What’s the Big Deal About Big Data?
What’s the Big Deal About Big Data?
It’s hard to avoid conversations about big data these days.
The concept has become politically charged amid debates on just how the federal government and large corporations are using the vast stores of data they’re gathering on us. In areas that range from thwarting terrorism to understanding consumer tastes in toothpaste, there is vast disagreement about the ramifications. Some see unprecedented threats to personal privacy; others welcome the potential for increased efficiency in decision-making. Most of us are unsure what to think.
A Boolean-Bayesian Bouillabaisse
For data geeks, the rise of big data represents a transition from the Boolean to the Bayesian. Before you shake your head in dismay and turn the page, here’s a simple explanation from the National Association of Realtors®’ Chief Technology Officer Mark Lesswing.
Business intelligence and technology used to be dominated by Boolean logic, named for 19th-century English mathematician George Boole. Essentially, this refers to a form of algebra that’s binary in nature and represents a pair of different, absolute values. (Think “yes or no,” “true or false,” “black or white,” “1 or 0,” and so forth.)
Today, business intelligence is considered in terms of Bayesian probability. Termed for another long-dead English mathematician named Thomas Bayes, this involves conditional logic that can change based on the information streams. If the visual structure of Boolean math is two parallel lines, then Bayesian math is like a star, with multiple streams of data meeting in the center to produce a conclusion. With the latter, you can combine data sets in practically unlimited combinations, and if you do it correctly, new insights about consumer behaviors can emerge.
Strictly speaking, big data doesn’t just mean “a lot of data,” though that’s certainly one element. Nor does it refer to large organizations collecting data, though that too tends to be an attribute. And while it’s sometimes employed in both a pejorative way—in the same spirit as, say, “Big Government” or “Big Oil”—and in a positive but overly generalized way akin to “cloud computing,” those characterizations are more misleading than elucidating.
Big data refers to the increasing interconnectedness of data, the melding of large, complex information sets that are nearly impossible to process using traditional database management and processing tools.
The promise of all that piling on lies in the ability it gives researchers to predict human behavior. Most famously, big data has been used to draw a connection between rising food prices in the Middle East and the Arab Awakening; theoretically, it might someday help you determine when people will move and what type of home they’re likely to buy.
Even in its nascent stage, in real estate and other disciplines, the phrase big data is being used in ways that threaten to render it meaningless. It’s bandied about on Twitter and Facebook; dissected and discussed at industry conferences; and increasingly used to pitch marketing and information management solutions that can purportedly help brokers run their businesses better. It is, as Realogy Franchise Group President and CEO Alex Perriello sardonically put it, “the silver bullet of 2013.”
“Most people think it’s just the same old data processing as in days past but more of it,” says Kenneth Cukier, data editor for The Economist magazine and author of the book Big Data: A Revolution That Will Transform How We Live, Work, and Think. “That’s not true. Big data isn’t just how people interact with lots of information, but about how computers can process vastly more data to do new things.”
Perriello adds: “Big data is really the amalgamation of separate but related data sets. When you aggregate them, they provide valuable insights that you can’t get by looking at them separately.”
In practical terms, that means business intelligence is getting more, well, intelligent. “By tapping vastly more data, we can ask new questions and do new things,” Cukier explains. “And we’re harnessing types of information that we never had before. With this, we can find correlations that before escaped our notice.”
Large retailers such as Wal-Mart and Amazon are already using big data to great effect. These companies are finding patterns among consumers and using those insights for target marketing and product positioning. (If you’ve ever received a “You might also like …” message after purchasing something online, then you’ve gotten a small taste of big data.)
“In economics, when we improve transactions, price setting, and liquidity, all parties gain,” Cukier says. “Big data makes markets more efficient—so everyone stands to benefit.”
And what holds true generally also holds true for real estate. “On balance, it’s a really good thing,” says Rob Hahn, founder and managing partner of 7DS Associates and author of the well-known “Notorious R.O.B.” real estate blog. “If someone does it the right way, it’s really, really good. If you’re using big data, you can say, ‘These 14 homes have possible clients,’ instead of blanketing a whole ZIP code with mailings. If I think to myself, ‘Maybe it’s time we moved out of this starter home,’ and I start getting mailings from a local agent, that’s powerful. And in this day and age, consumers expect that kind of experience.”
