#158 Connor Leahy: The Unspoken Risks of Centralizing AI Power

31:16So today, the multifamily approach that Google employs is much like what they did for travel about six or seven years ago. And for anybody that's searched for flights on Google now knows, then it's, I mean, they'll still surface in organic and in ads, you know, your kayaks, your travel offices. But what they also service front and center, which has reduced the available organic page real estate is their own module, travel module. And so we know that that's coming for multifamily, wherein Google is going to cut out ILSs or partner with them. We'll see how this works. And we've talked to the various ILSs about it, and they've confirmed our suspicion.

32:04But we see that being pretty disruptive from an ILS standpoint. in what way I wouldn't dare to kind of presume, but it's coming in much the same way they've upended travel. So - Well, did you - Go ahead. Directly, did you do it all at once or did you stagger it all at once? Wow, that's pretty brave. Or had you already proven on some level, because I'm imagining you pitching this up, that had to have been a pretty significant presentation, especially if it was going to be ripping the band-aid versus we'll prove this out and then we'll roll it across the rest of the properties. Yeah, it's a good question.

32:53The nuance there is that we rolled out the individual property sites because we were finding clients were wanting something that was bright and shiny, they've got a new asset or they've got a new brand, they're rolling out. We rolled out the early BTR product with Christopher Todd and they had really broad brand expectations and wanted very explicit websites and all these different things. And it became apparent to us that this was not the exception, but eventually going to become the rule. And what would happen is, what's really important for us is owning the Google Business Profile orientation relative to a property and where you point prospects from a website standpoint.

33:40And what we couldn't have happen was have all of these third-party managed property sites co-opting. It used to be Google My Business. I believe it's Google Business Profiles listing, the website listing. What was really important for us was kind of maintaining the primacy of MarkTaylor.com as a private ILS. And by primacy, I'll give you hard data. You know, CoStar used to share Apartments.com's entire network, unique traffic data with us on a monthly basis. They've since stopped. But, you know, there were months where MarkTaylor.com itself generated more unique traffic than the entire apartments.com network.

34:28Now, this was 2018 era, so I won't pretend to say that's the case anymore, but it's quite an engine. And so we needed to preserve that. And if we had 80 property Google business profiles pointing to to 80 different property websites, that was gonna hurt us. And we saw the appetite for these custom sites costing anywhere from 50 to$200 ,000 that ultimately didn't perform for all the reasons I mentioned earlier. They're not built for mobile, right? They're replete with all this rich imagery and all these design kind of attributes and et cetera, but they don't load on mobile and that's problematic.

35:12We knew we needed to have a alternative that was viable. So to answer your question, we rolled out the standalone websites, those individual property websites, established them, polished them. That was about a six month process. And then in tandem with rolling out the new MarkTaylor.com, we turned off ILSS. Got it. So staged. We didn't just, I mean, it was already scary. Yeah, I bet. I mean, it was already, yeah. In fact, I remember my CEO at the time saying, you're really exposing yourself here. And this is how much I believed in it. Because I'd spent a year studying. I said, listen, if I'm wrong, we can still go back, number one.

35:58Number two, I will submit my resignation. This is how much, how strongly I believe in it. And he says, at that time, I think John, who is now our president, he was our president then, but he is, John Carlson leads Mark Taylor. He was literally the only person that believed this was possible as well. So fortunately, it's proven out. It was a little bit of a scary period there. But again, we haven't had to return to ILSs out of need, right? Out of necessity. In fact, I'll give you a data point that's helpful. We average about 200 active leads today per property in our CRM. So while we are, yes, out of the decade of abundance from a multifamily perspective that masked a lot of the poor performance from operators um you know that's no longer the case today you know which is why you're going to see operators exposed because that abundance period is over cost per posture continue to rise right um and uh you know payroll ad etc etc and all the associated performance induced costs because you don't do things well that those folks are going to start to get exposed.

