Tag Archives: Zillow

A Couple of Brief Notes on Realogy

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I’m busy writing, but thought it worthwhile to take a few minutes to make a couple of observations about Realogy. I mean, it’s only the most important brokerage and franchise company in the industry with over $4B in annual revenues….

On “Project Flanker”

First, with regards to this story on Inman… I’ve already told the writer, Paul Hagey (@InmanHagey), who does excellent work in the article, that he should chat with his headline writer. :) Paul writes:

The nation’s largest real estate brokerage, NRT LLC, is preparing to launch two new search portals that are aimed at reducing the company’s reliance on leads from Zillow, Trulia and realtor.com, attracting homebuyers by offering access to a complete set of MLS listings in markets where NRT operates, plus bells and whistles like automated valuations.

Maybe I’m dead wrong here, but I can’t see how Realogy is outflanking anybody with this new website, even if it’s code-named “Project Flanker”, nevermind Zillow-Trulia. Two reasons, one of which was cited by Hagey in the article:

“It is not intended to compete against the big portals like Zillow or Trulia,” Smith said Monday during Realogy’s second-quarter earnings call. “It is a very different approach to the markets, very smart, I think it is very strategic.”

But to get the full story, one should read the Investor Day transcript as well. This comes right after Bruce Zipf, the head of NRT (Realogy’s company-owned brokerage operations), talked about the “generic URL website” they were working on and a Wall Street analyst started asking about competing with Zillow/Trulia.

Richard Smith:

So that you don’t start modeling a Trulia or a Zillow-like model here. Let me give some color. This is a broker transaction oriented site. We’re creating the opportunity under the radar screen using the URL that’s fairly generic. It will not get the media attention or the financial support that you would expect at Zillow or Trulia because they’re in different businesses.

But this is to be at the point of sale, to be as close to the decision making process as possible, but outside of our traditional URLs like coldwellbanker.com because then in the context of those sites, we have limitations as to what we can do from a consumer perspective. When you’re outside of that, using the URL that is fairly generic and we haven’t disclosed as of yet, you’re approaching the consumer in a slightly different way.

But they’re not up here where the Trulias and Zillows are. They’re media companies and they do a very effective job for us as media companies. This is when that person moves from Zillow or Trulia closer to the decision making process where we think we can cast in that wide net, we think we can capture more of that business.

So the business is not coming to us directly through the relationships, yard signs, all the other things we talked about. We think when they get to the decision making that I actually want to see this house, we can offer an alternative to what’s out there today, again, adding to the 700 plus.

Just given our size and our market share, we think this can be meaningful to consumer, and then we think it can generate incremental leads. So all of what we’ve discussed with respect to that is in all the discussions we’ve had up to this point, the incremental initiatives in NRT that’s working on that I believe we mentioned in the first quarter. It’s contained in the context of all that discussions. So don’t expect big jumps in marketing spend or technology spend based on that conversation. It’s already on our forecast. [Emphasis mine]

The two takeaways here for me are:

  1. Realogy sees Zillow/Trulia as an important feeder into this “Project Flanker” website, since Flanker.com (I just named it that) is supposed to be further down the sales funnel. That is perfectly in line with what Spencer Rascoff and Pete Flint have always maintained: that Zillow/Trulia is a media company selling advertising opportunities to real estate peeps.
  2. No big jumps on spending = no attempt to outflank. I mean, sure, real estate folks like to believe that since they have the listings, it’s no big deal to attract a consumer audience without spending too much (“Internet advertising is free!”) but… um, no. Given that Zillow and Trulia combined spent a combined $120 million in Q2 (that’s three months, folks) on marketing and technology, let’s not talk about outflanking until Realogy commits real dollars to both marketing and technology.

Seems to me that Realogy’s position is consistent with everything we have heard from brokers, including The Realty Alliance, large independents, and franchised-brokers: they no longer regard the portals as a threat. It’s the MLS they’re concerned about.

The Real Deal

While the real estate industry was completely absorbed by the Zillow-Trulia deal, fact is that Realogy quietly made one of the more important moves in recent years by acquiring ZipRealty. I’m going to have to do more on this at a later date, but read the transcript announcing the acquisition.

