Home Real Estate Zillow's Newspaper Gambit: A Possible Parallel

Zillow's Newspaper Gambit: A Possible Parallel

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Eric Blackwell of Bloodhound picks up on this story that Zillow has entered into a relationship with a number of newspapers and asks a series of pointed questions. The comments section has some hot and heavy action going on therein, and it makes for an entertaining read.

I saw this deal cross the news earlier as well, and thought it was interesting on many fronts. For one thing, unless I’m very mistaken about the nature of the deal, it simply means a co-marketing arrangement where the partners simply add ammunition to their sales teams:

The agreement expands the network to include display non-real estate related advertising. Greg Schwartz, vice president of advertising sales at Zillow, said the Web site will focus on “moving-specific” advertisers like home improvement and furniture companies in search of national coverage. Meanwhile, newspapers, such as the San Francisco Chronicle, for example, can offer a furniture retailer additional coverage through Zillow’s San Francisco channel.

So a ad sales guy sitting in the LA Times office can sell a million impressions on Zillow.com, and a Zillow sales person can sell Home Depot on a package deal of Zillow ads plus say 150 newspaper ads.

It isn’t clear whether this covers only online, or print also, but either way, all we’re talking about here is a “Hey, you can sell my stuff, and I can sell yours” deal. Makes a lot of sense to me without a tremendous amount of downside.

Now, David G. from Zillow goes on to say in the comments of the Bloodhound post above that:

Today’s announcement relates to a large advertising network advertising for reaching real estate consumers but there are also technology and content aspects to these partnerships. Later this year, Zillow will begin to power the online real estate sections of our newspaper partners’ websites. And listing content is already pushed to Zillow via newspapers that are selling featured listings on the site.

This tidbit is interesting as well. Because as it happens, there is an almost exact parallel on this play that might prove illuminating (or not).

Cityfeet.com did this exact play in commercial real estate a few years ago. They went out and signed up newspaper partners, powering the online real estate sections of these newspapers for commercial real estate search. I’m guessing that Cityfeet couldn’t get the online residential real estate sections, because those were too closely connected to major revenue centers for the newspapers. That Zillow was able to wrest those away from the newspapers is extraordinary. And extraordinarily interesting as commentary about the newspaper business.

It appears that newspapers are headed for some sort of a cliff.

Thats a double black-diamond slope, son!
That's a double black-diamond slope, son!

The news industry is panicking, to say the least:

The new bad news is the decline in online revenues.

In the best of times, online never contributed more than 10% of most publishers’ total revenues, but with double-digit growth, it was the sole bright spot in the middle years of the decade, holding the promise that interactive revenues might some day make up the losses on the print side.

Unfortunately, most of the growth in the online revenues was due to “up-sells” from print classified listings. As the volume of print listings declines at an ever-faster pace, that means there are fewer opportunities for online “up-sells.”

Considering that real estate advertising in newspapers fell by a whopping 36% in Q2, if online advertising also fell for newspapers, it isn’t clear that there is a sustainable business here for the dead-tree media companies.

So… Cityfeet couldn’t wrest away residential real estate sections from newspapers. Zillow did. In large part, this is because Zillow is many times larger and better funded than Cityfeet ever was.

However, let’s pause a moment and consider this.

  • Newspapers lose 36% of real estate ad sales.

  • Newspapers lose online ad sales for first time in years.

  • Newspapers do a deal with Zillow that is essentially “We take 50% commission for selling your ad space, Zillow.”

  • Zillow stands ready to “power newspaper real estate sections” — meaning all of that traffic probably goes to Zillow.

This looks like a total abdication of the real estate space by the newspaper industry, at least to me.

While that’s a big win for Zillow, I have to sound a cautionary note.

Cityfeet, you see, sputtered along for a couple of years before getting bought by Loopnet for $15m. (Since Cityfeet at the time boasted 100 newspaper relationships, including the big names like New York Times, Boston Globe, and the like, that means each relationship was worth about $150,000. Maybe. It isn’t yet clear that Loopnet has made back its $15m investment in Cityfeet.) The reason, quite simply, was that the brokers and agents who listed on Cityfeet were not seeing a lot of traction. Newspaper readers and newspaper website visitors tend not to be serious consumers for commercial real estate.

Now, given the differences between commercial and residential real estate, this may not be a problem for Zillow. 80% of commercial buyers/lessees do not start their search on the Web, for one example. But this should sound some warning gongs:

“This partnership allows advertisers with our papers to reach not only local real estate consumers who live in particular markets, but also consumers who may be moving to particular markets, via their searches on Zillow.com,” Lincoln Millstein, senior vice president of Hearst Newspapers, said in statement. “This is a significant opportunity for advertisers to target a very large number of consumers on the verge of major home-related commerce.”

