A property website or 'The world's most trusted and vibrant home-related marketplace'?

by Alistair Helm in


zillow_premier_agent.jpeg

Zillow held its inaugural Premier Agent Conference last month inviting over a thousand of their more than sixty thousand Premier Agents to a two day event held in Las Vegas. Described by CEO, Spencer Rascoff as the most important event of Zillow's 10 year history, the event itself speaks so much to what and how Zillow is and will develop in the future.

Zillow is in many ways a late starter to the global industry of property portals. When it launched in 2005, REA group in Australia (arguably the most successful property portal globally) was about to launch its international expansion and had been operating for 9 years and was generating A$34 million in revenue - just in Australia. It would take Zillow until 2011 to reach that level of sales and by then REA had powered on to revenues of A$238m!

Zillow though does have a larger pond to play in with a population of over 300 million, annual property sales of over 4.5 million and well over 1 million agents.

I watched the various reports and tweets from the conference and quickly became engaged with the approach Zillow is taking with its customers. It was beautifully summed up in the phrase "a website that has created an ecosystem for consumers, agents, renters, homeowners and lenders to interact around housing". The notion of an ecosystem is very appealing to me, as it is all about a platform. Platforms are the most powerful digital business solution. A platform can deliver a long term value in a space where people can undertake interactions and potentially create marketplaces that ultimately provide the revenue opportunity that all such digital platforms aspire to and must if they are to survive and grow.

Now Zillow more than many other global portals needs to nurture the revenue opportunities from agents as well as ancillary service because fundamentally the US model for property portals provides no income opportunity for subscription based listing services. The US has the somewhat unique MLS structure that effectively removes the opportunity of charging for listings. The model, that for REA Group generates over A$100m in annual revenues from 9,500 Australian real estate offices, amounting to 25% of total revenue. However Zillow and other property portals do not see agents as simply revenue sources, they recognise that the role of a property portal is inextricably linked and closely aligned to the agents. Agents are the advocacy platform for portals as well as the source of all future business. This thinking is what has driven the investment in digital services and customer relationship services entirely focussed on building that bond between the agents and the portal.

What is so appealing in my mind around all of this evolution is how far we have come in the property portal space from the early ideas of simply being advertising websites for the display of listings through into this idea of being a broader media site with listings, and then evolving into this far more engaging and enveloping concept of an ecosystem that provides support and value to all of the community. That is what Facebook has done for our social connections, what e-Bay and Trade Me has done for all types of retailers and what Zillow and the likes of REA Group in Australia and Rightmove & Zoopla in the UK are doing for their respective real estate community and all of the home related services.

Zillow shared at the conference their mission, a mission statement that they had not made public until the conference.

To build the world’s most trusted and vibrant home-related marketplace
— Zillow Inc

In my view we have collectively come a long way as a community. The community of digitally focussed and passionate supporters of the real estate industry who across the globe seek to support and lead the evolution of this industry and those millions of agents that operate day-to-day in the market delivering services to consumers. We have evolved from websites to ecosystems and marketplaces delivering greater services and value to the industry we support.

Here is the video summary of the Zillow Premier Agents conference - in my mind it was a milestone event in the history of the company and of this industry in the US and internationally.



Consolidation in the US property portal market

by Alistair Helm in


This week saw the announcement by Zillow that it had entered into a definitive agreement to acquire its competitor Trulia for US$3.5 billion. The move by Zillow is an aggressive one that further cement its position as a key part of the future of the real estate industry in the US market.

Zillow has long held the mantle as the largest real estate website in the US surpassing the effective incumbent Realtor.com many years ago as it has headed for an aggregated audience of over 80 million unique users per month. Trulia has played a powerful game as the challenger as it has also surpassed Realtor.com and carved out an audience and support base within the industry.

Both companies rely on advertising revenue from agents and 3rd party companies as the US model with industry owned MLS’s (Multiple Listing Services) effectively making access to listings open and free for portals negating the opportunity to build a business model of a subscription as operated in most other countries. Agents are sold advertising packages to provide profile to secure listings as either buyers or sellers agents. With over 1.5m agents there is a large customer pool and with $12 billion of marketing spend across the industry each year these two leading portals and others have a significant cake to carve up between them, especially as the US industry effectively ceased print advertising for real estate a few years ago.

Neither company is as yet 10 years old and equally neither really makes any serious amount of money. For Zillow the 2013 year saw revenues of $197m and EBIDTA of $29m; for Trulia revenues of $143m and an EBIDTA of just $17m. Yet these two companies have a collective market capitalised value of $8.2 billion that is a staggering combined price earnings ratio of 178:1.

Trulia and Zillow are very different operations strategically, culturally and in regard to user experience and consumer brand experience and this has been part of the reason for the healthy and respectful rivalry.