For now, let me limit my observation to two points.

  1. Some folks, like Citron Research, thinks that the ZipRealty acquisition is about Realogy outflanking (there’s that word again) Zillow. But as we saw above, I don’t see Realogy looking at Zillow-Trulia as competition; I see Realogy looking at them as the top of the funnel, and Realogy wanting to capture the middle of the funnel, where they can get 35% referral fees from the bottom of the funnel (the agents themselves). So… why is this deal important? Because…
  2. Now that Realogy has this platform, which Richard Smith described in absolutely effusive language (and trust me, Smith is not an effusive type of a guy)… the pressure is on the other major franchises. REMAX, KWRI, BerkshireHathaway… they’d best step on up if they hope to remain competitive with Realogy’s Franchise Salespeople knocking on every door offering the ZipRealty platform to brokers and agents. The real competition for Realogy are other franchises (for its RFG division) and other brokerages (for its NRT division). ZipRealty’s technology platform is a huge advantage in both. The other guys have to step on up.

Thing is, who’s out there that’s got the proven technology assets that ZipRealty has? As far as I know, there’s only one company: Redfin.

My guess? I think REMAX acquires Redfin, if Redfin is even remotely available for acquisition. Since REMAX is a public company, Redfin may essentially end up “going public” via merger, and its investors reap the benefits of that. KWRI is an unknown, but their investment in eEdge makes me think that they’re unlikely to bid for Redfin. BerkshireHathaway has Warren Buffett money, of course, but if Redfin shareholders want the upside that comes from an IPO… I rather think some sort of a stock-and-cash deal with REMAX is probably more attractive.

Then again, maybe Realogy approached Redfin and was rebuffed, so they settled for the second-best option in ZipRealty. Who knows?

What I know is that one of my Black Swan scenarios just came true. Surely there ought to be some sort of Nostradamus Award for this, no? :D

Anyhow, gotta get back to work… just thought I’d get these out there. Your thoughts are always welcome.

-rsh

Special Guest Post: James Dwiggins on Zillow/Trulia

The following was posted on Facebook by a friend, James Dwiggins, earlier today. James is not only a very smart guy — also one of the tallest guys in the industry — he’s also the CEO of Nexthome in San Francisco. Because this is long, detailed, and worthy of saving past what Facebook thinks it ought to be, I repost it as a special Guest Blog, with his full permission.

The original thread may be found here. I’ve taken the liberty of minor formatting for legibility but have not otherwise edited this. The image/photo to which the comments were attached is at the top.

==============POST BEGINS HERE================

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I’ve been traveling the past week so I haven’t been able to comment on the Zillow/Trulia buyout and I know many of you have asked for my thoughts.

Let’s set the stage first: Trulia was founded May 1st, 2004 and according to CrunchBase, they received 32.8M in venture funding before going public. Zillow was founded in January 2005 and according to CrunchBase, they received 92.5M in venture funding before going public. Both companies set out to change the way consumers search for real estate online and make money off the advertising revenue.

According to NAR, in 2001, homebuyers used Realtors 69% of the time when purchasing homes. In 2013, that number is now 88% of the time. While homebuyers continue to search more and more on non-real estate company sites, ironically they are also using Realtors more as well. My take: finding a home online is the easy part and constitutes about 5% of the entire home buying process.

The hard part begins once you want to make an offer and actually purchase it, which consumers understand to some degree. If they didn’t, those numbers would not be increasing like they have and lots of alternative models that past several years that tried connecting buyers and sellers online would have succeeded. In fact, almost all of those companies have failed. I’ve attached the actual chart showing the increase in Realtor usage from the 2013 NAR Profile of Home Buyers and Sellers.

With regards to everyone worrying about Trulia and Zillow becoming a real estate company or franchise. We all need to understand that this is not their model whatsoever or for their shareholders sake, shouldn’t be.

At the end of Q1 2014, Zillow had 52,968 premier agent subscribers. At the end of Q1 2014, Trulia had 66,700 premier agent subscribers. As everyone knows, their business model depends highly on having real-time listing data on their sites which is provided by brokerages and agents who in many cases are paying for premier placement.

