Competitive Analysis: Compass

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Competitive Analysis: Compass

Introduction

The real estate industry was hit hard with economic challenges as COVID-19 overtook the United States. Yet, Compass has not just recovered, it has posted record-breaking monthly revenue every month from June to October. In June, July, and August, agents netted 50% more revenue than the same period last year. Since April, the company has hired an additional 3,500 agents to meet demand, luxury home sales (top 5% in the market) rose 42% year-over-year in the third quarter (2020), and showings, both virtual and in-person, rose 64% year-over-year in September; new listings rose 2.8% in Q3, and luxury listings rose 45% due on the technology-driven platform.

Factors Influencing Real Estate Industry Players to use Technology-Driven Platforms

  • Technology is shaping the real estate industry — more than 70% of today’s buyers search for homes online, and 85% of real estate agents use texting to get work done.
  • The real estate tech sector itself will not be replaced by a single technological solution, but rather changes enabled by technology and leaders that embrace it; hardware acquisition does not replace the adoption of innovative solutions (software solutions, applications and platforms). Consequently, 93% of agents agree that real estate businesses must engage PropTech companies to stay relevant, with 30% of real estate companies currently investing or planning to invest in PropTech start-ups.
  • As the industry is seeing more technology applications for VR, the cloud, and block chain, forward-thinking realtors are currently moving beyond photos and 360-degree video to offer clients 3D virtual property tours on their personal devices.

Why Agents, Brokers, and Buyers Choose Compass over Competitors

  • The high-tech real estate startup's co-founder and CTO have extraordinarily strong tech backgrounds, and a full 5% of Compass non-agent workforce is devoted solely to tech. An infusion of $1.6 billion from SoftBank enabled Compass to continue to build a technology team of more than 300+ engineers to support agents by offering software on their platform that eliminates busy work, and enables agents to work with more clients and close more sales.
  • A large percentage of annual revenue is paid directly to agents (70%–90%), with a smaller percentage retained by Compass as its gross profit. High producing agents command more favorable commission splits as high as 90/10 — and evidence, in some cases, shows that Compass offers 100% commission splits as a recruiting incentive, either for a certain amount of time or a fixed number of deals.

How Technology has Created Stronger Competition Across the Real Estate Industry

  • Artificial intelligence (AI) is revolutionizing the real estate industry, and the opportunities that accompany AI are helping agents and brokers better understand and dissect data to assist clients and secure sales. Consequently, Statistics show during a 12-month period (2018) Compass generated more revenue ($2.6+ billion) in San Francisco home sales representing buyers versus $250 million by Redfin.
  • The use of modern technology during the home valuation process helps to eliminate human bias, automate routine tasks, makes home searching more sophisticated, and data determined by the intelligent algorithm helps agents and homeowners, get a better deal. In a recent survey, 92% of agents agreed that in the near future, computer vision technology will become a more important factor in their decisions about which companies to work with.
  • The Internet of Things (IoT) is helping real estate professionals grow and manage businesses more efficiently than ever before. With the onset of huge volumes of data and millions of data points, terms such as big data, machine learning and artificial intelligence (AI) are becoming common place in the real estate industry, and the technology is, or will be, available to support data driven services- there is a strong appetite to consider using new technology-driven solutions, with 72% of agencies considering its use.

Research Strategy

We begin our research by locating relevant data connected to technology in the real estate industry and its effect across the industry. Information was gathered from Compass' annual reports, technology periodicals, agent articles from three national agencies, and articles found through ResearcGate, Wall Street journal, and Forbes Magazine. The data covers Compass' growth in 2020, why agents/brokers/buyers choose the company's tech-driven platform, and competitive needs that increase the use of technology in the real estate industry.


Sources
Sources

Quotes
  • "Technology touches every aspect of the real estate industry today. Buyers can see a birds-eye view of a neighborhood 2,000 miles away through drone footage, and buy a house online without ever taking out a pen to sign a contract. Searching for new listings is as simple as downloading an app, choosing a location, and awaiting notifications with options."
Quotes
  • "The real estate industry will not be replaced by a single technological solution, but rather the changes in the industry will be enabled by technology and the leaders will be those that embrace it."
Quotes
  • "93% of agents agree that real estate businesses must engage PropTech companies to stay relevant, with 30% of real estate companies currently investing or plan to invest in PropTech start-ups."
Quotes
  • "Forward-thinking realtors are currently moving beyond photos and 360-degree video to offer clients 3D virtual property tours on their personal devices."
Quotes
  • "Regarding the average sale price to list price percentage while acting as a buyer’s agent, Compass’ performance indicated buyers paying 3.1% less as a percentage of list price than Redfin’s performance over the same time period."
Quotes
  • "Compass has not just recovered, it has posted record-breaking monthly revenue every month from June to October. In June, July, and August, agents netted 50% more revenue than the same period last year. "
Quotes
  • "Compass has built a technology team of more than 300+ engineers to help agents, offering software on the platform that eliminates busy work, enabling agents to work with more clients, and close more sales. "
Quotes
  • "High producing agents typically command more favorable commission splits as high as 90/10 — with only 10% retained by the brokerage."
Quotes
  • "The opportunities that accompany artificial intelligence are already helping agents and brokers better understand and dissect data to assist their clients and secure a sale. "
Quotes
  • "As the valuation market moves to becoming more digital, it is clear from the client survey that how valuation service providers use data and technology, and how they demonstrate this to clients, is going to become increasingly important to the decision to purchase their services. "