Not There Yet
Despite all the talk, few real estate companies are positioned to become true leaders in this area. That would require multimillion dollar marketing and technology budgets, departments dedicated to building massive e- commerce teams, and deep experience with developing predictive analytics systems.
Plus, the information available within the real estate industry alone is not, generally speaking, extensive enough to lend itself to big data solutions, Hahn says. “I don’t believe real estate data today is all that deep vertically, even with public records and all that. We have only about 5 million transactions per year. When you think about it, that’s actually not all that many. For real estate, the opportunities are horizontal.”
So, is big data’s impact on real estate on the verge of exploding or nowhere close to being realized? And will it be a good thing for practitioners, consumers, and companies in this business?
Perhaps the best way to think about how real estate will be affected by big data in the future is to look at Realogy’s partnership with Meredith Corp. In 2007, the company formed an agreement with the publisher to license its Better Homes and Gardens brand to create a new national real estate brokerage. As part of that agreement, Realogy’s Better Homes and Gardens Real Estate brokerages can access Meredith Corp.’s database of approximately 100 million consumers—with an average of 800 data points per person—for their marketing efforts. This enables what Perriello calls “mass marketing to the individual.”
“That’s data at all kinds of levels,” Perriello explains. “If someone in that database is asking about cooking, the photo of a house for sale that I send that person isn’t of the front of the house. It’s of the kitchen. At the company level, it can make your marketing and prospecting efforts far more efficient.”
Cukier believes real estate is fertile ground for big data methodologies, though individual practitioners and companies will likely be somewhat removed from their actual application.
“I don’t think small players will work with big data directly, but they will use it,” he says. “This is in the same way that consumers benefit from Google searches, targeted coupons based on their purchasing behavior, and the like. The small players will improve what they do when their information technology systems tap big data or when they subscribe to services and databases. In the same way that Amazon recommendations are very accurate, one can imagine that real estate professionals will be able to improve what they do too, tapping into the big data analytics that bigger firms provide.”
Of course, that same information is getting into the hands of consumers, too. “In the past, you had professionals who were used to having broad access to data and working with consumers who didn’t have that access,” says Stan Humphries, chief economist at real estate aggregation site Zillow. “When consumers have the same base level of facts, that’s a good thing for them,” helping to correct what Humphries calls “information asymmetries” in real estate.
That gets at the heart of many real estate practitioners and companies’ fears about big data: a further loss of control.
A better way to look at it is as an opportunity, Perriello says. “Where industry gets concerned sometimes is that they’re afraid of giving the consumer too much information, because now [consumers] don’t need them anymore,” he says. “But consumers are going to get the information from somewhere. It’s up to us to tell the story [with data]. Don’t be afraid of giving them that information—embrace it.”
“The practitioner’s role is to be a trusted adviser in a high-stakes transaction, to help consumers make good decisions,” Humphries says. “Agents can take [analytics derived from big data] and turn it into information that has meaning, and then turn that into insights to help clients make decisions.”
NAR’s Data Dive
How much should your association know about you? That’s the question the National Association of Realtors® Data Strategies Committee is floating by members attending the Realtors® Conference & Expo in November. “The thought is that by collecting just a little more information about you, we could provide a much richer experience,” says Ted Loring of Eureka, Calif., who chairs the committee. “Some may find that threatening, and we hope to gauge that. Others may already wonder why Amazon and Netflix know more about them than their professional association.”
The Holy Grail: Foresight
The benefits of big data are still emerging. As it moves beyond the early stages and into the mainstream, it will allow practitioners and brokerages to get much more targeted and predictive with their marketing and prospecting. And as the technologies and techniques become more advanced, the results may start looking like something out of science fiction.
Just as weather forecasters have become better at giving early storm warnings, real estate practitioners will become better at forecasting turns in their market. “The more sophisticated it becomes, the more effective it’s going to be,” Perriello says. “The Holy Grail is knowing what a consumer’s going to do next—you won’t have to wait for the person to act because you’ll know ahead of time.”
But as with developments that came before—the Web and social media come to mind—having the data is no substitute for knowing the fundamentals of real estate: transaction management, market knowledge, negotiation skills, and so on.
“Big data is a component of a marketing plan that’s integrated into a business plan. It’s not going to solve all your problems,” Perriello says. Neither, he might add, will it render you or your expertise obsolete.