Our fifth Beyond the Box episode is out TODAY and it could not have been with a more inspirational person. Mike McAra had the pleasure of sitting down with the fun and intelligent Morgan Carey, CEO of Real Estate Webmasters and renowned public event speaker.
Watch/listen here to get the scoop on what Morgan is up to and what he thinks about the current real estate climate.
“There will be adoption. It’s forcing us to work outside of our comfort zone and to start looking at some of the things. It’s interesting, I was reading a Harvard Business Review article the other day and they were talking about how the fact that in recession, people actually do tend to invest more often in technology because there isn’t the opportunity cost.”
Full Transcript of the Show
Mike: Alright, so we’re on here. So, thanks so much Morgan for coming on the show. Really appreciate your time.
Mike: So, uh, so I guess we can start by chatting around, you know, current events and the elephant in the room. So, being the CEO of you know, the Real Estate Webmasters, how have you been able to manage the transition from working on campus to having a lot of your people working remote, you know, in the new reality here. How are things kind of moving for you guys in your transition?
Morgan: Yeah, you know it’s interesting obviously the dynamics are different from region to region and to country to country. I feel like in Canada, we’ve been very fortunate for a lot of reasons. We’ve got, you know, a really good support of Government, healthcare, and a lot of space in between people, so we’re not as condensed of a population. So, you know, first of all the other people not in Canada listening, it’s a different paradigm for us, but we still obviously want to support the Global social distancing effort you know, sheltering at home when you can. Myself, personally as we talked about, we were on a work trip when all of this stuff went down, so I was quarantined for the last 14 days. I just got out of quarantine which is great. Um, but no it’s been an interesting and really stressful and challenging exercise in, in, urgency. Right?
Morgan: We all realized very quickly not only is there serious health uh, impact if you don’t move quickly, but there is also serious economic impact. So, we spent our first week in just absolutely ensuring our staff were safe. You know we obviously have had sidebar conversations about, you know, what is next and how to take care of our clients and all that sort of stuff, but we moved from over 100 people on campus, you know between our Vancouver and Nanaimo offices to zero people on our Vancouver campus and we actually shut our Vancouver campus down.
Morgan: Everyone went home and ah uh, we’re about 75% on Nanaimo campus has gone home as well. And, for us, because we, we’re not what some people think of as a tech company, in the sense that we don’t work remote we actually we have a “work on campus policy” and that’s to encourage collaboration, product quality, culture, and so it’s a real hit for us to not see our friends and our family every day and the people we work with, we really do think of as family. And so, there’s, there’s a morale hit, there’s a process and you know, we’re just trying to all figure out how to… how to work with each other collaboratively in the same way that we’re used to but not being able to talk face to face. Umm. And there’s logistical challenges too, like, um, we didn’t have take-home laptops for everyone. Right?
Morgan: And in our world, security is massively important, and so we don’t allow people to work from private machines. They have to work from company machines so that they have the proper securities software, and VPN, and all this sort of stuff. We had probably 40 take home laptops in our company for travel and whatever, right? So, trying to find 60 extra laptops in a crisis is actually pretty difficult.
Mike: Well especially when Apple goes and shuts down all their stores.
Morgan: Exactly right, exactly right. So, there was a lot of adjustment. There was you know, retrofitting people’s spaces at home and doing you know, analysis of where they could work. They’re bringing their actual, physical, PC’s home, or their physical Mac, you know, Mac pro’s and stuff like that. So, you know, it was…we move very fast and um, but it was really challenging. Really stressful for our leaders and for our staff, so um. We’re up and running, we are at a reduced staff level though, that was the next piece is that
Morgan: We recognized that demand was pretty significantly impacted as well. Where obviously we’re in the software business, but we have a large agency and uh, our overall staff levels were reduced by 40%.
Mike: Oh wow. Wow.
Morgan:–Pretty significant from that perspective. But there is government programs that help offset those costs, and so again, being Canadian, we’re very fortunate that the net, net of the people who either have been laid off, or have staff reductions in this country you know, can often times and end up keeping them relatively close to their standard of living, so I think we’re very fortunate to live here.
