Newer posts are loading.
You are at the newest post.
Click here to check if anything new just came in.

September 01 2012

Who pays for R&D?

The other day I read an article on Inman News titled “Why is nobody making my dream real estate app?” and was inspired to highlight the R&D expenses most companies, including document management companies, must incur to support mobile devices and who is going to pay for it.

I asked a simple question to the author “how much would you be willing to pay for it?” and the reply was $20-30/mo or better yet, sell to the MLS or brokerage so they offer it for free.  This I believe is the same mentality with consumers (including real estate professionals) around the U.S. that everything should be cheap or free, but I fear we forgot how the world worked even 10 years ago before massive venture capital investments flooded into technologies companies devalued good software and paying for what it’s worth.

The author cites the lack of a single solution that does everything and the frustration to workflow various tools to do their day-to-day duties.  I agree, things should be simpler, and if someone does something great then be willing to pay a premium for it (think Apple).

There are some great tools and companies already, as mentioned in the comments to the article, but I can attest that mobile engineering often doubles and triples their engineering costs to build/support all the various devices/screens, etc.  What they should do is double/triple their fees to fund it, but pressure to offer the additional tools at no extra cost means they must sacrifice margins or provide “good enough” solutions to end the immediate complaints.

Remember the days when something new came out and the early adopters paid a huge premium (your first computer, television, VCR vs. current one)?  Today, with insanely-large venture capital investments to cover those R&D losses for years, consumers have become accustomed to no longer paying that early adopter “tax” for R&D with new products.  The traditional, privately-owned, profitable companies still must fund that R&D and recap expenses through revenues so if they don’t raise outside capital and sell off huge chunks of their company, they are forced to move slower and fund R&D through existing revenues, or increase revenues/prices.

I believe if you want more, you should be willing to pay more, and you’ll get much better service but for some reason people today want more and to pay less – Wal Mart.  It doesn’t seem to apply to everything, however, which is hardest to understand yet.  For example, if I want great service at a restaurant I frequent, I make sure to tip well so they eventually remember me and I get top-notch service.  We can all relate, I’m sure.  What I find puzzling is the reverse mentality when it comes to investing in critical tools for doing business.

I was reading Trulia’s S-1 filing the other day and saw their engineering costs alone were over $10 million/year.  Assuming a company investing the same in technology likely needs at least $25 million/year in revenues to profit (or say $2 million/mo), they need over 66,000 agents to pay $30/mo to reach that revenue.  Trulia’s S-1 filing revealed they have 20,000 paid subscribers and it’s taken 6 years to get there and they’re just breaking even, earning $140/user (far more than $30).  Nearly $100 million in total cost (reinvesting revenues plus over $30 million VC funding) and 6 years later, and they’re only 1/3 to the 66,000.  Very few can float those kind of losses.  There will always be companies investing much, much less in engineering and will provide “good enough” solutions as you mentioned, but put some simple numbers down on paper like I did and you’ll see why you get what you are willing to pay for.

Rest assured, there are many companies dedicated to providing the best-of-breed and taking this financial risk to hopefully be rewarded some point in the future through volume sales.  Don’t forget what it really costs these companies and the significant financial risk they make to try to improve the lives of real estate professionals like yourself.  They should instead be celebrated and recognized for their efforts.

References:

Inman News Article

Trulia S-1 Filing

February 16 2010

Real Estate Technology Veteran Jacob Wills Joins Goomzee

Missoula, Montana – February 16, 2010 – Goomzee® (www.goomzee.com), the leader in mobile advertising and lead generation for real estate sales and marketing, today announced the hiring of emerging technologies guru and real estate veteran Jacob Wills.  In his position as Vice President of Product and Business Development, Wills’ responsibilities will include forging strong relationships with Multiple Listing Service partners, ensuring the Goomzee product offerings exceed client expectations, and developing products for emerging technology opportunities in real estate.

“We are very excited that Jake has joined Goomzee,” said Mike Sparr, CEO and Founder of Goomzee.  “Jake brings a wealth of experience in mobile services and emerging technologies, and his knowledge and relationships in the real estate space will help Goomzee as it expands nationally.”

Wills has been working in real estate software and technology for over 10 years, with expertise including product design and management, mobile and voice technologies, business development, and marketing.  Most recently he has served as Director of Product Management for NewportWorks (acquired by The First American Corporation), Product Manager for Fidelity National Real Estate Solutions (now LPS Real Estate Group) and as a consultant for companies large and small.

“I’m thrilled to join the Goomzee team,” said Wills.  “I’m looking forward to driving the growth of Goomzee’s best-of-breed mobile marketing solutions, working with an outstanding development organization, and helping translate market opportunities into new products and services.”  A graduate of The Johns Hopkins University, Wills now lives in Southern California.

About Goomzee
Goomzee Corporation provides a mobile marketing technology platform that connects buyers and sellers at the point-of-interest.  Goomzee’s flagship product, Realty Connect®, and Mobile Virtual Tours, specifically assists real estate professionals to win more listings, acquire more leads and close more sales.  The Company was established in 2003 offering hosted online storefronts to small businesses as well as consulting for some of the world’s largest companies and brands.  Goomzee is an industry leader in text message marketing and continues to innovate from a client first perspective.  We connect buyers and sellers at the point-of-interest.  To learn more, visit us online at http://www.goomzee.com or contact us at (877) 324 – 1796.

Older posts are this way If this message doesn't go away, click anywhere on the page to continue loading posts.
Could not load more posts
Maybe Soup is currently being updated? I'll try again automatically in a few seconds...
Just a second, loading more posts...
You've reached the end.

Don't be the product, buy the product!

Schweinderl