37:11But for us, we've had to just be really cognizant of and really simplify it. And as long as we were seeing the key metrics that we needed to, we knew we were pointing in the right direction. And so here we are, I guess, six years later, almost, where, yeah, we're coming up on our sixth year. No, we're past it. It was in October. Yeah. So we've really been cranking. Yeah. And been successfully. Go ahead. What were you going to ask, Rick? Well, I had two questions, but maybe I should narrow it to just one because I want us to be able to hit some other topics. But if there was one lesson that you could pass on to a marketer, an owner, operator listening to this about making that switch, what would it be?

37:55Yeah, that's a good question. Well, number one, avoid indulging on really expensive sites that look good, but that don't perform to mobile requirements. That's a heavy no-no. Strip out all of the additional kind of cutesy bullshit. Allow somebody to convert after a single click. Like don't make your form feels too heavy. Most people are thumbing that, right? So just ask for their name, email address, phone number, maybe the unit type they're interested in. But really, really understand what Google cares about from an SEO accessibility performance standpoint and really build to that. Trust that you can bring in these marketing capabilities in-house.

38:50It's something that you can do. And it can be really valuable because, you know, we've experienced with it. And, you know, when you utilize third-party managers, some will turn around sites very quickly. You never know what your situation may be. You may be taking over a property in three days. If you have a three-week requirement to get a website up and all the feeds connected, that's going to be a challenge. And I know you guys do this piece well, so this certainly isn't you. but there's a lot of folks that that's that was the standard um so think about the immediacy of having somebody in-house bringing a specialist in they will pay for themselves um if you bring in the right ad strategists and the right account managers um and then really take a hard look at providers who can give you websites that um you know are mobile for first oriented and are going to be additive.

39:47And in doing so, that is going to create a new problem for you, which is answering your phones. But that's a good problem to have. So know what your needs are, know what your goals are, come in prepared. And then when you're pursuing partners in this space, unless you do it yourself, know what you're going to ask them, ask them what their success metrics or how do you justify your existence? How do you perform? Because when I first arrived, we used to have these meetings with our third party ad strategists and they come in and say, you're averaging 4 ,000 uniques per property this month. And we'd be like, oh my God, this is great.

40:31Then you'd ask the next question, if you're thoughtful and we weren't particularly at that front end period it's well what's my conversion rate of unique to a lead right because i only need 100 uniques if they're converting at a 20 rate right and so i don't need 4 000 all you know for which most of them are paid since at that time our website wasn't indexing well for um search so we were nowhere near page one of search results for organic um so if you're somebody that's listening the podcast and you're saying all right where do i start with this you know owning your footprint is really important finding a really strong third-party partner who can help reduce your dependence on ilses is critical somebody who's mobile first that understands kind of the ever shifting landscape of doing that well um who monitors and audits how the algorithms are changing from a search perspective who understand the integration of now generative in that process what that now means from an SEO and structure data, what those implications are, and really can make sure that you're always competing.

41:42Because we know it. We track our performance via Google's development tool, web.dev, and we run our sites every week through that to see what's changed. And I can tell you that things change every week. We may have a high SEO score one week. actually SEO doesn't change that much, surprisingly, nor does accessibility, but performance certainly does. So we can be in the high 70s and drop down to the low 30s suddenly, and you're like, holy shit, what just happened here? And so you want a partner who's paying attention to that and making sure that you have a reliable lead gen motion. That's really critical.

42:22I mean, that's high, high level, but that's how you want to think about it. Think about what you care about, have your goal to be creating more qualified traffic and reducing your cost per lead by extension, your cost per lease, your cost per unique. And if you do that well, you deploy a CRM that allows you the visibility into these different things, you're going to be able to understand how much you now need to spend to satisfy, say, an unforeseen event at your community where you You had 15 residents suddenly submit notice of vacates. And now you need not on top of the existing lease turnover.