If they became a real estate company, you could almost guarantee two things: 1.) 52,968 & 66,700 premier agents subscribers would likely stop advertising on these sites, destroying their revenue, and eventually the companies as well… and 2.) If Zillow and Trulia were real estate companies, they wouldn’t want competing agents advertising on their sites either. That would be allowing competitors to take away buyers and sellers from their own agents which makes no sense. It’s exactly why every real estate company and franchise doesn’t allow its competitors to advertise on their sites now. That would be counter productive to making money.

In other words, I can’t possibly see how Zillow and Trulia becoming a real estate company would make any sense whatsoever so we should stop worrying about this. If we as an industry are scared of this idea, then we should be paying closer attention to Redfin who is trying to make this kind of model work to some degree. They are not the first and they certainly won’t be the last.

Are Zillow and Trulia dominating the online real estate space and will they continue to grow? The short answer is yes… until either “organized real estate” starts listening to consumer needs and builds something they actually want and will use, or another outside entity creates it. Lots of companies create game-changers and then lose the throne. Think AOL, Netscape, Internet Explorer, IBM. It can be done and it will happen again including our space.

In closing, this is just two major online portals consolidating their businesses in a market that is fast becoming oversaturated as it is. They have just over 110,000 combined subscribers in an industry that has 200,000 potential subscribers at best. They’ll combine resources, streamline operations – (job consolidation) and hopefully become profitable. Please feel free to chime in if you see something different. RobKeith,ImranNobuAaron, I would love to get your take on this as well.

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I will add my thoughts in the comments.

-rsh

As the Real Estate World Turns

There is something about Zillow that brings out the melodramatic in the real estate commentariat, both of the professional variety and often more hilariously, of the amateur variety. The big bombshell from yesterday, of Zillow acquiring Trulia, has brought out some of the finest performances in a drama and in a comedy.

It’s an odd thing to see both massive over-reaction and huge under-reaction. But such is life in the funhouse that is the American real estate industry.

I’d like to look at a few and just… well… comment, I guess. I don’t know if I have much useful stuff to add, except snarky maybe. Though to be honest, sometimes, snark can be useful!

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Zillow Acquires Trulia; I Speak With Greg Schwartz & Paul Levine

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By now, every reader of this blog knows that one of the biggest deals in recent memory (if not ever) just went down this morning:

Zillow, Inc. (NASDAQ: Z) today announced that it has entered into a definitive agreement to acquire Trulia, Inc. (NYSE: TRLA) for $3.5 billion in a stock-for-stock transaction. The Boards of Directors of both companies have approved the transaction, which is expected to close in 2015.

It appears the rumors were in fact true. The reaction so far this morning might be characterized as stunned confusion, leavened with the expected amount of zaterade. For a variety of reasons, including my business relationship with Trulia, I haven’t commented on the rumors. But now that it’s a done deal, and I’ve spoken with both Greg Schwartz, Chief Revenue Officer of Zillow, and Paul Levine, Chief Operating Officer of Trulia, about the deal, I think it’s worth discussing at least a little bit.

At this early stage, however, everything that isn’t directly stated is conjecture. They two companies announced the acquisition; it hasn’t gone through due diligence, the normal amount of litigation, and the long integration process. I’ll do what I can to provide actual information, and then speculate away.

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Clareity Goes Back to the Future Beyond Syndication

Back To the Future

“Marty! I went back in time before Listhub! It was amazing!”

My friends at Clareity, Gregg Larsen and Matt Cohen, have just released a white paper they co-authored titled Beyond Syndication that is worth reading in full if you’re interested in this sort of thing. They include an overview of where things stand today, and then make a recommendation or two. Despite the fact that I declare Syndication dead as an issue a couple of years ago, it’s like a zombie that refuses to go away, so I have to write on it to see what I think about it.

At the same time, I think this white paper is significant in that it strikes a different tone in some respects, and perhaps we can consider it a step forward in putting the syndication issue to bed once and for all.

Having said all that… I was expecting something a bit more… ah… dramatic given the title. I suppose the role of the dramatic overstatement and questions no one wants to ask is mine and mine alone. :)

So let’s get into it.

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