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Apple, Microsoft and Costar Pt. 2

Posted on May 28th, 2010 by John Reeder

As if my original post wasn’t long enough, here comes Pt. 2 of my thoughts on Apple, Microsoft and Costar.  Joshua had some good points in the comments, so ever the opportunist, I decided to squeeze a post out of the response.

First to clarify, my general point is that competitive advantages can be erased in no time, and that the products that are important today can be supplanted by better products.  There’s no reason to think that monopolies have to continue on in today’s ever changing world.  Also, I really have no problem with Costar (I’m a land broker, their land comps aren’t very good and I don’t need their Property service) except that lack of innovation is offensive to me.  With that said, onto the criticisms of my point.

1.  The analogy isn’t useful because MSFT and AAPL are very different companies that just happen to operate in the same industry.

Untrue.  MSFT and AAPL have been battling for the hearts and minds of tech users since the 1980’s.  The success of both companies depended for a long time on being the preferred alternative to the other.  Since the early part of this decade, when it became apparent that tech users would be trading in desktop and laptops for mobile devices, both companies should have been focused on capturing sales from the switch.  One company did it.  The other failed miserably.  MSFT is at risk not because anybody is beating them at their game.  They are at risk because the game itself changed and they can’t play the new game.

2.  The analogy isn’t useful because AAPL is actually the company that acts like Costar

Again, I disagree.  If Apple acted like Costar, we would still be walking around with first generation iPods that Apple would tell us are really cool and worth the $400 price tag.  We wouldn’t have color screens, video, cameras, increased storage, or any of the post 1st gen improvements that AAPL made.  Why?  Because AAPL wouldn’t want to threaten its legacy profit center. 

Admittedly, AAPL is often accused of ignoring its users (the demand for a Flash player is an example) a charge that I associated with MSFT.  But this only furthers my point.  If AAPL is ignoring its users, that creates opportunities for other companies.  Other companies are stepping up to address those concerns.  In fact, more phones are now being activated with Android than iPhone OS.  So the trend that I pointed to continues.  The beat goes on.

3.  It’s not conceivable that anybody could supplant Costar because the data has to be collected by human researchers, and nobody will be able to challenge Costar on this front.

This is the point that is mystifying to me.  I think it ignores several precedents.  First, residential MLS systems are much better than Costar in terms of data quality and reliability.  These residential MLS systems rely on broker input.  So here’s a newsflash: Brokers who decide to police themselves with data quality standards are already better than Costar at maintaining comps.

The other important precedent that is being ignored is Wikipedia.  Nobody thought that Wikipedia would work and yet it has become our default reference system.  The crowd sourced encyclopedia put Encyclopedia Britannica out of business.  I know because I looked it up on Wikipedia!!!

The Britannica has had difficulty remaining profitable.[3] Some articles in earlier editions have been criticised for inaccuracy, bias, or unqualified contributors.[5][9] The accuracy in parts of the present edition has likewise been questioned,[1][10] although criticisms have been challenged by Britannica’s management.[11]

I know I’m becoming a broken record on this point, but only because I have a hard time understanding why people think that just because Costar has an advantage today, that it will continue indefinitely.  It just strikes me as going against the lessons of the last 10 years. 

Remember when Myspace was the default social network?

Remember when the Palm Pilot was huge?

Remember when Yahoo was #1 in website traffic?

Remember when H2 Hummer was a relevant SUV?

Remember when the Motorola RAZR was the ubiquitous phone?

Why weren’t these companies able to use their leads and extend them over their competitors?

Here’s another thought related to a comparables service.  Why wouldn’t a coalition of the top brokerage firms create in-house comp reporting systems and both require the keeping of comps, as well as charge users for access to the system?  Why don’t they create the in-house system that would be shared among the companies at a discount, then sell it to the rest of the world (appraisers, small brokerages, institutional investors, etc) for the same price that Costar charges?  At a time when brokerage businesses could use every penny, there’s another profit center.

This post has gone on long enough.  Joshua – Feel free to disagree in the comments!

May 28th, 2010 | Category: Uncategorized

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