Sat 9 Dec 2006
Zillow Talk
Posted by Marlow Harris under Real Estate
[8] Comments
“The reports of my death have been greatly exaggerated.” — Mark Twain
Zillow announced with great fanfare, new features designed to capture more eyeballs. You’d think it was the end of the world with bloggers, agents, commentators and pundits declaring the end of real estate sales as we know it and the beginning of a national MLS, predicting the end of commissions, the end of real estate agents and the end of such companies as HomeGain, HouseValues, Trulia and Realtor.com.
Well, today is a new day, the birds are singing, the sun is shining (well, metaphorically anyway), and life goes on in our little real estate world.
I’ve had fun trying out the new Zillow, which is part Craigslist, MySpace and Wikipedia, reading what other have had to say about the service and what this means, if anything, to the “industrial real estate complex” as we know it.
HomeGain’s General Manager. Louis Cammarosano, says “free listings (are) a big threat to the MLS”. Elizabeth Rhodes says “with Zillow offering free advertising, pressure may be put on real-estate agents to cut commissions“. Annette Haddad of the LA Times writes, “Zillow was launched in February amid much hype about its potential to reshape the real estate transaction process into something more transparent and less costly.” With this turn of the screw Galen and Greg are having a field day predicting the end of the real estate industry as we know it. IT professionals and bubble bloggers alike are positively gleeful with the prospect of the real estate agents demise.
At this point, Zillow was and remains an advertising portal with its hook being real estate valuations, home sales prices and now homes for sale. So, while its original audience was homeowners (a great demographic) it’s now also appealing to homebuyers.
From the Zillow employees I’ve spoken to, they originally thought they’d be selling ads to real estate brokerages, companies that were looking for leads. So far, most of their ads seem to be from lenders and mortgage companies, hotels, luxury cars and a few discount or rebate brokerage houses like Redfin and Zip Realty. I was told that unless you have a budget of several thousand dollars a week, they don’t want to talk to you. You can view the details of their advertising program here. A Zillow rep said that they will begin rolling out a less expensive agent advertising option in March, and perhaps it will be sold via zip code or neighborhood, not sure and perhaps they don’t even know yet themselves what form it will take.
From reading the commentary on the new Zillow offerings, I come away with the impression that many of these writers think that now, since Sellers can post their homes for sale on the site, there will be no need for Buyers Agents. Of course, Sellers could always place their own ads in the classifieds or put their own sign on the lawn or put their own ads on Craigslist. FSBO’s and listed homes have always existed side-by-side, both in real life and in the newspaper and now online.
“Years ago I used to say one magical business model will transform real estate, but that has not happened at all” –Brad Inman (9/18/06)
So will Zillow change the traditional real estate business model? Right now, they’re saying that they wish to partner with the real estate brokerages. If they’re asking for each listing to be downloaded separately, then they need real estate agents listings for content. When asked why they just didn’t use their MLS feeds (as Zillow is licensed in Washington and other states too), David Gibbons told me that this defeats their purpose of making the site interactive. (Though I suspect it may be that using a feed somehow will violate MLS rules, as they’re selling advertising on the site.) The more times people have to come to their site, the more eyeballs they get, the more ads they can sell. So, to have a feed just defeats the purpose. The purpose then, is not to be the encyclopedic list of all homes for sale everywhere in the entire universe. It’s to attract as many eyeballs, visits and clicks that they can, from anyone they can, real estate agents and the general public alike.
Many brokerages mistrust Zillow and wonder if it’s friend or foe. Some liken it to a drug dealer who gives away the first couple of hits for free. Once you’re hooked, then the dealer can start charging whatever they want. A few point to Craigslist. What was once free (real estate and job listings) are now being charged for. And several other Seattle agents remember Redfin’s about-face, as it started out as a referral business for agents, but quickly alienated them by setting themselves up as competitors and as Tech Crunch noted “doing their best to completely remove real estate agents and brokers from at least half of a home sale.”
So far, Zillow is very popular but the challenge will be turning that popularity into profits. They probably still have a few million dollars left, however, and can probably go many years without having to actually make any money. If they can remain innovative, stave off the competitors, attract eyeballs and keep everyone happy, perhaps those early stage stock options will be worth something someday.
December 10th, 2006 at 12:24 am
I suspect if the general public starts to “get” Zillow, then brokerages will have to start putting listings on Zillow.
Seeing realtors are required to make a decent attempt at selling the house, and Zillow is free, and all it takes is uploading a few photos they already have made for the MLS – well whats their excuse to NOT list on Zillow. Is it ethical to NOT put a principles house on a free internet site that generates millions of visitors daily?
All it’s going to take is 2-3 stroppy sellers making ethics complaints and it’s a different ball game.
I suspect we will have Zillow and the NAR-MLS running as dual systems for a few years. Then the MLS will simply no longer be needed.
December 10th, 2006 at 12:48 am
Athol, it’s apples and oranges. One is a portal site to advertise luxury cars, loans, hotels and brokerage services. The other is a private clearing house for professional real estate brokers to share listing information. The MLS will be in existence for quite a while and I do not see a threat to it in the foreseeable future.
