In a recent interview with VICE, global real estate tech strategist, investor, and respected analyst Mike DelPrete described Compass as “the world’s most unprofitable brokerage ever.”
DelPrete based his analysis on the data surrounding the rise of Compass and its recent layoffs and spending cuts. He doesn’t want to see Compass fall any more than their agents do.
But his comments have ignited a firestorm of controversy. One of the biggest voices to speak up in defense of Compass is Ryan Serhant.
Serhant makes some valid points
Serhant didn’t name Mike DelPrete when he referenced the “world’s most unprofitable brokerage ever” comment, but he did have a response for it:
At the end of the day, Compass was a fundraising company more than anything else, and they executed on that plan perfectly—better than any other real estate firm in the history of the world. Asking them to stop burning cash is like asking a Mack truck to stop burning diesel fuel while it rockets down the highway. Can’t do it. It’s how it was built.
Compass has changed the real estate industry, especially for agents. It forced the industry to step up its game with technology that works across devices and platforms to “make the very difficult job of being a real estate agent as easy as possible.”
Pointing the finger in a different direction
Serhant has a theory as to why the industry cares so much about Compass’s apparent inability to turn a profit.
The only reason the industry cares is because Compass came onto the scene like a new rich kid at school and started breaking everyone’s toys. And now that rich kid is a little less rich, and people are eating it up…
He had a few recommendations for his parting words:
- Focus on the good Compass has done for the industry
- Stop with the negativity
- Take what you can use from their example, and move forward
Compass set out to disrupt the industry, and they’ve done it. Given his final, “Let’s see what happens,” Serhant is more curious than either positive or negative about their future.
That said, whether DelPrete was being negative or just factual is worth a closer look.
Is it negativity—or just an evidence-based assessment?
Are Mike DelPrete’s words about Compass unjustifiably negative? Or is he simply pointing to available data and making an analysis based on his understanding of the market?
Put another way, if someone is pointing out what is verifiably true, it doesn’t matter if his words sound negative. It’s still true.
DelPrete never said Compass hasn’t done anything good for the industry. Nor has he written off Compass as a failed experiment or speculated that they’re doomed to fail.
He hasn’t come across as someone “eating up” Compass’s financial struggles with glee.
What he has said is backed up by publicly available data:
- Based on its own financial data, Compass spends more money than it makes.
- Despite recent layoffs, Compass is retaining its agents (and their loyalty).
- Compass is making deeper cuts that will likely hit its tech team hardest.
In Del Prete’s final analysis, Compass is still spending more than it earns, but it is taking corrective action. The question is whether Compass can make deep enough cuts while remaining attractive to real estate agents.
When you’re a publicly traded company, you have to be lean when there’s uncertainty…. Because I leaned into the tools, (Compass) doesn’t have to do anything to get me to stay.
Another question is whether Compass has a “viable path” to profitability as a brokerage.
Everybody knew this couldn’t last forever. And there were vague notions of what would need to happen to reach profitability—either it would have to get to enormous scale in the U.S. or they would have to deliver on the promise of technology reducing costs and making people more efficient… I think that’s an existential risk here for Compass. They’re taking a much-needed pause. But what’s the long-term implication of that going to be relative to who they’re competing with in the market?
DelPrete’s perspective is based on data and experience. And knowing what he does, his attitude is still more cautious than negative. It’s a “wait and see” without the optimism.
As for Serhant, he’s choosing to focus on the positive aspects of Compass and what they’ve done for agents.
Both add something to the conversation. What you choose to focus on as a real estate agent will likely depend on your relationship with Compass and your industry knowledge.