Zillow Group CEO Spencer Rascoff took the stage at Inman Connect New York to talk about the lens through which the portal views the industry.
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Please see the entire transcript of Leigh and Spencer’s talk below:
To help us understand how Zillow sees the world of real estate please welcome guest moderator Leigh Gallagher of Fortune and the CEO of Zillow Group Spencer Rascoff.
Leigh: Welcome Spencer.
Spencer: Thank you. It’s always hard to follow Seth Godin. (Laugh)
Leigh: I know. We have a tough act to follow. We’ll do our best.
Spencer: Yeah. (Laugh)
Leigh: Anyway, you were here last year. Just, we’re going to talk a lot about the future but before we do that just tell me the past year. What’s been the biggest change at Zillow? What’s on your mind? What’s been the biggest focus the past twelve months?
Spencer: A lots changed at Zillow. We closed the acquisition of Trulia. So today the name of the company Zillow Group. So that’s Zillow, Trulia, Street Easy, and HotPads.
Leigh: And how did that go? It was a little bumpy at the beginning but then it seemed to work out.
Spencer: Well we took almost a year discussing it with the government and then the government approved the transaction. And since then everything has gone really terrific. So it’s been great learning from the people at Trulia and combining the Trulia audience with Zillow has been terrific for Zillow Group.
Leigh: You have actually made a lot of acquisitions. Trulia got a lot of headlines, obviously, but you’ve made ten acquisitions since 2010 when you came onboard. The most recent one was Dotloop, which I think it’s interesting because this is a company that does, simplifies the paperwork for real estate transactions. It seems that that’s your first foray into kind of the backend. Is that a shift for you?
Spencer: The acquisition of Dotloop was really important for us. It’s the leader in transaction management in the real estate space. And for us it’s totally on strategy because we want agents to be more efficient. We want agents to be able to do more deals. So I mean a perfect example, I was in Las Vegas at a conference in December and an agent from Kansas City came up to me and said, “Spencer I just closed a deal sitting here in Las Vegas, in Kansas City but in Las Vegas on my iPhone using Dotloop. And I’m on pace to do 50 deals this year and in the past a good year would be 25 deals. And one of the reasons I’m able to do so many deals is because I’m able to close deals from my phone wherever I am.” So I hear that and I think wow. Agents can do more business. They can become more efficient. If agents do better brokers do better, agents want to buy more advertisement from us. I mean Dotloop fits in perfectly in terms of trying to help agents just grow their business.
Leigh: So this doesn’t put you any closer, you know we can allay the fears that you’re going to become a brokerage. So it’s
Spencer: We’re not going to become a broker. So sell ads not houses. We’re a media company. I’ve said that thousands of times. And we want agents to be successful. I mean we have a whole business built on agents earning commissions, on having this huge audience that connects an audience of consumers with local professionals. If agents do well brokers do well, if agents do well they buy more advertising from us.
Leigh: So Brad earlier in his remarks was talking about the many ways that real estate industry is getting disrupted. And we’re seeing it in Fortune 500 industries that have not yet had disruption yet. And suddenly it’s happening overnight, whether it’s hotels or you know Dupont. I mean every industry this is happening. In real estate Brad was talking about things like automation, automated offers, on demand showings, predictive analytics, all these things. So how do you see this all playing out in the future? And are we kind of talking about technology versus the agent? Or no?
Spencer: Well the role of the agent, the agent will always play a central role in the transaction. I firmly believe that. I think Brad said something about maybe someday three clicks to buy a home. I totally disagree. I completely disagree with that. There will always be an agent in the transaction. It’s too complicated. It is too infrequent. It’s too expensive. It’s too high stakes for a consumer to outsource completely to technology. So what you see, the innovations happening in the industry is all about helping agents be more successful. So that is absolutely changing. A lot of these you know “so called” disruptions though they seem really disruptive at the time and then a couple years later they’re very standard. So when we launched Zestemates ten years ago they were very disruptive, very controversial. And now automated valuation models are all, you know they’re on most broker sites, most agent websites have automated valuation models today. When we launched agent reviews a couple years ago that was very disruptive. Agents, you know the whole industry was talking about it. And now everyone kind of understands that agent reviews are really important and we have over a million of them now. And we were just talking backstage, today we just rolled out agent reviews on brokerage websites. So agent reviews now are on sites like, like Windermere.com. In my neighborhood in Seattle, for example, they actually have Zillow reviews on the broker website and we’re now pushing them through other technology companies. So it seems really disruptive at the time, a couple years later we all say yes of course.
Leigh: So between ratings and reviews and I know you’re putting a lot of focus on premiere agent and premiere agents and your earnings are starting to show the revenue is increasingly coming from those. Are we talking about a separation of the haves and have nots in terms of the, you know the agents that have those tools and have that kind of revenue to spend and, and the others?