Um, Lincoln… I don’t know how to break this to ya but… I doubt that visitors to Zillow.com can be described as being “on the verge of major home-related commerce.” Maybe Zillow has statistics that prove me wrong, which I would welcome, but going to a Zillow or Trulia or any of the major consumer real estate websites strikes me as merely the first step in a fairly long journey that may or may not end in “major home-related commerce”. If by “being on the verge”, Lincoln Millstein meant “within three to six months” then his expectations are properly set. If he means more like, “a matter of weeks”, I think he might be disappointed.

And his advertisers might be disappointed. Will consumers remember seeing some ad for a mortgage product on Zillow.com three months later as they’re finally sitting down with their realtor and going over mortgage paperwork? I really, really doubt that one.

As with all prognostications, I might be dead wrong on this one. But all in all, I’m not sure I see this major win here that the newspapers and Zillow would like us to see. Time will tell, but the trends are not encouraging for either party.

-rsh

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Rob Hahn
Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

7 COMMENTS

  1. Its a great SEO play and definitely good defense. Not sure how interesting the ad play is but it has to help the newspaper pitch. Can’t remember the last time I sifted through the real estate listings in a paper. It was probably when I last checked the automotive. That said the sunday open house section is well read in the Bay Area.

    Given that Cityfeet was strictly commercial I’d be surprised if they were ever trying to power residential listings. Turned into a great unintended SEO play. CRE ads are a blip on the radar compared to residential.

    Where’d you find the “80% of commercial buyers/lessees do not start their search on the Web”? Or did you mean they do?

    Great post,
    AB

  2. Its a great SEO play and definitely good defense. Not sure how interesting the ad play is but it has to help the newspaper pitch. Can’t remember the last time I sifted through the real estate listings in a paper. It was probably when I last checked the automotive. That said the sunday open house section is well read in the Bay Area.

    Given that Cityfeet was strictly commercial I’d be surprised if they were ever trying to power residential listings. Turned into a great unintended SEO play. CRE ads are a blip on the radar compared to residential.

    Where’d you find the “80% of commercial buyers/lessees do not start their search on the Web”? Or did you mean they do?

    Great post,
    AB

  3. Well, I’m not 100% sold that there IS a SEO play here at all until Zillow starts to power the online real estate search sections of various newspapers. Right now, as I understand the deal, all that this does is allow newspapers to sell Zillow ad space, and allow Zillow to sell newspaper ad space (online or print or both).

    So no SEO benefit yet. But in the future, yes.

    Cityfeet probably never even tried for residential, but still, if I were negotiating with the NYTimes, I’d at least raise the question: “Hey, so… we can do the same thing we’re doing in CRE on your RRE side….” My suspicion is that sort of thing got smacked down back in 2002-2004 timeframe when Cityfeet would have been trying to build out those relationships.

    The 80% comment was supposed to contrast residential real estate, where something like 80% of consumers start their search on the web, with CRE, where they do not. I have no idea what the figure is for CRE — I suspect no one really knows.

    🙂

    -rsh

  4. Well, I’m not 100% sold that there IS a SEO play here at all until Zillow starts to power the online real estate search sections of various newspapers. Right now, as I understand the deal, all that this does is allow newspapers to sell Zillow ad space, and allow Zillow to sell newspaper ad space (online or print or both).

    So no SEO benefit yet. But in the future, yes.

    Cityfeet probably never even tried for residential, but still, if I were negotiating with the NYTimes, I’d at least raise the question: “Hey, so… we can do the same thing we’re doing in CRE on your RRE side….” My suspicion is that sort of thing got smacked down back in 2002-2004 timeframe when Cityfeet would have been trying to build out those relationships.

    The 80% comment was supposed to contrast residential real estate, where something like 80% of consumers start their search on the web, with CRE, where they do not. I have no idea what the figure is for CRE — I suspect no one really knows.

    🙂

    -rsh

  5. Rob

    Homegain is owned by Classified Ventures (Washington Post, Gannett (USA Today), Tribune, McClatchy, Belo)

    We don’t sell ads the way Zillow does, so don’t have that type of deal.

    I agree with you, its not a major win, but it can’t hurt to have another ad partner.

  6. Rob

    Homegain is owned by Classified Ventures (Washington Post, Gannett (USA Today), Tribune, McClatchy, Belo)

    We don’t sell ads the way Zillow does, so don’t have that type of deal.

    I agree with you, its not a major win, but it can’t hurt to have another ad partner.

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