“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.
(The entire 80+ minute video is here and the question without edit is here):
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.
I have to think that if they could buy rentjuice for $40 million then they should be able to pay for the data they are monetizing…
But if the MLSs did start to charge for their data, would Zillow find another way to get listing data? Didn’t they do something like that with H Hanna?
Zillow said they would go around MLSs if they had to but I would think the brokers would want a piece of the $Billion, either in cash or stock.
Ultimately the brokers have all of the leverage in these scenarios. If the air supply is cut-off, they would zuffocate.
Let’s flip this around for just one moment. Can you imagine the discussion between a listing agent and their seller, the same seller who just signed an exclusive listing agreement which includes a 5-6% cut of the deal as compensation back to that agent, on why their listings don’t appear on Zillow, Trulia or other well-regarded high-traffic real estate website:
Seller: Why, exactly, is it that my house isn’t listed for sale on the Zillow & Trulia, those big sites with all the listings and real estate info?
Agent: Well, because Zillow & Trulia won’t pay my broker or my MLS for the right to promote your listing on their websites.
Seller: Huh? Why would they pay the broker or MLS? If anything, shouldn’t it be the other way around?
Agent: Well, both the broker and MLS consider your listing information to be their valuable data and feel they should (each?) be paid for its use on those websites.
Seller: Wait a sec…MY listing is THEIR data? Are you nuts!! I want my house listed on those sites now.
Agent: OK, I’ll handle it.
Call that the made for TV version of the chat. Regardless, after that discussion, the agent uploads the data – as many will do, and rightfully so, to best serve their client. Unfortunately we also know that agent-sourced data is the least accurate data feeding syndication websites. So now we’re back to the outdated/misleading data problem.
It’s pretty clear that consumers have spoken, they like choice when it comes to real estate search, and there are a number of responsible companies providing that service at all levels, from agent sites through broker & MLS sites up to local, regional & national portals/media sites. Most agents, brokers & MLS execs I speak with hear this message loud and clear and are making decisions about “where & how” to distribute listings online, not “if” or “for how much”.
Jonathan,
First, congratulations on your announcement that Zillow, Trulia and Homefinder will be working with you.
Kris Berg made an eloquent statement regarding the coercion of your argument and, in my opinion, delivers the coup de grâce to all those that think putting listings on any and all websites is a moral obligation to the seller. Everyone should go read it. I’ll wait.
[NOTE: Zillow has since redirected and removed the Zestimate of their HQ that I referenced below (it now goes to a generic Zillow page. You can see an archived image of it here.]
The “de-syndicate” movement is a small snowball, gathering size and momentum. It may just melt without doing any damage but there is a possibility it could roll right through 1301 2nd Ave, Seattle, WA 98101. Go ahead, click on the link. It’s Zillow’s Corporate HQ which, according to Zillow recently sold for $115,000,000 but has a Zestimate of $528,200. It’s also listed as a 54,021 sq ft condo. I can’t make this stuff up
Robert – thanks for the acknowledgement on our announcement. We’re excited to work with these publishers as well as the many other IDX Providers, Technology Vendors and Publishers committed to providing agents & brokers with the insight needed to best promote their listings and sell homes faster.
With respect to your comment below, I want to make my position clear. I am certainly not an advocate of “putting listings on any and all websites”; on the contrary, I believe there are very few websites worth even considering. Ultimately it is an important decision that each broker & agent need to make based on what they believe will provide the best exposure for each listing. Our 360 Insight platform is focused on providing exactly that window into online listings performance.
But in the end, I also believe that these decisions should be made based on performance and results. The arguments about brokers/agents/MLS’s getting paid for that listings data by these publisher websites don’t have any impact on the agent’s job of selling that home. Agents are engaged in the important business of helping people buy & sell homes, not data licensing.
Out of curiosity, do you feel that all websites generating ad revenue from listings should pay brokers/agents/MLS’s for the data? Realtor.com?
