of Shiner is on sale for $9. And then you make several purchases. -- ed.]

In that last month I've noticed a new, attractively-packaged Anheuser-Busch (A-B) product called "Budweiser Select." I took note of it because I thought A-B might have simply renamed Anheuser World Select, a relatively new premium lager. I've been curious as to whether or not Anheuser World Select would succeed. It's a pilsner, but not a remarkable one, in my opinion. It's also expensive, and I tend to not associate Budweiser with expensive or quality.

So I did some research on this Budweiser Select. It is not Anheuser World Select (which is not on the shelves at my local HEB, indicating to me that it isn't doing spectacularly).

Here's some excerpts from A-B's local paper, St. Louis Post-Dispatch,

Anheuser-Busch Cos. will begin test-marketing Monday a new Budweiser product that has slightly more hops flavor, while offering a lower carbohydrate and calorie content than any product in the Budweiser family, including Bud Light.

Though it has more hops flavor, Budweiser Select remains an American-style lager, said Don Meyer.

With only 99 calories and 3.1 grams of carbohydrates per 12-ounce serving, Budweiser Select will have the lowest carb and calorie count of any Budweiser product.

Budweiser Select is expected to have broad appeal among beer drinkers, though it may be skewed to the white-collar and upscale market given the sophisticated packaging, Meyer said.

"I think it will be equally attractive to males and females, and it also should appeal across the whole age demographics, 21 plus," Meyer said.

The beer will be priced the same as Budweiser and Bud Light.

The seven test-markets are: Austin, Texas; Deptford, N.J., a suburb of Philadelphia; Athens, Ga.; Des Moines, Iowa; Green Bay, Wis.; Sacramento, Calif.; and Nashville, Tenn.

To generate some buzz, A-B weeks ago set up billboards that directed consumers in these test-markets to go to an Internet site. For example, Austin consumers are sent to www.areallygreatnewbeeriscomingtoaustin.com, where they go through a humorous presentation of "great moments in beer history." The teaser ends with Nov. 8 left as the "next great moment."

"We don't reveal it is from (Anheuser-Busch) in this teaser Internet campaign," Meyer said. On Monday, consumers going to this site will be directed to another site, where they can access the brand and retail information, he said.

A-B also will support the product through new local television, cable and print advertising as well as promotions at on-premise locations.

To boost 'word of mouth,' the brewer will hold Sunday 'bartender balls' at each of the test-markets aimed at introducing the beer to select bartenders, waiters and waitresses.

I'm in Austin, so hence why I've seen the product on the shelves. Here's some thoughts:

1. I didn't see any of these advertisements...or at least don't remember any of them if I saw them. That doesn't bode well.

2. Lowcarb and lowcal publicity. What exactly is their target market? A-B already has Michelob Ultra in the low-carb beers, so I assume they don't want Budweiser Select to compete with that.

They say they want to have "broad appeal" though it "may be skewed to the white-collar and upscale market. . ."

Uh, ok. It doesn't seem to me like their marketers have really figured out a profile of their target customer. They're sending mixed messages. Apparently they aren't targeting light beer drinkers, but every article notes that Bud Select has the lowest calorie and carb content of any A-B beer. So it must've been in their press release.

When people hear lowcarb and lowcal, I think they assume that it lacks taste, because it's a light beer. I certainly do.

3. Packaging. The packaging is great. It's eyecatching, classy, and it looks like a premium beer. It was so good that it made me do this research on the beer.

4. Price. Yet they're pricing Bud Select the same as Budweiser and Bud Light. It's premium packaging, yet BudLight pricing. There's a disconnect there that is confusing to me as a consumer.

5. The product is shelved with all the other Budweiser products, which tend to be on the lower-end of the beer pricing and quality spectrum. My guess is that many premium/microbrew folks don't check this area out unless they want a light beer or something of that nature.

