CompStak: Mining Money From the Free Exchange of Data
In the real estate business (as in many others), setting prices is a bit of an art. When pricing a property, agents must take the transaction prices of similar deals into account. In the commercial real estate market, the best way to get data on these comparable prices, or “comps,” is not from any official or commercial resource. It’s from other agents.
Traditionally, agents looking for comps for a property ping their agent friends. They may give their friends some data on their latest deals to get useful data back (or just operate on the understanding that when a friend calls for comps, you share). It’s a human process, and it’s fast and yields current data, but after this social transaction, the data begins to evaporate and age, and it’s not evenly available to other brokers.
The process works, but it’s highly inefficient.
CompStak takes this process and mediates it over the Web. The idea is that if you’re an agent and want to look at some comps, you first put some of your own data in. This gets you credits that you can spend on retrieving information that other agents have put in. The cost to participate in the information network is information itself. CompStak CEO Michael Mandel, a former agent himself, says that the system increases transparency in real estate, improves the efficiency of the market, and should tend to tamp down outlier transactions (those that are too high or too low). I asked him if he thought more transparent pricing would lower prices across the board, and he didn’t believe it would. “Some deals will go higher,” he said, and some lower. Mostly, he said, efficient pricing data will make the market faster.
CompStak is a smart idea, and it’s working. It rolled out in New York in 2012, and now has data on nearly every commercial real estate deal in Manhattan from the last year. Two weeks ago it launched in San Francisco as well. Mendel says that the system already has data on 61% of all the commercial real estate deals in San Francisco from the past twelve months.
CompStak is free for brokers and agents, but this free service is also a money-making business. Mendel sells access to the data to banks, REIT managers, private equity funds, and so on.
The idea of adding technology to a social/business interaction and then profiting from it is not new. But it’s easy to do it wrong. At the 500 Startups event where I met Mandel, people were comparing his service to Jigsaw, which initially (in 2006) let you contribute personal contact information from business cards you collected to get credits to get same from other users. That was a horrible idea, since it broke the social contract around business cards. People don’t give other people their cards expecting the data to be sold or re-gifted. But Jigsaw did eventually tweak the service well enough, and Salesforce acquired the company in 2011 for $142 million.
CompStak is smarter at its start than Jigsaw was when it kicked off, since the data being bartered is financial, not personal, and since CompStak actually improves on an existing process (people do share real estate transaction data; they don’t habitually share business cards). CompStak is mining just one rich vein of historically buried data. There are others.
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