42:58Now you need 15 more leases in the next six weeks. And you're like, oh, holy shit, how much do I need to spend? And what you'll see is that folks will go right or wrong. They'll make a long-term commitment to solve a short-term issue. And they'll go and sign 12 months with an ILS or they'll go do. And it's, you know, it's not good. What you want to be able to do is go, okay, how many leases do I need? 15? Okay, let's back into this. Do I know what my tour to lease conversion rate is? Do I know what my lead to tour conversion rate is? Do I know what my unique to lead conversion rate is? Okay, what's my cost per unique?

43:35It's$2.25 a unique? All right, I'm going to need 1 ,000 of those that yield 50 leads. that are going to convert to a tour in a 60 % clip, which are going to convert to a lease at a 40 % clip. And you can literally be precise with your ad spend. And yes, there's other factors. If you've had turnover in parallel on your property team, you've got some competing factors that may exacerbate this, but you can really be precise with your spend. It's incredibly helpful, especially today where your third-party clients, your fee-based clients, they're not interested in seeing wide deviations to that agreed upon budget.

44:18And when they do see them, it invites further scrutiny as to what else are these guys missing? You don't want to have those conversations. And it's already a challenging conversation to have when you have to tell them that we suddenly need 15 more leases, so we need to spend X. So you want to make sure that you're reinforcing buying decision with them as well, that they've partner with a thoughtful organization that has a real understanding of what it's going to take to not only navigate the good times, but navigate the contours of the challenging times, which are inevitable. Well, Dustin, I think that's going to be a good segue into my next topic, which I think will be what we have time for today.

45:02But what I've heard that third parties struggle with, with, um, whether it's central is I'll just say centralization, but we can stick on, um, the ILS portion if you want. But when, you know, when you guys went to like, I read the ILS, as you mentioned, alluded to, you hired some in-house people to also help out here. And what I've seen third parties struggle with is like, well, shoot a lot of times that the, that budget is considered part of corporate, uh, headcount and I don't get to charge it back to the property. And then And therefore, they are actually cutting their margins while they're saving the owner the ad spend that you're talking about.

45:40So how did you guys manage through that where you're saving the owner all this ad spend, but now you had to bring on people, which dollar for dollar, it works out in your favor, as you said. But I've just seen other companies struggle with that. Yeah. So let me be clear. We have providers for our websites, right? Our partner union. But we have, and so, and this was probably should have been part of my answer to the previous question, but you want a pretty robust content management system, CMS on the back end, so that you can manage all of the various aspects of running a, you know, a potent web footprint.

46:20different. From a cost standpoint, you have these fixed costs around your monthly website maintenance fee, your SEO fee, your ad strategy fee, and there's VIGs that are associated with all of that. These are fixed costs. And by the way, they're worth it if you have a strong partner. It's absolutely a peace of mind play. At the end of the day, as an operator, owner, you want peace of mind. For us, by creating this marketing motion internally that offset our reliance on third party, again, our websites are still a product of a partner, but we own the management of those because we want immediacy.

47:06We can get things done. We can place a concession. We can do these different things, update pricing, whatever it may be, feature a whatever needs to be done. And so you what you do is you you paint the picture from a dollars and cents standpoint. These the folks on the other side are our asset managers, which is another way of saying detectives. They are truly trying to uncover wasted spend. And so if you can say, while maintaining current parity, from a performance standpoint, we're going to take these fixed costs, as I enumerated, and we're going to be able to strip out a portion of that cost while maintaining parity with today's performance and perhaps even improving it.

47:54That's a strong value story that helps move you forward. And for us, it's really important, you know, as managers, if you're not going to be paying a management fee to a third party ad stress or whatever, we aren't able to allow you to abandon that in full. We certainly have a management piece that represents our monetization of this so that we can employ these folks to do this and do this well. But the sum total picture is still very favorable for our clients. As I mentioned, they look at marketing costs per unit on an annualized basis, which can veer from$300 to$700 a unit for a community. And some of our bigger properties that are$100 or less.