Certain brokerages may discourage their agents from posting their listings on Zillow and they would certainly be within their rights to do so. No one has an obligation to help build another websites content or popularity, and it does not violate anti-trust regulations to refuse to share copyrighted information with another business, be it competitor or partner.
December 10th, 2006 at 6:46 am
> With this turn of the screw Galen and Greg are having a field day predicting the end of the real estate industry as we know it.
Galen can speak for himself, but, of course, I have said nothing of the sort. Almost all of my coverage has been devoted to the Zillow upgrades’ effect on other Realty.bots. That nothwithstanding, your work on the advertsing model is very informative.
December 10th, 2006 at 9:38 am
Sorry, Greg, your writing has given me the impression that you believe this will have significant impact on the real estate industry as we know it. When you say things like “We are looking at the embryonic form of a de facto national MLS system” and “I think they have the potential to become a true one-stop-shopping national real estate web site, and, from this point, I’d like to see them pursue that objective”, it reads to me like you are predicting the end of real estate business like we do it today.
December 10th, 2006 at 10:01 am
I’ve been saying all along that the half-assed end of the business is at extreme peril. Nothing will happen fast, but the devasation will be total. I think the same thing goes for half-assed Realty.bots. For Realtors — and vendors — prepared to deliver value in excess of their cost, the future is bright. FWIW, ours may be the only business in which the idea of having to deliver added-value is even a topic of coversation…
December 10th, 2006 at 11:20 am
I’m with Greg – I think I predicted a changing landscape for real estate search engines. I think the industry will change whether Zillow exists or not.
Zillow has put together a nice business model though, and I’d wager that their existence will accelerate change in the industry.
December 11th, 2006 at 1:27 am
Hi Marlow, it’s David from Zillow. Thanks for writing
A few thoughts …
We’d love to hear from all potential advertisers — you can use can this link to contact our ad sales team:
http://www.zillow.com/feedback/AdvertiserSignup.htm?origin=Home%3AHome
And see our ad specs here:
http://www.zillow.com/corp/AdGuidelines.htm
Let me clarify that because of the effort involved — mostly for the advertiser — in creative design and campaign management, our current ad products are best suited to advertisers who plan to spend at least a few thousand dollars. That said, many mid-size brokerages and developers have a healthy online advertising budget — and they should find our ad specifications match their existing creative. The rate at which that ad budget is spent depends on the ad type purchased and geography targeted. Ad campaigns serving high-traffic neighborhoods will sell through fastest.
Our next ad product will make it simple for smaller companies to purchase advertising on Zillow.
Actually, rather than trying to just be the encyclopedic list of homes for sale, Zillow took another step to becoming an encyclopedic list of all homes — not just those that for sale. We’ve started collecting and publishing more interesting information about many of the homes that were already in our database. Sellers can post that their homes are for sale on Zillow and provide their agent’s contact info. With sellers’ support and that of many listing agents, I think we have a great chance of attracting an interesting inventory on Zillow. It’ll be interesting to see where we are a year from now.
December 12th, 2006 at 6:46 am
As a Realtor in southeastern North Carolina, a market that draws interest from the entire U.S., I welcome with enthusiasm any service that helps consumers find the info they desire and that helps Realtors present information.
In addition to listing on our local MLS, which listings are then picked up by many national sites including Realtor.com, we are trying to find the best ways to use MySpace ads, Craig’s List ads, and ads on Zillow. We’re in a smaller market so currently most Zestimates include accuracy disclaimers, but likely as the data is spread wider and deeper greater accuracy will be possible.
Keeping the data current is a huge challenge even for MLS’s with staff responsible for the task, and I think the mix of Realtor and homeowner ads may confuse many consumers because of different levels of accountability. For example, our MLS levies fines if property status isn’t changed within a prescribed number of days; there’s no such motivation for homeowners.
Our industry is highly regulated and we are accountable for ad content . . . homeowners are likely not to be held to the same standards, other than ultimate liability in the case of outright fraud. For example, Realtors cannot say that a home is close to a church, or good for families, because of protected class regulations . . . buyers often want to know of those very factors, so if homeowners listing their own property make those statements, who is liable? Realtors can point to third party sources of school ratings or crime figures, two more hot topics, but cannot make statements about good or poor schools or about low or high crime rates – will Zillow be successful in keeping protected class statement violations out? Or will homeowners posting their own ads find themselves in court? Certainly these are areas of concern.
I personally welcome Zillow’s efforts in the hopes that they’ll have deep enough pockets and long enough staying power to become a major force – there are too many small players presently that fragment the market, which doesn’t benefit consumers or Realtors.
Will any online service totally replace Realtors? Of course I hope not, but helping buyers find property is only one part of the process. Getting to contract is of course another whole piece, often involving more emotion than hard data. The greatest challenge, though, which is present in both hot and cold markets, is getting contracts all the way to closing – hard to see how the hand-holding, support, and advocacy that good Realtors offer can be replaced by an online service.
Possibly the types of transactions where real estate online services will have the best chance of going the distance way from home search or listing to closing are those where the property is commoditized – for some investors, for example, or for home owners who don’t get emotionally involved with their primary residences. It works for cars, so why not for homes for those instances, but for many people, the emotion-laded factors rule great challenges.