Spencer: Yes. So the part-time agent is going to have a very hard time competing in a world where consumers expect their expert professional to always be available. If you think about how the internet and how technology and how smartphones have changed our expectations of consumer response, I mean I can ask my phone or I can ask my Amazon Echo or I can ask Google any question and I could get a response within seconds. So I want to be able to reach an agent in real time and get an answer to almost any question. So some agents are using technology to adapt to that changing consumer expectation, some agents are joining teams, and some are doing both. So it is absolutely creating a separation between haves and have nots. And technology and teams are the two most obvious trends that are propelling them.
Leigh: Does that mean that on Zillow the agents that are not the premiere agents are increasingly going to be at a disadvantage?
Spencer: I think it’s hard for agents nowadays to compete if they don’t have either a very strong local brand themselves or a very significant presence on the internet. So you know the days of the part-time agent, the days of the kind of agent that’s prominent around the PTA or the high school basketball game or the local church or synagogue I think it’s going to be difficult for that agent to compete without a larger presence on the internet and without embracing and using technology.
Leigh: I need to ask people who have empty seats next to them to raise their hands and keep them up so people can find a chair. This is a good problem to have. Spencer’s got some seats. (Laugh) Okay. Thank you. We return now to our regularly scheduled programming. You may want to keep the hands up a couple of minutes. Anyway. Okay. What is the biggest way, so you are the disruptor. You’ve come in and.
Spencer: I prefer innovator.
Leigh: Innovator. Nevertheless.
Spencer: Disrupt is unnecessarily provocative.
Leigh: Okay. But what is the next big way that technology is going to change this industry that we have not seen yet? What is the next tidal wave that isn’t here that’s coming?
Spencer: Well we’ll see whether virtual reality actually amounts to anything. There’s a lot of energy and focused being placed on it. It is true that technology is changing the funnel. So the consumer funnel of how many homes you initially vet to how many homes you visit to how many homes you make offers on. That, the shape of that funnel is changing pretty rapidly. The web has allowed the funnel to widen at the top. I mean I can now view hundreds of homes online and therefore I can see fewer homes in person and that actually makes agents much more efficient. It is possible that virtual reality will widen that still and sort of change the slope of that funnel. We’ll see.
Leigh: We were talking a little bit how Zillow is, sort of can be a lightning rod in this industry. So what is something or the biggest thing about Zillow that you would like this audience to know, that you think is, that they don’t know or is misperceived?
Spencer: You know we have partnerships now with 13,000 brokerages, with every major franchise or with 400 MLS’s so I think we’ve come a long way in terms of industry acceptance. When we, in the early years there was a lot of concern and questions about what Zillow’s endgame was and you know what’s the business model. It’s pretty clear now. We’re a publicly traded company. We’re very transparent about our business model. We attract a huge audience and we sell advertising. We connect that huge audience to the local professionals. And I think, you know there’s still some people that, that haven’t wrapped their minds around that. That’s what we do. It’s not all that nefarious or complex. It’s a much better version of the newspaper. It’s measurable. It’s trackable. Leads end up directly into some sort of technology system so agents and brokers can convert those leads. And we have content which attracts audience. That’s what we do and it’s, you know we do it really well. We’re very innovative in technology but it’s also not that scary or you know, it’s not that scary.
Leigh: Is there one thing over the past six years as you’ve grown Zillow that you would have done differently knowing what you know now?
Spencer: Yes, I would have. I mean I’ve learned a lot from you know Dave Liniger at RE/Max and Bob Hale at HAR and Alex Perriello at Realogy and Sherry Chris at Realogy. I mean in terms of how to communicate with the industry. I think in the early days we just kind of kept our heads down. We’re like hey we’ll just build cool stuff for consumers and agents. And you know we’ll show up at events like this from time to time. But you know the way we talk about ourselves isn’t that important. And I think that we’ve learned a lot about the importance of engaging the industry. We’ve also hired great people. Kurt Beardsley, Errol Samuelson, Nick Bailey. I mean these are people that came to us from other companies and really help us communicate with the industry. So we probably should have invested more heavily in that early on.
Leigh: You’ve written a lot about Millennials, mostly about managing Millennials at Zillow. But how do you see the onslaught of the Millennials changing the way homes are bought and sold? Both buyers but also Millennial brokers? I mean and how can these seasoned you know agents and agencies really make, get the most value out of these Millennials who are so different from you and me?
