“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.