Mike: Oh, absolutely. And I think that you know, that this just continues an overarching story for your story of you know, how real estate webmasters has become a household name in you know, the real estate technology market. Because you constantly have to pivot and reiterate and change things on going and so you know, obviously this being a black swan event and being extremely truly terrible, really, this has been in your core DNA being able to adapt. So, maybe it’d be really helpful or really exciting to sort of talk through how your path to kind of get here and how you were able to take an idea and a concept back in when, what was it, 2004? When you launched this and how you were able to build it out to today.
Morgan: Yeah, yeah, so umm…. I, you know, historically, I come from the search engine space. That was the first SEO guy. I owned a SEOguy.com I was one of the founders, I was one of the founders of SEO Chats. So back in the late 90s and early 2000s that was my origin story. And I um, became really successful in education, actually, real estate was not my first vertical. And um, so successful in fact that the company I worked for who ended up being the University of Phoenix decided that they’re paying me too much money and wanted to buy me out.
And so, I did my first sort of, buy out deal, and um, did very well but it also came with a non-compete in education. And so, I said, “Wow…vertical marketing is something I’m really good at. I should pick my next vertical.” Right? And so, it was actually about 2002 I think, when we got into real estate because I had a few clients in, you know SEO clients from my SEO consultancy and obviously I just got a bunch of money, so I bought a bunch of real estate and I’m an entrepreneur so you do your research in real estate becomes a big component of you know, empire building and stuff.
Morgan: And um, the um, the crux of it was you know I needed to pick another vertical because it just, I knew exactly what I wanted to do and at the time we actually opened a company called RealEstateOptimization.com. So…
Mike: Hmm… Good.
Morgan: So REW wasn’t REW yet, right? Cause…
Mike: It was Steven King before it was Stephen King.
Morgan: So yeah, we did only uh, SEO services, but what we found very quickly was that there wasn’t very many good vendors. Actually, there were no good vendors quite frankly in this space. I was used to working with Adobe, eBay, digital river, big companies who —
Mike: –You know, some household names.
Morgan: Right? And you know, when you start working for a successful realtor or brokerage, in 2002, they didn’t have tech companies or in-house design, or anything web related. And so, we found it very frustrating to try to do the job we needed to do on sub-par products.
Morgan: So, we started bringing in top level design talent, top level programming talent, and needing to custom build the platforms from the ground up. And, uh, so we realized pretty quickly that um, our name didn’t really match our services. Because we were doing design, we were doing branding, we were doing programming, we were doing writing. Not just SEO. So yeah, April 9th of 2004, we re-branded and um…
Mike: Okay, got cha.
Morgan: –So that’s where Real Estate Webmasters comes from, is sort real estate optimization is what we were doing, but then we realized that we were actually fully rounded real estate webmasters. And so, um, that’s where, that’s the origin story for REW!
Mike: Gotcha. You know, it’s uh, it’s so interesting if you think about it, 2002. So, we’re talking about pre-Facebook, pre-iPhone. I mean, Blackberry is just becoming a name at that point, and you’ve been able to see the spectrum from, call it, you know, web 1.01 and a half point 0, and now we’re talking about things like i-buyers subject to the all pausing last week, and this week, but you know, and you’ve got all sorts of these industry changes. And one of the key conversations If find myself having all the time is you know, what is next? How have we kind of gotten to where we’re getting? And less from sort of the association industry level, but really, what are the realtors saying? And how are their businesses changing over it. It’d be really interesting to get your take on how you see um, you know, the business model for the agent change over the course of, you know say, 2000 until now, and how you see it going forward. Um, both with the impact of say, of say, with COVID [CoVID-19] being now part of this, but also kind of the technology constant advancement and you’ve got Compass and you’ve got Softbank, all this capital inflows. There’s a lot of things going on there so.
Morgan: It’s a… it’s a different question now, isn’t it?
Morgan: So, here’s the thing. Fundamentally,I don’t actually believe the value proposition or the job of being a relator has changed since 2004.
