“You know what’s cool? A billion dollars.” Sean Parker from The Social Network.
Zillow is a Billion-dollar company. A Billion dollars. That’s about 800% more than all of NAR’s MLSs combined, if you use the per-agent value used by ARMLS ($4M) in last year’s attempt to sell the MLS to the Arizona state association.
How did Zillow get to be a Billion-dollar company? They got there by creating the Zestimate, the much-maligned, SWAG appraisal of a home’s value, by posting MLS listings, some great marketing and doing an IPO to raise capital.
They also got there off the backs of agents, brokers and MLSs. Zillow doesn’t create content, they use the listings of (almost) every REALTOR® as their content. As Spencer Rascoff, CEO of Zillow, calls them: Advertising Units. (His exact quote was “the advertising unit is content”).
Spencer is correct, his content (listings) are ads. And Zillow sells ads on ads. I’m an ad guy so I think it’s brilliant. And that’s why I watch Zillow so closely. It’s entirely possible that I’m just jealous of Zillow because they have such a great deal. Actually, I think it’s because we at iMapp work with MLSs every day and we recognize the value of what they have…the listings. We even blogged about it last year.
So last week I watched Spencer on MSNBC. They released their numbers and announced that they will spend $40 million of their IPO cash on RentJuice.com. My first thought (after “What’s RentJuice.com?”) was: How does Zillow get away without paying for listing data when they can buy RentJuice.com for $40 million in cash?
So I tweeted:
When I think about it, it reminds me of the old joke “Why buy the cow when you can get the milk for free?” Also said as “Why buy the pig when you can get the sausage for free?” But I digress….
And, to my surprise, the CEO of Zillow responded:
So I responded back:
A few minutes later, my direct message column in TweetDeck lit up. It was Spencer. I’m posting his direct message here with his permission:
You’re right, Spencer. That would be a stupid thing to say.
Last year at the Council of Multiple Listing Services (CMLS) Syndication Summit, Marilyn Wilson, one of the partners at WAV Group Consulting and a business partner director at CMLS, posed a question to the panel of syndicators that included Zillow, Trulia, Move (REALTOR®.com) and others. Marilyn asked if the syndicators thought the MLSs should be compensated for providing the listing data.
Here’s the question and Zillow’s response, edited for length since the other panelists answered for about 5 minutes.
That’s Greg Schwartz, Zillow’s Chief Revenue Officer, answering for Zillow. He says “We have no profits” and “you’re trying to get water out of a stone”, among other things.
You may need to turn up the volume to hear Marilyn’s follow-up, the microphone picks it up and you can hear it, but it’s faint: “Isn’t your revenue valuation based, in large part, on the depth and the volume you provide on your website?”
Fair enough, Zillow was pre-IPO and they didn’t have any money. They’re saying: “We can’t give you what we don’t have.” Some would say that implies IF we made money, we’d share it with you.
What a difference a year makes. Now Zillow is a Billion-dollar company paying $40 Million in cash for RentJuice.com.
I think it’s time that CMLS and their members re-think syndication and the value of the listings. I know the question will be asked again, I can’t wait to hear the response.
See you in Washington.