Zillow has always been about data and the desire to empower consumers as home-shoppers with all the information and insight to make better decisions in the real estate process. They began originally as a site with no listings, merely a valuation estimate for every house in the US, matched to historical sale price records which was instantly a much talked about and compelling reason for almost every American to visit the site. This razor sharp focus on data off-sided them in the early days with the industry of agents and brokers as the accuracy and credibility of these valuation estimates “Zestimates” were challenged by the industry. However applying huge technology to the problem their data insight and analysis has turned them into the leaders in property tracking in the US with the largest and most valuable database on US households.

Trulia on the other hand has always been about the agents and the listings, working to empower agents through creating a community for home-shoppers to learn, ask questions and establish contact with trusted agents.  They have tried to engage their audience on a hyper-local basis so that you feel that Trulia is there at your side as a trusted friend, unlike the Zillow role as a trusted advisor.

In terms of business development Trulia has been focused on getting closer to their customers especially through the acquisition in Market Leader last year a leading SaaS CRM provider to the industry. Conversely Zillow has been more focused on the consumer engagement first by powering the leading media portals of Yahoo and MSN and then moving to acquire the New York portal Easy Street last year. They have also outspent Trulia in advertising and has lead a massive social media and PR campaign that has effectively intertwined Zillow into the vocabulary of US home-shoppers.

So Trulia and Zillow are different very different brands, different in culture, focus and user experience; however they are competitors. They both fight for the same advertising dollar of agents and brokers, as well as 3rd party advertisers eager to engage with home-shoppers. For this reason I hold no long term belief that Zillow will continue to operate both websites - Trulia as a website and a brand has a finite life. Zillow will be the gorilla in the market. A portfolio strategy as advocated by Spencer Rascoff Zillow’s CEO is a laudable strategy when the portfolio is made up of regional players or segment specific portals for rental property or holiday property or commercial property, but two national residential real estate portals - I don’t think so.

This acquisition will drive Zillow’s growth and earnings. For a start, the combined companies were due to be spending over $100m on advertising this year - no point in wasting half that money to try and out-flank your sister site! A single site will allow Zillow to begin to leverage their massive audience to drive lead generation solutions for agents and brokers, unchallenged by a competing offering from Trulia.

This consolidation is very unlikely to be challenged as anti-competitive even allowing for the shear scale of the combined audience share; as the marketing of property listings will not be impeded by the deal with the MLS structure still effectively allowing any real estate company to be a local portal with all the listings; after all real estate is far more a local business than a national business, especially across 100+ million homes and 300+ million people across the vast continent of 50 states.

Zillow have however not won the war with this acquisition, they have merely avoided a distracting skirmish with a competitor on the road to their ultimate goal of getting closer to the advertising cake of $12 billion a year. They will continue to innovate and acquire on their path as they will continue to grow in influence and power. Both companies have been highly innovative with technology across all platforms and whilst the acquisition could potentially be seen as a chance for Zillow to take a breather on such innovation, I suspect not. Zillow is all about empowering consumers and they are at their core a tech company so I see no easing up in the flow of smart user friendly innovative future tech. This is good news for the consumer and the real estate industry in the US who have nothing to fear and much to gain from this consolidation. However within the US real estate industry the general feeling is of the threat this acquisition brings to the core operation of real estate. That view is in my view more a function of the industry's inherent lack of confidence that their business model (with dual agency services and c. 6% commission fees) being ultimately sustainable.

As to the implications and ramifications for other countries and specifically for NZ. This deal demonstrates the stakes that the key players are playing for in the global property portal space. Zillow is by no means the poster child of the industry, those accolades rightly belong to the likes of Rightmove in the UK and REA group in Australia who deliver significantly stronger financial results from far smaller markets. Those operations though do have very significant competitors who have gained significant ground over the past few years. The likelihood of consolidation in these markets of the #1 player acquiring the #2 are less likely. What is far more likely is regional consolidation with more acquisitions of emerging market players by these two key specialist portal players and other media companies such as Axel Springer and Schibsted.

In NZ Trade Me has no need to consider acquisition, nor would it probably be able to as the ownership of Realestate.co.nz is more a strategic asset for its shareholders than a financial investment. The key focus for them as it is for Zillow, will be cementing the relationship with the industry customers at all levels, agents and business owners. More likely on the agenda may well be the benefit of an integrated CRM system as Trulia saw with the Market Leader acquisition. In NZ and Australia new operations offering SaaS solutions for real estate CRM look to be redefining the digital backbone of the industry and this could be key for Trade Me and other property portals who all rightly recognise their core customer are agents and brokers / business owners.