Morgan: And, I think their pitch has changed, and maybe their understanding of what they do and provide as a service is maybe evolved and they’ve become more particular around it, but I always believe and have always believed, and will continue to believe that the relators deem the emotional heart of the transaction. I don’t think that real estate is the same as travel. I don’t think that a lot of the parallels are the same because this is, as everyone talks about, the largest financial transaction in anyone’s lives. And it is complex, because you are dealing with multiple parties; you’re dealing with buyers, sellers., sometimes multiple parties on each side of those things. Financial institutions, titles, mortgage, everything. Um, and people don’t seem to understand that while you can remove the complexity in some of those transactional pieces, there is still a human on each side of the transaction. And dealing with humans is something that algorithms do that well. Right? And dealing with the emotional components even in the best of times, is still a difficult thing and I believe that people will always want to work with people when it comes to transacting homes. So, I don’t actually think that the role of the realtor has changed, I think um, that the realtors that have suffered are the ones who are actually trying not to be realtors.
Morgan: Right? So, if you think aboutwhat people are accusing Zillow of trying to do, and if you think bout what people are saying about I-buyers, realtors themselves were looking for more efficiency to do more transactions etcetera. They were actually trying to take themselves out of the transaction. Those people can’t compete with Zillow, because their value proposition compared to Zillow is not the same, right? They don’t have the same capital, they don’t have the same technology, etcetera.
Morgan: Right? But any relationship-based realtor which is what I think is every realtor should be, has the same job and will always have the same job is how I feel.
Um, now, with respect to COVID [CoVID-19]; it’s funny, I was on a call with some of my B.C friends earlier today, and this is a whole different ball game now. The “recovery” from, from Co-VID will be a few months. The economic recovery will be a few years.
Morgan: If there’s one thing we know is that when people feel apprehensive and when people are scared, they are going to flock to safety. And safety is going to be the expertise of the realtor. And so, I actually think that all of those people: Zillow, you know, any I-buyer program, etcetera. If they overinvested, I think they’re screwed.
Morgan: I think their model relied on predictability. Right? Their model relied on the fact that you can put money in now, because we can clearly see a path of safety for the next couple of years in order to throw these billions of dollars in. Take losses, grow market share, etcetera. Um, but it… the game has changed. Its consumer sentiment has changed. In an instant.
Mike: Do —
Morgan: And we will not be unafraid in two months.
Mike: So, do you… And I can completely understand those points. Do you think that from the realtor’s point of view, though, with their technology, that this is going to help spur innovation on, or adoption from the Agent’s side? To, let’s say, streamline um, more, call it, remote again video chat, kind of like what we’re doing here to help forward the transaction to help spur innovation, do you think there would be a spur in that type of innovation?
Morgan: Um, well, not in innovation. The innovation exists. I do think that…
Mike: Adoption, sorry. Adoption. Yeah, that’s a better word.
Morgan: There will be adoption. It’s forcing us to work outside of our comfort zone and to start looking at some of the things. It’s interesting, I was reading a Harvard Business Review article the other day and they were talking about how the fact that in recession, people actually do tend to invest more often in technology because there isn’t the opportunity cost.
Mike: Right. Right!
Morgan: The important point they make, and that is, when times are really good, you’re way too busy closing deals to do anything else. And you want to! You want to make hay while the sunshine, or whatever.
Mike: Oh yeah.
Morgan: But right now, we actually have the time, and the resources. We can’t get rid of our resources. We need them. Because this is a short-term thing. This is three or four months. So, we have to put them to use, and to good use, on projects that will benefit us on the upswing. And so, absolutely, any technologies or infrastructure, any project that will actually allow people to capture market share as we start going back up, I think the smart companies will be investing in.
Mike: Well, I’d imagine that’s probably a conversation that you’re having a lot with your clients as well, right? Its, it doesn’t take a day to build a website, right?
Mike: And it doesn’t take a day to invest in good SEO either, right? So, now is a good opportunity, assuming that, you know, the world will continue to turn, I’m going to make that assumption. I think you’re going to make that assumption. Right? And I think I was reading a report from Mike Pelfrey, that he referenced the recovery from SARS in Hong Kong in 2003, I think it was.
