Zillow is buying Trulia? Now what?
It’s official, Zillow announced today that will buy Trulia, for $3.5 billion in stock. The expected close date is sometime in 2015. So what does this all mean for the rank and file real estate professionals from big brokers to individual agents? We discussed this very possibility at the Real Estate Webmasters summit last week and several possible scenarios were shared as well as the overall impact that supporting Zillow and Trulia has on real estate business today.
Zillow and Trulia are truly unbelievable businesses and I cannot think of any other business that receives the raw material for it’s products for free, from which it creates products and then turns around and sells these products back to the very hand providing them the raw materials. It is as if we were giving them bars of gold and they in turn create rings, and other jewelry that they sell back to us. It really is amazing when you think of it.
In truth, organized real estate created the problem. We created it by ignoring what consumers were asking for, more transparency. Consumers love Zillow and other 3rd party sites, because they gave them access to property data (even though there are often inaccuracies) when the real estate industry tried to keep that data behind closed doors. Now they own the real estate eyeballs of the nation and even our president sits down with Zillow to discuss the state of real estate.
In talking with brokers and agents last week at the REW Summit opinions ranged over the entire spectrum. Some felt Zillow and Trulia were no big deal and the cost to use them to get leads via premium services was well worth it. Others felt it was all a Trojan Horse play and that we were ultimately inviting them into our house only to set them up to ultimately take over our business. Only time will tell which of these is true.
On a side note, it is interesting to me that Zillow says that they will maintain both brands. Of course, this could be temporary but it is hard for me to understand the real value in this since the world will know it is one company regardless of the labels.
The Real Questions
Ulltimately, the real question, is what impact will this acquisition have on our industry? Specifically, will the new Zillow make a play beyond the product and advertising model they have held to so far and move into the real estate industry’s back yard? Will they create their own broker brand? Will they make a play for MLS or create a consumer centric sales model that dis-intermediates today’s real estate professionals? I don’t have a crystal ball but will share some thoughts and suggest, that no matter what, you really should have a strategy well in advance of any moves that they might make. Remember, you still do hold the keys to their business, you source it with your listing data.
Will Zillow change its business model?
When Zillow and
Trulia first rolled out they presented their concept as “free
advertising” for the real estate industry. It was to be no
more than that. In very short order, however, when they
realized the income from that initial concept didn’t cut it, they
put restrictions on listing displays and charged the very people
providing the listings to receive leads on their own
properties. So when they tell us today, they have no
intention of being an MLS or of being a real estate broker what
should we believe?
Here is what I believe. I believe Zillow will do whatever it thinks gives them the best chance of making their revenue and profit goals and providing great returns for their shareholders. I believe they may even mean what they say today about not getting into our business but history has shown these promises mean very little in the long term
What should you do? Syndicate or not?
Individually you have a simple choice today. You either syndicate your data to Zillow and/or other 3rd parties or you don’t and you either subscribe to their products or you don’t. The truth is, almost all listing data is syndicated today and the vast majority of brokers and agents support this process. A substantial segment of our industry pays them, as well, for premium services. With this latest announcement should that change? Will that change?
I am not a broker, I don’t list properties, but I have advised MLSs, brokers and agents for years on syndication and have told them pretty much the same thing over the years. If I could turn the clock back to the beginning of syndication and turn off the listings I would do it in a heartbeat. I think for all the claims that Zillow and others make about the great services they provide, in my mind they have not truly provided anything that wasn’t available before, they just did a better job of marketing. Realtor.com could have, and should have been the consumer window to real estate but unfortunately NAR has done a good job of handcuffing the very members it serves over the years with data restrictions that make it hard for real estate professionals to compete with the portals. Ultimately I believe syndication has weakened our industry and done a disservice to the consumer, at least in the short term. How many times have consumers been mislead by a Zestimate or been excited after finding their dream home only to find out it had been sold three weeks ago? Long term maybe this is part of an evolution home buying and selling that simply has to take place but no matter how you look at it, you really should have a solid strategy in place and not wait to be rolled over if the new Zillow decides to more into your territory.
Some suggestions moving forward:
- Regardless of whether Zillow changes its approach there is no question they own the eyeballs of North America in terms of real estate search on a “national” level. Don’t confuse this, however, with local dominance. As a broker or team you can and should be able to compete and compete well in your local market. Consumers that search on Google for homes are, by definition, not interested in Zillow at this point in their searc. At the point they are doing a Google search they have left the looky loo land of Zillow and are getting more serious. Whether they are looking for an agent or a specific house, you need to make sure you are in position to be there to be found. Justin Havre, from RE/MAX in Calgary, Alberta has a team that has done over 400 sides so far this year. He points out that you should never confuse website rankings with website success. While there may be a correlation to some extent the real issue is whether your web presence is driving quality leads into your business. His certainly is and through his multiple websites from Real Estate Webmasters, and a very well managed market strategy he is winning the local battle.
- Make a decision on syndication. Don’t wait for the day when Zillow decides to change direction to make a decision on syndication. Decide now. Is this something that is important to your business or not? If so, go with it, and figure out ways to integrate the costs into your business model. If not, be clear on why you feel that way and be ready to have this discussion with your clients.
- Educate your customers. No matter what you do with syndication, make sure that you are seen as the “expert”. Explain to them the pros and cons of syndication and give them the facts on how inaccurate valuations or poor online data can actually hurt their chances for the best sale price in the shortest time. Explain to them that the real buyers come to the source of the data at some point, which is MLS. Explain that while more and more home buyers do search on there own at first, those that actually use real estate agents has increased.
- Accept ongoing technology costs as mandatory part of business. If you are not prepared to spend significant dollars each month on competing for real estate business on the Internet your are wasting your time and money. You need to invest in SEO (search engine optimization) and consider Pay Per Click advertising and you need to work with a vendor that has this expertise. Morgan Carey, CEO of Real Estate Webmasters (the original SEO guy) noted, "Our clients that truly engage in building world class web presence understand this is a partnership. It takes work on our side and their side to be successful." Putting up an entry level template website is great if you just want an online business card, but if you are trying to build online leads and grow your business via Internet leads it takes time, money and a solid strategy. Talk with your web vendor and work with them to map out your objectives. Set a budget, execute the plan and measure progress daily. You really can compete and do well in your local market.
I would welcome your feedback on Zillow’s announcement as well as your thoughts for where this is going to take us short and long term. Will this acquisition actually hurt Zillow? Will the industry finally realize they have to make a stand? Will consumers let them? Let us know what you think.