The fact is that nowadays the property portal industry is far exceeding the value of the real estate industry they support and rely on for their business. This is largely a function of a continued belief that the digital transformation of the whole industry process will occur at some time and smart tech companies will be the ones to take advantage of any such trend. For real estate companies there are massive efficiency gains to be made through working with portals, however collectively the industry around the world still holds an adversarial relationship with their local portal. 



Spring has arrived in the US and with it a new battle of real estate websites

by Alistair Helm in ,


There is a war being fought right now in the US - a high stakes tussle between the 3 aspirants of the property portal industry. The prize is a slice of the more than US$6 billion a year spent by the real estate industry in marketing, coupled with the potential of a foothold into the influence of more than US$60 billion in transaction fees a year. By comparison the NZ comparable numbers are around $100 million in marketing and $1.4 billion in fees.

The three players in the market for the eyeballs and influence of the buying public of the US are Realtor.com, Zillow and Trulia and each have today rolled out their new season TV commercials perfectly timed for the Spring home buying season.

I have always been partial to TV advertising and in some ways I'm sad that the heyday of TV commercials is past and their relevance is diminishing - they are the ultimate creative medium, as creatives and production crews combined with massive clients' budgets all seek out that holy grail for that one special ad that transforms a company and becomes enduring and memorable - think Coke ads and Toyota ute ads.

The latest collection of adverts for these real estate portals reflect perfectly the differing personality of these three companies and their distinct point of difference and viewing them further reinforces these differences.

Realtor.com

The industry stalwart, serious, factual, professional. The site is the 'official' site of the National Association of Realtors and as such focuses on facts - more listings, more accuracy, more up-to-date. All wrapped up in a warm 'idealised' family of wholesome values from a place only existing in TV commercial land - lightly glazed with humour.

 

Zillow

Zillow is the leader in eyeballs at the moment with a staggering 77 million unique visitors per month and plays an emotional card creating beautiful vingettes of real people 'looking for a place for your life to happen' rather than a boring functional requirement to move home, or just find or buy a house. It's another tear jerker to complement the homecoming advert from last year. In some ways it is similar to Realtor.com full of purity and the idealised perfection of a perfect couple - mid market, middle America. The search functionality featured in the ad might have been more convincing if the search term was "tree house" instead of 'big tree' but that would have killed the punch line and I just did! 

 

Trulia

Trulia has the appeal of being the battler in this threeway tussle, not the scale of Zillow and not the authority of Realtor.com, however they create a unique experience, they focus on real situatons and inject subtle humour and insight that is hyper-local which is important. It is the subtly l love, the insinuation that is made of the situation - creates memorability and this ties into the campaignable idea of 'Moment of Trulia' - gets my vote. Shame though about the competition as the end frame - seems to spoil somewhat the authenticity and emotional connection.



Living with greater transparency - the challenge for real estate

by Alistair Helm in ,


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Two articles this week prompted my thoughts about the challenge that greater transparency plays in our lives and the impact it will have on the real estate market. I have commented in the past as to the use of obfuscation by some commentators from within the real estate industry when talking about the market, a behaviour that I sense will have no part in the future.

The first article that caught my eye was a tweet which came into my stream as a retweet from a person I do not know but the content certainly made me sit up! 

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A person using social media to reach out to as wide a community as possible to ask a question - a very relevant question as to the condition of a rental property. A question they could have asked the letting agent or the landlord, however they chose to reach out to an open audience to see if anyone could answer the question. This 'reaching-out' to people's connections whether on Twitter or on Facebook or any other medium is what the internet allows us all to do. Rather than historically relying on controlled channels we can look for trusted connections to help us evaluate products and services.

The lesson for the real estate industry from such examples is be open, be ready to engage and answer all such questions and better still, be proactive and provide as much relevant information as possible. If as the case in this example there really is a water-tightness issue with the property (and I have no idea) then take steps to discuss with the landlord to be ready to answer any such question, after all the agent is just that, the agent, not the owner. 

 

The second article was actually a link I saw to a random listing in the US on Zillow. A house that had been on the market for a couple of months. Now; with well over 2 million homes on the market this house is not remarkable in anyway. What is remarkable, and it is not for the first time that I have seen this, but in the context of this issue of greater transparency this property caught my eye because of the richness of valuable information available on the property that we would never see on a property in NZ.

Let me highlight these insights and in so doing provide an explanation of why I think we are being short-changed in regard to valuable property information, not so much from the real estate industry but from at heart the property data industry.

 

5410 Ocean Mist Loop, Blaine, WA 98230 is For Sale - Zillow.png

1. Sale Price - this property much like most in the US and in fact most countries has an asking price. Not a sticker price, but a price which based on comparable local sales would indicate that it should be worth as judged by the listing agent, thereby providing prospective buyers with a guide. This property may sell for more than the $339,500 if there is sufficient demand just as would be the case for property in Auckland at the moment. To put a price on a property, every property for sale in NZ would not be extra work for real estate agents, it would not diminish their role or devalue the sale price, it would though I think build respect and openness!