48:48And so when you tell that story, that's the story they care about. How you've engineered it or the construct thereof is less important. It's that you're able to do two things, carve out costs and improve performance simultaneously. That's your winning ticket. And it can be done, I promise you. There's no, Phoenix is as competitive a landscape as anywhere right now. You know, most folks that are in this space know that in migration to Phoenix is top three in the country. We've got all kinds of, we've got all kinds of new product coming online, 34 ,000 units this year and next year, for which we've only got about 12 ,000 units of demand.

49:28And it's going to be a very challenging marketplace to be successful in, specifically with new product in Lisa, because it's going to be a race to the bottom from a price standpoint if you're not thoughtful about your approach. So finding savings, especially now, is incredibly important for your clients. And if you can do that while improving performance, you have the winning equation. Got it. So on this entire effort, through your four chapters, you talked a lot about, I'll just again put the overarching centralization, whether from marketing or lead handling or what have you. How much of that does Mark Taylor get to benefit from?

50:09Meaning, it improves your guys' margin versus how much is that more of a marketing strategy, as you said, when you're pitching new clients, that it's like, hey, this is how we're different so that they're not just hearing the same pitch from someone else? In both environments, they're very they resonate. The upside for us is that if we provide the framework for this instead of, because otherwise you're a client, you're trying to build this community, you're also trying to figure out your brand. And so we have a full consultancy now where we've extended our centralized services for competitors.

50:50We're answering their phones for them. We do brand creation. We do market studies. we do all of these different things now in the space. And what's important for us from a client perspective is being able to say, hey, brand new brand, Mark Taylor's established, let's borrow from the trust and the confidence and the awareness around this brand to quickly elevate your brand in partnership, that halo effect, that knock on effect. and we'll direct flights of ad capital, of ad spend to both digital footprint. So both marktaylor.com and your property website so that, you know, there's a lot of merchant builders in our space and there's value for them from a brand standpoint.

51:37Although oftentimes a transaction yields a brand change that's written into agreements, but very helpful for a client who's looking to lease up quickly and transact to be able to say, Hey, look at this digital footprint we have that yields x y and it has proven to be very valuable that's important it's also important for clients to see that they're pushing traffic to their specific product versus just the mark taylor brand now it's important to know that we aren't pushing we don't um direct ad traffic to the mark taylor home page it's very targeted to a specific property right and so we have a it's not sophisticated but we have a a an algorithm ourselves for determining based on occupancy and what's something called long-term netters 60-day forward look absent any new leases what would your occupancy be that's a bit of our canary in the cage in the cave scenario we're able to um uh direct ad spend to specific properties within the mark taylor.com domain so they're not encountering Mark Taylor, they're encountering the property and its brand.

52:49Right? And this is a question that comes up because if you're a thoughtful client or owner, you're like, Hey, I love you. I love Mark Taylor, but why am I spending to generate awareness and traffic to Mark Taylor when I'd rather allocate it all to my property website? And so we talk them through our blended ad strategy approach. We protect brand with our, and we're hyperlocal with our standalones, our property websites when we're national we have different blend a blended approach that dovetails well so we're not competing um in terms of driving up ad costs because we've got two property two property websites for the same property that are that are bidding for the same search queries so um we've we've tried to be very thoughtful there and we go a long way to allaying um their concerns because you know there are a lot of thoughtful clients out there who will go And like I said, they're detectives, which is great because if they're detecting good things, that's only serving you well, right?

53:51But who will ask those questions? And we certainly have an answer for that. Got it. Cool. Well, Reid, why don't you bring us home?

54:02Well, I have a ton more questions. Let me think what I should bring us home with. uh you got a hot takes yeah uh david was saying hot takes i feel like you got you're loaded with those which is just more the contrarian viewpoint how do you normalize the picture related to performance and this is probably not the best question to ask to take us home but what i mean by that is you have all these metrics you said it's really important which i was going to say maybe that will be the biggest lesson is is which metrics to actually pay attention to because that's That's one of the hardest things in digital marketing and advertising, website analytics.