Mike: And you know, the transactions dropped by 80 to 90%, but within two to three months it snapped right back. You know there wasn’t… it didn’t make up the loss, but it brought back to typical levels. So, you know again, depending on where you are in the world, it’s you know, it’s now that time to invest in those tools.
Morgan: Yeah, yeah. What I talked to my teams about, is there’s really three kinds, or three groups of people right now in this pandemic. There are the people who are absolutely crushed by it; both emotionally and financially. So, they don’t have the choice to invest.
Morgan: They might not be able to anyway, because they aren’t handling the world. There are the people who are the “wait and sees” where they probably could, if they wanted to take a risk, but they’re kind of waiting and seeing. And then there are the people who see this as an opportunity and have the resources to take advantage of it. But the way I break it out for my team, is I tell my team that at least 50% of the people live in that world where they can’t do anything right now. They have to do what it takes to survive.
Morgan: And absolutely they should do so. 40% of the rest of the people; 40% of the people are the “wait and sees.” That takes 90% of our opportunity off the table for the next couple of months. So, as entrepreneurs, we understand the massive impact. Imagine 90% of the business, like you said for SARS, goes away. And in real estate, it’s no different for vendors, right? So, we have to figure out what’s going to happen with the 10% and that’s the group that we’re talking to. Because right now, you know, sensitivity aside, like we are sensitive to this.
Morgan: Of course, as a company, we took care of our people first, and made sure that everyone was safe and healthy. But then, we actually have a responsibility to the global economy, to try and flatten the curve when it comes to recession. And that means, where we can encourage people to invest, we should.
Mike: So, for your perspective, being… having gone through a financial crisis, how does that compare to what you’re experiencing now?
Morgan: So, uh, it’s totally different, here’s why. The financial crisis is actually the best growth time in the history of my company.
Morgan: And the reason for that, if you think pre-financial crisis, people just didn’t care. They were closing deal left, right and centre. They were spending money on TV commercials, and all this stuff. They had no idea where the money was coming in from. But they were happy to spend it because there was lots coming in.
Morgan: As soon as the financial crisis hit, people realized they needed to tighten their purse strings, and what again they would do is flock to safety. The internet is completely trackable, right? We can put dollars in, you can track where those dollars went, what leads became out of those dollars, and what deals came out of that. If you’re going to choose between an expensive TV commercial and billboard, versus guaranteed ROI, you’re going to pick the guaranteed ROI. And so, we actually got a lot of business and growth during the financial crisis. But it was not as…it was not as much of a “black swan” to your point event, it was a little bit more…not predictable…I think it was actually.
Mike: Well, I mean, some people called it!
Morgan: So, it’s not just that, its impact took time to truly take effect.
Morgan: It wasn’t instantaneous. And it was prolonged, but then the recover was similar. But here there was no time to plan. Here, there was no conversations like… it was last week we were talkingsomebody about doing a new project and they had all the money in the world and now this week they’re broke and they’re asking for a discount.
Mike: Right. Yeah.
Morgan: Because panic, the fear, the media…is so strong right now. And it’s totally understandable. But I think in two weeks people are actually going to be going, “you know what? I’m glad we over-reacted. If we over-reacted, but now we recognize that this is the new normal and let’s get on with the course of business so we can save the economy.”
Mike: Well, and it truly is a paradox in the sense that, if you don’t react, then the worst happens. But if you react then it never occurs; so, the question is “should have I reacted so strongly” right? And so, it’s such an interesting. It’s like those thought experiments that they have, you know. Pick your favourite university or something and now it’s a reality. But I guess in saying that, you know, and just to kind of to get towards the end and to wrap it up. Obviously, there is a lot of change going on and there are lots of challenges happening. In your opinion, how do you see the next year, we’ll put a time limit on here. What are the biggest challenges to realtors and tech companies over the next year? And then, what are the biggest opportunities for both tech companies and realtors over the next year?