I’ll start by saying iMapp pays 30% of gross ad revenue to the MLS that drove the impression so yes, I feel that all websites generating ad revenue from listings should pay the MLS associated with the traffic. That’s why I said “It’s entirely possible that I’m just jealous of Zillow because they have such a great deal.” in the original post.
In Zillow’s case, a 30% revenue share would equate to +/- $19M annually (based on Q1′s numbers) or said another way, less than half of what they spent for RentJuice.com.
In the case of REALTOR.com®, I don’t know the details behind their agreement with the NAR so they may be paying for the listings or perhaps there is an equity stake (or maybe there’s no compensation).
Robert, you must have irked the boyz at Zillow. They took their HQ off the site. Now when you search their address, 1301 2nd Ave, Seattle, WA 98101, it goes to 2821 2nd Ave APT 1301, Seattle, WA. Check it out!
Now how can I get my address removed?
The above comment included a link to Zillow’s Zestimate of their headquarters building in Seattle. My point was that with so many people claiming that “Zillow is great for the industry, all hail Zillow”, the Zestimate isn’t that great. I thought it was a fun poke.
This morning I found out that the link has been redirected to a generic Zillow search page. I guess that means even Zillow thinks the Zestimate isn’t that great.
If you enter Zillow’s HQ address into a Zillow search box, it now geocodes to an apartment building. Try it, it’s fun.
1301 2nd Ave Seattle WA 98101
I’ve left the original link in the comment but added a link to a screen cap I made on Tuesday. I’m guessing the take down order will be typed up and sent later this morning, soooo….you can see Google’s cache of the Zestimate here.
Greg from Zillow here. I wanted to expand on my comment and offer some clarification.
Zillow invests millions of dollars to provide free mobile and Web services that help home shoppers find homes they love and then connect to real estate agents. We also provide complimentary services and tools for agents such as prime placement for listing agents, an agent CRM platform and training classes to help them further grow and market their business.
Zillow has more than one thousand partners that provide listings to Zillow. Our partners understand the value in making sure their listings are on Zillow and being marketed to Zillow’s more than 32 million unique users each month on mobile and the Web.
Greg,
Thanks for…clarifying? It reads like two paragraphs from a former Waggener Edstrom flack.
I’ll take your response as a “no”.
As far as the services offered to agents, I’ve posted previously about the egregious and still unchanged Terms of Use on what you refer to as a CRM. Since it doesn’t even have a method for deleting contacts, I think the term “CRM” may be overstating the feature.
The point of my post was this: Last year you made the statement that Zillow had no profits and therefore could not compensate MLSs for listings. Now that Zillow has a few bucks, perhaps it’s time to re-visit the way Zillow works with their partners.
Hi Robert – Jay T. from Zillow here.
You wrote, “… I’ve posted previously about the egregious and still unchanged Terms of Use on what you refer to as a CRM.” (my emphasis)
Section 3 of the Terms of Use you quoted in your previous post HAS been changed to include the language, “Zillow will not use client contact information that is uploaded by agents into Zillow’s Agent Hub portal for any purpose.” (see http://www.zillow.com/corp/Terms.htm) It was changed on April 19, less than 24 hours after you posted.
Thank you for the update, Jay. I apologize for missing that change.
But since you brought it up….
Correct me if I’m wrong but the updated ToU only applies to contacts that are “uploaded”. If a contact sees one of my listings and likes it enough to request more information via Zillow’s form, Zillow has an “irrevocable, perpetual, worldwide license to (a) use, copy, distribute, transmit, publicly display, publicly perform, reproduce, edit, modify, and translate your Submission”
That would also mean that if the contact initially provides just their e-mail, but I later add phone number, notes, etc., Zillow would have the license to all of that contact information, since it wasn’t “uploaded”.
I also find it odd that a Customer Relationship Management tool doesn’t have a “delete” option for contact information, uploaded or not.
Truly glad to see you back at it. Your blog post about your experience was both heart-wrenching and eye opening. I’d be happy to buy you a cranberry juice at Midyear.