6. I don't think that A-B's Budweiser Select viral marketing campaign will be in any business school case studies in the future. A website that doesn't reveal what the beer is? I don't like that. Also, I went there today and I put in a zip code that I knew wasn't in their target markets. The website froze. They apparently didn't plan for anyone to visit the site from outside their target markets...not a good way to create buzz outside your target markets.

7. I like the "bartender balls." Bartenders have the ability to tell their customers about a great new beer, if they like it. I don't know how standard this is in the industry, but potentially it seems like a good idea. Malcolm Gladwell -- who helped kick off the viral marketing trend -- might call bartenders Mavens of their subject.

I haven't tasted the beer yet and I'm not sure I intend to. It seems to me that there are too many mixed messages. If they were going to choose that packaging, they should've marketed it as more of a premium beer. If they're going to note it's low-carb, low-calorie nature, I think they should market it as a light beer. I think they're already going after the low-carb premium market with Michelob Ultra.

Perhaps it really tastes wonderful -- they seem to think so, since they're marketing it very broadly. But with all the contradictions in packaging, price, and low-carb, low-cal publicity, I don't think this beer will take off.

What I would have done: if they think this beer tastes so great that they're going to market it broadly, then I think they should have done two things differently: raise the price to match the packaging and omit the low-carb information.

Lots of unfinished posts as of late...

I've been drafting posts, and then not finishing them. I don't know why.

Tomorrow I'll probably go in and finish most of the old posts.

Today is Pearl Harbor Day, a previous generation's 9/11. Will we meet the challenge as our forefathers did?

An idea...

I suppose it would be pretty easy to start a company that did exactly what I described in my bleg yesterday.

As far as I have found, there are no companies that do what I asked about yesterday. Geocities offers free sites, but if you want to host a domain, then you have to pay. Other companies offer free hosting...but there's a catch: you have to pay a high price to register your domain with them.

I don't think it's really in my area of interest, but I think it's a profitable idea. Go buy a cheap server somewhere, write a contract up for your users, sign up for Google adsense, and then place an Adsense bar on each webpage.

Your marginal costs are extremely low -- electricity for the server? -- and thus should be easily covered by Adsense.

It may be a little difficult to find consumers. Free webpages are easy to find, and it's not expensive to host a domain name. Plus, most people who get a domain name are willing to pay the hosting fees.

Hmm. Except bloggers. Bloggers might be an easy way to find folks to sign up for free domain hosting.

MSN search

I've been using the beta version of Microsoft's new MSN search.

Frankly, I'm impressed. And not just because my own sites do well in the rankings.

I've only been using it fulltime for a few days, but so far it is outdoing google. There are some searches where Google returns better results, and others where MSN returns better results. Considering that MSN Search is still in beta, this is pretty impressive.

If MSN Search returns better results, Google will have to tweak its algorithm. Quite a few of us think Google has gotten lazy about maintaining vigilance of its results' relevance.

Bleg

Does anyone know of a company that does free web hosting?

That is, I have a few domain names that I would like to host...but they aren't worth paying $8 or so a month to host.

Popups would be okay, as would banner advertising...as long as it's not ridiculous.

New auction site

BusinessPundit writes up Jonathan Ruff's new auction site, Jittery.

How do you compete with eBay? I can't imagine how he thinks he will get the traffic, but good luck to him. He seems to have a number of interesting ideas.

Irrational

A friend of mine got married recently. At the reception, I asked him if he'd seen the NBA brawl involving Ron Artest, the Pacers and the Pistons. He said he had, and in fact had stayed up a few extra hours watching replays of the brawl...instead of going to sleep before his wedding day.

I dream of having that sort of customer loyalty.

Northwest

The other day I flew Northwest. I was hungry and it was a long flight. They didn't offer me food, but instead offered airplane food for $5.

I probably won't fly Northwest again, unless their price is considerably lower.

Travelling again

Nonetheless, I can't believe how little I've blogged in the past couple weeks.

I'll get back on that horse.