Spencer: And it’s becoming the biggest cohort of homebuyers. It already is actually, according to the data. So the good news first of all is let me allay any fears. Millennials do want to buy homes. Okay? The media frequently misrepresents this. And so they say well Millennials they don’t buy cars, they use ridesharing services. They don’t buy music. They stream music. They don’t buy movies, they stream movies. And so they won’t want to buy homes. Not true. Zillow has done a lot of research on this. Millennials have very traditional views about home ownership but they’re going to do it later. So they’re going to buy homes in their 30s not in their 20s. And as a result of that their start home is much higher end. So they’re basically skipping the starter home. And the typical home that a first homebuyer is buying today is significantly more valuable than what the prior generations first time homebuyer was buying because they’re renting longer and buying later. So that’s the good news. You don’t have to worry about any, you know kind of a whole generation not buying homes. In terms of how to market to them and how to communicate with them look they want you to be always on. So they want to be able to reach you by text or by social media. They want you to be brief and talk quickly and kind of have rapid communication.
Leigh: Does it help to have a Millennial broker on the other end? Do they prefer dealing with? I mean is that going to be important?
Spencer: I think it’s more about communication style. I’ve seen plenty of older agents that are having great success building business with younger clients. And I’ve seen plenty of Millennial agents that are building business with clients. It’s more about accessibility and communication style. And ease of use of different, different forms of communication. So it’s funny. I was just talking with someone yesterday who’s like yeah my agent is always posting on Instagram how he’s like zip lining through Costa Rica and you know he’s doing all these wonderful, glamorous things and I’m thinking like well, this is the consumer. He’s like well I’m paying for that. Why do you keep putting all that stuff on Instagram? And so it’s kind of a fine line. It’s like you want to form these personal relationships and that’s a big part of real estate but then also you know that glamorous life, your clients are also witnessing it. So I think you know you want to be kind of careful about that. But the most important thing is just having a similar communication style as your clients.
Leigh: What’s the next twelve months going to be like for you? What is going to be your focus for Zillow?
Spencer: We have a lot going on. So here in New York our Street Easy brand is growing very rapidly and we have a lot of big things in store for Street Easy. Clearly Dotloop is the newest company that we just bought and they have a lot of opportunity as well and so we’re doing a lot with Dotloop. Let’s see. The premiere agent program continues to grow. So you know most agents are now realizing that they need to start buying media and managing the reviews. And so I think they’re embracing us. We have around 100,000 premiere agents that advertise with us every month. And then we had a big announcement today with Northwood Reality, for example, one of the largest brokerages in the country now sending us listings. So there are 13,000 brokerages and 400 MLS’s that send us listings and that number continues to grow as more and more people realize the importance of partnering with us.
Leigh: What’s your biggest headwind in the next twelve months?
Spencer: Biggest headwind. Probably our own, you know we have to stay out of our own way. We have so many initiatives internally and we have so much going on and just trying to manage it all is complicated for me and I think for our whole management team. So I mean that’s good. I like what I can control and I can control our prioritization but it’s complex.
Leigh: So Zillow you hit your tenth anniversary next month, I think.
Leigh: So let’s look to the next ten years. What would you want the headline to be on Zillow in 2026? You were the editor of your newspaper. So give me a five word headline. Your high school newspaper. Five word headline that is the story about Zillow ten years from now.
Spencer: (Laugh) Five word headline. Well Zillow Group takes two of those five words.
Spencer: Okay. I mean I (laugh), Zillow Group Delights Real Estate Industry and Clients. I think that’s too many.
Leigh: That’s vague. Something a little more specific than that.
Spencer: So what we’re trying to do.
Leigh: What’s going to be the news on Zillow ten years from now?
Spencer: We’re going to keep building cool stuff that’s going to attract a really huge audience. So I mean Dave Liniger from RE/Max when we first got into this industry ten years ago we went to go see him and Dave famously told me, he said, “Don’t be the guy that shows up at the potluck with only a fork.” And you know that story resonated and it has become lore within Zillow Group. So I’m trying to make sure that we’re not the guy that just shows up with a fork. So what are we bringing to the party? We’re bringing technology, innovation, a huge audience. That’s what we’re bringing into the real estate industry and the way we make money is by selling advertising. That’s not going to change. So ten years from now I hope we’ll keep building cool stuff, we’ll have this huge audience across multiple brands and agents, brokers and MLS’s will choose to continue partnering with us to connect with that huge audience. So really more of the same, honestly.
Leigh: Before we go just a couple quick real estate trends that you’re seeing. Behavioral trends, preference trends. We have about ten seconds. So really quick.
Spencer: Buyers are, you know the kitchen counter, the kitchen island is the new home office. So Millennials aren’t entertaining in their home. They’re not using their kitchen to cook. So small kitchen, big kitchen islands is what agents and home builders and multifamily property managers are telling us. As consumer preferences are changing and big shared spaces in apartment buildings. And the big trend among all of you is of course real estate technology, agents embracing technology. You’ve all done the right thing by being here. It’s because you know this stuff is important. And increasingly people that are not in this room are going to be left out and aren’t going to be able to keep up.
Leigh: Spencer thank you. We’ll see you back here in ten years and we’ll see what the story is.
Spencer: It’s a date.
Spencer: Thank you.