54:42There's so much data. When you're testing new strategies, and we've talked a lot about the move away from the ILSs, that's obviously a big one. But I imagine you mentioned the conversion rate, the call data. Is there a paradigm for you, Dustin or Mark Taylor, in how you guys go about trying to to normalize that picture before you test? Or is it more kind of project by project and how you go about the data analysis? Again, not maybe a great one to end on, but I'm always fascinated when you kind of come across, I'll say change agents that are really looking at new ways of doing things and trying to prove it out through data, how they handle that part of the equation.

55:31Because a lot of times it's not easy with all the noise going on in the market, all the different technology, different strategies that are in motion. How do you really distill that down and feel like you're getting an honest look at what's driving results and what's not? Yeah. That's actually a really great question. Look, when I started in 17, SEO wasn't a table side conversation. You would have asked what SEO means to folks here, decision makers here and nobody, you would have gotten, you know, a hundred different answers. The important piece is to maintain focus on the strategic objectives for the organization.

56:12For us, you know, we've gone to great lengths to simplify it. We have three core objectives, right? People, excellence, and growth. And that's the basis for all of our decision making. So, you know, partner to all of this change, and there is a lot. You have to be able to append that to the key and known strategic objectives so that folks have context for it. Remember, you take it from a centralized standpoint, you're taking generalists who are asked to do a myriad of different things. And for us, disproportionately now we have more Gen Z than we even have millennial on print. These are folks who want to explicitly what is asked of them.

56:54what's next for me? What are your plans for me? Like they want to know that they're doing well. They actually dispositionally are tuned to being specialists. They can derive more happiness from the role instead of being asked to do a million different things on any given day on-prem. So for us, the change piece was absolutely tethered to the success metrics that mattered. But in some cases, you're going to be introducing success metrics that nobody's even heard of for folks. So it was really important for us to paint a broad kind of future cast picture. So here's what good can look like for us if we do the following in service of our three objectives, whether it's people, excellence, or growth.

57:37If we want to get here in the timeframe that we've stipulated, we're going to have to do the following series of things. You have to be thoughtful about it. You have to map it on high level at a high level while also being abundantly communicative about the fact that, hey, there's going to be some learnings and deviations. This is theoretical today, but we're starting to see that this can happen because we've done, we've run this preview or we've trialed this or we've done this and here's what we've seen back. We feel it is a statistically sizable enough data set or sample set to really paint a this is what good can look like for us picture.

58:18And then you start the education process. Heavy communication on the front end is really, really important. Emphasis around each individual contributor's role within that process so they feel a part of it. A lot of feedback. I'm not saying a lot is kind of nebulous. Just, you know, guys, this is right. So we've got this objective. we are moving in this direction, which, which means the following is going to happen impacting you in the following ways, which is great because it's going to allow you to do this, this and this, um, or it's going to expose you potentially if you're not doing those things well, but really, um, you know, painting the picture as you're kind of future casting and trying to peek around the corner and allowing folks to, um, uh, to understand and buy into what the vision is, is really important so that they know what their role is.

59:17They can see it. They feel that they understand their importance in it. And they also feel comfortable raising any kind of questions or feel like there's this feedback channel where they're not gonna be judged. Nobody wants to fail in full view, especially property team members who don't get a chance to collide with the corporate staff because they're on this tribute. They don't want that. They don't want to be exposed. They don't want to have an additional opportunity to look bad. They don't want that. So you paint the picture of what good can look like. This is going to mean this for you. We're going to hand off qualified leads.

59:45You know, you're going to be in a conversation for an hour only to find that somebody is not qualified to rent a class A. And you start to tether to the things that they care about. And that becomes super helpful. But there is an educational piece, David. You know, you are going to have to explain kind of the the more nuanced aspects of what we do. And again, I've alluded to SEO, but SEO is broad. That's massive impact to our business. Review and rep has massive impact to our business. Seemingly inconsequential, not, big deal. So being able to paint that picture thoughtfully, articulately, and then one last thing, is we then arm our asset managers, we call them managing directors, with talking points, and then objection handling, because not only is it new for them, but it sure as hell is new for their clients.