Morgan: So, the challenges to realtors are… I think very predictable. Surviving the next 90 days from a financial, you know, because again historically, they don’t have a lot of savings, they don’t plan… nobody plans for these things. Surviving the next 90 days is challenge number one. Challenge number two is actually taking advantage of the opportunity that is going to happen on the upswing. They need to be prepared for that, right? Because, you’re right. Just like with SARS, they might not recover to the exact same levels as it was, but you also have to recognize that a lot of people are going to go out of business. There are going to be a ton of opportunities for realtors, 90 days from now that they need to start preparing for today. So as long as you’re at home and you’re safe, the challenge is financially making sure you make it through and all that sort of stuff, but if you’ve got that covered, people really should be thinking about how to service the market adequately and take advantage of the market share that is going to happen on the upswing, right? Because, we’re going to hit a bottom in about a month and then it’ll start going up.
Morgan: So that’s a realtor challenge. Tech companies… um… you know, again, everyone has to survive. There are small, medium, and large tech companies. A lot will not survive. I think that there will be adjustments to people’s expectations when it comes to M&A. M&A will be wiped out, I think. From a high, high multiple, high valuation perspective.
Morgan: It will still be done, butcompanies are going to go on sale. We know this.
Mike: 10 to 20x revenue numbers, won’t be the norm?
Morgan: Well, that’s not the norm in our space anyways, but somewhere between 2 and 5x is. The tech companies. The 2 to 5x is going to become 1 to 3x.
Morgan: People don’t adjust their expectations; they won’t be able to sell their companies. And there will be less people wanting to buy companies unless they’re on sale. And a lot of the companies who could have sold 6 months ago, and should have, quite frankly, will just actually go out of business. Because they won’t be able to adjust. So, short term, it’s going to be all kinds of um… chaos, in that sort of space. Longer term though, very similar to the realtors. We all have the opportunity to take market share. Everyone is going to go on online, because everyone is going to realize, “Holy shit, during this time, I did not have a good CRM and I wasn’t able to be organized. I wasn’t able to reach out to my past clients. I wasn’t able to continue to do my business if I wasn’t able to do open houses or door knocking, or whatever.” So, I think those of us that are in the platform, CRM, lead gen space, it’s going to be a massive, massive, bounty. It’s going to be there… everyone will get off the fence. Everyone recognizes the value of online collaborative tools. And so, I don’t want to look forward to anything per say, because of how shitty this situation is currently.
Morgan: But if you need to look for a silver lining, I think the opportunity for the good tech companies is actually quite high.
Mike: Love it. Love it. So then, just last question so, hypothetically, it’s 2021. Inman Connect, New York City, you’re the keynote speaker. What are you talking about?
Morgan:[laughs] Inman 2021 in New York, I’m the Key Notes Speaker…
Morgan: I’m probably talking about the resurgence of the realtor. I probably am, to be honest. It, it’s… um… this concept that their value becomes greater in adversity, I think is an important concept. And I think reminding them of that, right? Reminding them that your true value is the fact that you are the heart and the soul of the transaction. You know, we say it a lot, but people still get distracted by trying to be a tech company, or trying to be a lead gen company, or trying to be something you’re not. Right? I believe that the resurgence of the realtor, or I… in a crazy way, and I hate to say this, I feel like Covid in some ways will save realtors.
Morgan: Yeah, it’s a concept I’ve been thinking about, right? Is that, it will have re-emphasized their value in the transaction.
Mike: Well, if anything I think what it’s proved is that we crave social interaction, and you know, as we said in the beginning here, relationship are so essential when you’re brokering the single largest transaction for most people. So, you know, I think that time will always tell, but yeah, it’s definitely plausible.
Morgan: So yeah, we’ll see. Maybe you can ask me in New York!
Mike: Yeah, I hope so! I hope to start seeing people in person again.
Morgan: Yeah, that would be good.
Mike: Anyways, thanks. Thank you so much for doing this again, Morgan. I really appreciate your time.
Morgan: No problem.Thanks Mike.
— End of Podcast —
Beyond the Box: Conversations with real estate executives, venture capital partners and technologists on what lays ahead for the real estate industry in a world after COVID-19.