2. Last Sale Price - this property sold for $390,000 just over 3 years ago - FACT. A fact that is true of all houses in NZ, yet we are not given open access to this information, it is locked away behind payment walls by government entities (local/ national) - it is public record and should be openly accessible to assist the property process. 

5410 Ocean Mist Loop, Blaine, WA 98230 is For Sale - Zillow-1.png

 

3.  Days on the market - valuable information, thankfully we do have this insight on both Trade Me Property and Realestate.co.nz in the form of a listed date; although somehow this data structure seems more telling.

4. Estimated valuation - in this case the proprietary Zestimate. A complex dynamic algorithm developed by Zillow to place an up- to-date estimate on every property in the US. Now in NZ you can buy such an estimate from QV for $50, but in the US the data is free, dynamic and referenced as to when it was last updated. QV is joint venture between the Government owned entity Quotable Value Ltd and the US company Core Logic. It's NZ public record data being managed through a US technology company's algorithm to be sold back to us at $50 at a time!

It is interesting to see that QV report an accuracy of 10% variance of sale price to estimate 65% of the time and 20% variance of sale price to estimate 93% of the time, Zillow goes further by reporting 5% / 10% and 20% variance by major city with accuracies of up to 73% at 10% variance and 93% for 20%. So the data model of QV is good - we just have to pay the government and the US company for the pleasure.

 

5410 Ocean Mist Loop, Blaine, WA 98230 is For Sale - Zillow-2.png

5. Price History - not only do property buyers in the US have an asking price and a 'last sale' price they also have an incredible insight into the historical price movements of both sale and asking price as cited by this example.  Here we can see the historical transaction record (a bleak picture in this case as the US property market tumbled and continues to struggle). Two public record sale prices together with details of when the property was listed at what price and price changes as well as by which agency.

I can sense a loud cry from the real estate industry about this data, that it should not be exposed as to do so would be to diminish the appeal of the property. However if all property was laid bare with the true facts, buyer could make informed choices. Property transactions would not collapse. Quite possibly we might not have the rampant property speculation and price bubbles built off the back of sketchy information and hyped frenetic auctions. Maybe, just maybe this greater transparency like sunlight could help us all better understand and operate with greater confidence in the property market!

 

 


Online marketing is the new prospecting tool for real estate agents

by Alistair Helm in ,


Transient

The time honoured approach to prospecting for new business by real estate agents has largely consisted of door-to-door leaflets, local business networking, endless coffees and the ubiquitous press adverts comprising smiling faces alongside successful sales results.

Today - more and more the power in prospecting is online and the leading property portals around the world are reaping the rewards as they deliver just what agents want – sellers.

I came across the excellent, simple and highly effective advert from Zillow in the US which succinctly ‘sells’ their Premier Agent service, which provides a profiling of agents as a prospecting tool.

Here in NZ there are just under 9,000 active agents. All of them are self-employed contractors who whilst operating under the banner of their chosen branded company are solely motivated to become the most successful agent in their chosen geographical area. This hyper-competitive environment is what keeps on attracting people into the profession, yet it is also what makes real estate so challenging for new entrants. This has been the rich harvesting ground for the print media for the past decades and now become the cash generating machine for online property portals as the last of the print media for real estate finally dies.

Building a profile is tough as a rookie agent, as is it is for an established agent competing against all the noise of rookies trying to raise their profile.

It reminds me of a piece of advice I heard back in 1995 when I was first investigating this industry and undertook the real estate salesperson course at the time.

I was told that there wer three things you needed to be a real estate salesperson:  (i) the money for the course – c. $1,000 at the time (ii) a car to take people around to see houses and (iii) a house. This last requirement was nothing to do with a home-office, and everything to do with the fact that if you could not generate any leads in the first couple of months, you could always list and sell your own home. Not to save the sales commission fee, but to be able to then showcase that you had a listing – and thereby demonstrate achievement of the first rung on the ladder!

This new online profiling tool is being marketed in NZ on realestate.co.nz as the featured agent service which places an agent advert adjacent to the listing result – spend enough with the company and you also get a photo adjacent to all your listings – why is it that real estate is one of the few industries where everyone is driven by their image, on the business card, online etc?? (a question for a later post I suspect).

In Australia the leading site of realestate.com.au has grown a business nowadays turning over in excess of A$250m from advertising of agents and listings with a company solely focused on online real estate valued in excess of A$2 billion.

It is clear that all types of real estate marketing, albeit property related or agent related is moving online at a pace so clearly it begs the request that the last to advertise in the newspaper, please switch off the machine!