Does The Compass-anywhere Merger Spark New Phase In Portal Wars?

The completion of Compass’s acquisition of Anywhere Real Estate has led to the creation of a real estate brokerage monolith, the size and scale of which the industry has never seen. 

Compass’s new size combined with its stance on private listings and current legal battles with Zillow and Northwest MLS (NWMLS) have led many to wonder how this new megabrokerage could impact the already heated battle among the residential real estate portals. 

As early as October 2024, Compass CEO Robert Reffkin made it clear that he wanted Compass and its website to be the place consumers went to find listings. 

“By growing our listing inventory, we believe more and more buyers will search Compass.com and use Compass agents, as it will be known that Compass has more inventory than any other website or brokerage,” Reffkin said during his firm’s third-quarter 2024 earnings call with investors and analysts in late-October 2024. “Ultimately, our North Star is to use our depth of inventory to create better outcomes for sellers, buyers and our agents, which, as a function, translates to better outcomes for Compass and our shareholders.”

Compass inventory may raise concerns for portals

Nearly 18 months since that earnings call, industry analysts believe Compass may very well be on the path to accomplishing its goal, which they say should raise some concerns for the portals. 

“I think they will be able to leverage their private listings into an online real estate portfolio,” Alec Brondolo, an analyst at Wells Fargo, said. “In his letter to the industry last week, Robert publicly indicated that he is planning to compete directly with the online real estate portal business.” 

How exactly that will manifest is still a bit unclear to Brondolo, but he does say that Compass’s ability to show listings other real estate listing sites may not have will play a large role in how Compass is able to market its site and brokerage to consumers and agents. 

“There is some merit to being able to say, ‘I have a portal with 100% of the available inventory,’ or even just a greater amount of inventory, that can build consumer traffic,” Brondolo said. “It is also definitely a tool for agent recruitment because if you are an agent at another brokerage and there are homes on the market that you don’t have access to or don’t know about because you are brokered somewhere else, that is a good impetus for you to join Compass.” 

Some portals more impacted than others

While Compass’s potential entrance into the portal wars could pose a threat to any of the space’s major players from Zillow, to CoStar and Homes.com, to the now Rocket-owned Redfin, analysts believe some may be more impacted than others. 

As industry analysts at Keefe, Bruyette & Woods (KBW) see it, the portals like Zillow and Redfin, who direct consumer leads to buyer’s agents, “may face more friction than portals [like Homes.com] who keep leads with listing agents.” 

“We really do think CoStar has the upper hand here among the portals because of how aligned it is with Compass,” Ryan Tomasello, a managing director at KBW, said. “You could read Robert’s open letter, and you’d think [CoStar founder and CEO] Andy Florance wrote it.” 

While Tomasello and his colleagues say that Compass’s increased market share and private listings may give it a supply side advantage, they are skeptical of the firm’s ability to compete with national portals. 

“Running a nationally branded portal and the investment that is needed to drive traffic is a very different business than running a brokerage, and we think that the national portals are still best equipped to be marketing partners,” Tomasello said. 

A Homes.com partnership?

Given this challenge, Brondolo believes there is a possibility the Compass may entertain the idea of a partnership with Homes.com, the portal that has most clearly shown its support of many of Compass’s current areas of focus. 

“I think CoStar and the Compass team have indicated that they have alignment on private exclusives. It is unclear how it is going to manifest itself, but there is clearly this idea that they [Compass] are going to try to take the public use of inventory and translate it into a real estate portal product that has a competitive amount of traffic share,” Brondolo said. 

Leads to help with agent retention

Eventually, Brondolo said he could see Compass using the consumer traffic on its portal as a way to generate leads for its agents, which in turn could help the firm with agent retention. 

“If they get an agent that wants to go somewhere else for a better split or different technology, they could look at statistics and see that last year 20% of their business came from Compass leads, which they wouldn’t have if they went to another firm, and I think that makes the brokerage stickier,” Brondolo said. “It gives them a lot more leverage in negotiating with agents.”

Zillow in a tough spot

Due to the potential challenges both Tomasello and Brondolo see Zillow facing due to this merger, the analysts say the firm may need to make changes due to its business model, especially since some aspects of it are currently facing litigation.

“I think it all puts Zillow in a difficult spot, given the hard-line stance the company has taken on private listings, but they could pivot and ultimately increase the flexibility and even take a deal with Compass. But, they have kind of backed themselves into a corner here by putting out their stance on this last year,” Tomasello said. 

Overall, analysts agree that they expect to see an increased interest in private listings and private listing networks due to the merger, which they anticipate will lead to a meaningful fragmentation of inventory across the market. 

“I think there is potential for inventory and listings to no longer be commoditized and that opens up a lot more room for competition among the portals. I think the one that may win out might be whoever strikes some sort of  partnership with Compass,” Tomasello said.