Kim Kardsahian stares endlessly at a mirror looking for her imperfections.
Obviously Spencer does the same with a monitor and google alerts on Twitter.
Bednarsh’s dialogue illustrates a valid point. Zillow basically provides a valuable advertising outlet for brokers, and (in most cases) the MLS is paid by brokers to provide the feed. A decade ago, brokers paid media to advertise and that model is changing–a benefit to brokers.
Zillow’s acquisition of new companies is an acquisition of tools which bring value to brokers by increasing market penetration. It’s a sign of Z’s good business strategies to anticipate market changes and invest in them–few MLSs and individual brokers have the resources to do that individually–but everyone benefits from the transaction and wider exposure and better service.
I think consumers, brokers, and MLSs are happy with Zillow’s successful business decisions, which are an enhancement to the real estate sales process. Speaking from the point of view of an MLS manager, I look at what Zillow is doing as an investment which builds capacity for all of us, and that reward is in the long term a better use of resources than paying brokers or MLSs in nickels and dimes.
Not quite sure why you are fanning these smoking embers, Robert.
I was at the CMLS syndication round-table last year and, as the video shows, many of the CMLS members seemed appreciative of Marilyn’s question.
I posed the question in my tweet and responded to Spencer’s DM. When he said “We never said to an MLS we have no money” and “That would be a stupid thing to say” it prompted me to
fan the smoking embersremind him of the comment.I contacted Marilyn and she told me to go for it, so I wrote the post.
Greg’s answer at the time indicated the reason Zillow doesn’t compensate MLSs was because they had no profits. Now they have profits and have provided guidance that they expect the increasing revenue/profits to continue in Q2, so it seems fair to ask the question again. His non-response indicates Zillow has no plans to change their business model.
Greg also said it costs millions to run these sites (Zillow). It costs millions to run MLSs, too and many are looking for non-dues revenue to keep up with decreasing membership (and dues) while providing expensive services to their members.
When the NAR increased dues last year, the MLS and associations took the brunt of member’s displeasure. It also made it more difficult for an MLS to raise their own dues.
In any case, I don’t think individual REALTORS® should be required to fund the content creation of publicly held companies.
As I said in my reply to Jonathan, iMapp pays a 30% gross revenue share to MLSs that allow us to run advertising. It seems clear to me that any company profiting from MLS data should compensate the source.
Your blanket statement that consumers, brokers and MLSs are happy with Zillow seems generous since brokers big and small are making thoughtful decisions about syndication and some, like Kris Berg, are making active decisions to de-syndicate.
You’ve even reported on your blog: David, a CEO of a MegaMLS, said “…If someone profits from it, then the broker wants to know and if appropriate, be reimbursed.” That reimbursement could come in the form of payment to the broker’s MLS.
This is an ongoing debate and there are many sides. It seems each side has their agenda (mine is that I’m jealous and everyone should pay their fair share).
I doubt my post will change anyone’s view but, as you point out, where there’s smoke, there’s fire.
‘De-syndicating’ isn’t the same thing as being unhappy with the success of Zillow’s services to a brokerage. And as an MLS looking for revenue sources, asking for payment from a broker for providing agreed-upon services is one thing, demanding a second payment from an advertiser for a broker’s listing is quite another. As an MLS provider trying to diversify income sources, I’d be looking in other, more creative and profitable opportunities than extorting payment from companies providing services to members.
The real question is why zillow exist? Because MLS is a piece of garbage, dos not work on iPads or mobile phones and even in computers looks cheap and not professional.
MLS if run by professionals could have a consumer version, and compete with Trulia, zillow etc, but that would be entering the real world of competition not the monopoly that we realtors are forced to pay for a inferior website.
Zillow is proof that consumers want better websites with easier navigation and usable data. MLS website is full of empty fields and unnecessary colums and spaces prosperous of 1980′ websites. Unfortunately they charge like the good sites.