SAN FRANCISCO — The creators of online home-valuation service Zillow learned the same lesson that many innovators and entrepreneurs before them have learned: real estate is difficult, it’s local and it’s not the travel industry.
Co-founders Rich Barton and Lloyd Frink shared 10 lessons they’ve learned since entering the real estate industry with the launch of Zillow earlier this year, and recalled well-known words of wisdom from Dave Liniger, co-founder and chairman of RE/MAX International.
Years ago, Liniger said that to be successful you can’t show up to the potluck with just a fork. At the time, there were companies attempting to do just that by simply taking real estate data compiled by multiple listing services and using it to make money from brokers, agents and others without adding value.
“We want to show up with stuff that we can bring to the industry,” Barton, CEO of Zillow, told a crowd of attendees Wednesday at Inman News‘ Real Estate Connect conference.
Zillow, which launched in beta, or test, form in February, has attracted a lot of interest with its home-value estimation service. The Seattle company this week announced another $25 million in investor funding, giving it a total of $57 million in venture capital to back up its mission to make home-valuation information available for free to consumers on the Internet.
Among other lessons the company’s founders have learned is “If you love it, set it free,” which they say is why they have decided to allow industry Web sites to display Zillow’s home-value estimates in exchange for a link back to Zillow.com. The company’s anchor partner in this is Yahoo!, which has incorporated a home-value estimate button on its search and real estate portals.
Frink also noted another service the company is launching called “Z mobile,” in which people can send an e-mail to email@example.com with an address in it and within minutes they will receive a Zillow estimate, or “Zestimate” of that home’s value. About 1,100 e-mails were sent to the Zillow service within minutes of announcing the service, company representatives said.
Barton and Frink, who is president of the company, also said they’ve learned that advertising is their business, not commissions. Zillow operates on an advertising model, with companies buying traditional online ads and incorporating Google AdWords into the site.
“Commissions are not our business,” said Barton. “We do not nor plan to ever collect a commission on a transaction.” And if someone were to ask Barton what he thinks will happen with traditional agent commission models going forward, he said the answer is “I do not know.”
Instead, the real opportunity for Zillow is in online advertising, where billions more dollars are expected to migrate in coming years.
Barton and Frink helped create online travel giant Expedia, and many have speculated that they would try to disintermediate the real estate industry much like travel Web services eliminated a lot of middlemen in that industry. But “real estate is not travel,” Barton said. “Real estate is not an e-commerce category. It will never be common practice to see a ‘Buy It Now’ button” for houses like items on eBay.
Real estate is much more difficult a transaction than buying a book or plush toy as the duo learned when they experimented with trying to sell a home auction-style about a year ago. They spent about $20,000 marketing the house, Frink said, and held open houses and other traditional marketing for a home sale. “Everyone knew about this house and then no one came to the auction to bid…We learned that maybe auctions are not going to work for every home.”
Barton commented that to “geeks” like him and his partner, anything involving a whole lot of data seems like a solvable problem. And another one of the lessons they learned since launching is that consumers have a large appetite for this data. Zillow launched with two terabytes of data on properties across the country and the site quickly soared to the top 10 most highly trafficked real estate sites on the Internet.
Despite the anticipation and fear that’s been built up around Zillow, the founders appear keen on working with industry professionals. “We’ve been very humbled by the industry,” Barton said.