1:00:35And so you tell a client, we're pulling your property off ILSs, there's a lot of red flags and warning bells that will go off. So how do I talk about this confidently with my client and not put myself in a position of vulnerability? I'm not a marketing expert. So you've got to think about all these different scenarios and arm people with the requisite information so that they're empowered to go and coherently communicate and act as an ambassador for the effort. Not only with their, their, their, their internal teams, but also with the clients. Well, this has been incredibly enlightening, Dustin.

1:01:09I've not heard, I can't remember the last guest we had, maybe Jay from CoStar who had as many of his KPIs like offhand. Like I just want to run through some of them for the folks that, that didn't write them down, but I love how you talked about that through all these efforts that you improved your answer rate from 51 % to 90%. I'm directionally correct on a lot of these, Dustin, so you don't have to get out the red pen. Then I love how you said, like in today's dollars, you're able to migrate that$4.5 million in ILS spend to other means that allows you to be more flexible versus getting stuck in these long-term contracts.

1:01:48And I love that you said that you've really worked on, that you guys even track now the 60 % to 70 % of the inquiries to your on-site teams or current residents versus, let's say, lead handling, which shows where their attention goes, right? That means two-thirds of their attention is on the current residents, not on placing new ones. That's right. And then obviously, you made it super focused to get your guys' reputation above 4.0, which just helps you convert more of those leads. So I just love how tight you are with all these KPIs. I'm sure next time, I'm predicting we'll have you on again, that you'll have more KPIs that you drop on us.

1:02:25So he's been great. I knew you guys would like him. You guys, after all, no, we're fighting the same fight and you guys are doing it quite well. So kudos to the digital team. Appreciate you guys having me on. This was really nice. I hope that this is appetizing for your audience. And if anybody has any questions or want to engage further, I'm happy. I'm an open book. I'm happy to talk about our centralization efforts. You can find me on LinkedIn or elsewhere. Cool. So if they want to get in touch, as you're saying, they'll just go find you on LinkedIn, mention that they heard you here, that they'd love to learn more about centralization or what have you.

1:03:01Yeah. I mean, look, we've got, we've kind of plotted our path. I'll share again. I will share explicitly what we're doing because at the end of the day, you still have to hike that mountain. That's still you that's got to do it. But we've had a ton of learnings. We've made a lot of mistakes and sometimes it's helpful just to hear you know what those are so that you can maybe you know avoid some of those in the process so feel free to reach out like I said I love to chat and I do often now a lot of folks are starting to do that reach out and kind of for a read on kind of our approach and I'm happy to have that conversation so feel free oh and I forgot a plug for you you guys also started a podcast to do to share a lot of these insights as well.

1:03:42What's that one? Yeah, Multifamily Forward. Check out our first season. It just dropped. Would love for you to, I'm on there as well, so you'll hear some of my stuff, similar stuff, but a deeper dive into the centralization piece specifically. First episode is myself. I think I'm starting to get a little oversaturated here in this marketplace. Maybe I need to just disappear, but check that out. I think we've got six episodes and we'd love to have you. This is a big family, multifamily for us. We count a lot of our competitive peers as really close friends. And, you know, there's enough for all of us.

1:04:26So we want to see folks do well. We are so pleased to see the digitals of the world come in and do really critical pieces really well. So proud of what you guys are doing. I've been obviously rooting on Karina from afar. And I knew that her addition indicated you guys were thoughtful folks. So you guys are an important piece, you know, for what we're doing and what we need to do in the future. So excited to be here. You guys have me on again. I'd love to give you an update in a couple, you know, a year or so and let you know how we're progressing from a centralized standpoint. It'll be fun. Awesome.

1:05:04Well, thanks so much, Dustin. Get down.