Zillow plays chess, not checkers. While the introduction of Zillow Instant Offers, on its own, looks menacing, there is more going on here.

Yesterday, Zillow launched a test — “Zillow Instant Offers.”

The fear mongering was deafening.

“It is all over now.”

“Zillow is in the brokerage business.”

“It’s time to either close the doors or go on attack.”

Not so fast. Let’s look at Instant Offers a little more closely.

First of all, Zillow plays chess, not checkers. While the introduction of Zillow Instant Offers, on its own, looks menacing, there is more going on here.

Brian Friemel

Could Zillow be both confronting a challenger in the industry while expanding the services it can offer to its customers — agents?

Zillow has built a business developing and selling buyer leads. Agent advertising represents 70 percent of Zillow’s revenue.

But buyers are only one half of the transaction. Agents work with sellers, too. Unfortunately, seller leads are much harder to identify and close. How can you find the needle in the haystack — a homeseller?

Zillow thinks it has found the answer.

With Instant Offers, Zillow is building a new seller lead service for its Premier Agents.

Opendoor and other similar business models plan to disintermediate the industry. While they have not disrupted the industry yet, Zillow has certainly taken notice with its Instant Offers program.

Zillow’s response to Opendoor highlights its position in the industry and its creativity to leverage that leadership. Zillow’s response to Opendoor not only competes directly but also offers an alternative. The alternative is the key. The alternative is to use the service of Zillow’s primary customer — agents.

If you are going to sell your home, what is the first thing you would like to know?

What your home is worth.

When I recently sold my home, I looked on realtor.com and, yes, Zillow for comps. I could’ve called an agent to get a CMA, but I wasn’t sure if I was ready.

With very little work, as a homeseller using Instant Offers I can get a CMA from Zillow to weigh side-by-side against real cash offers. I can then compare the cash offers with the net proceeds I would receive if I were to use a Zillow Premier Agent.

Are there sellers who will choose the cash offer? Opendoor is betting there is. But when is the last time your seller asked you to lower the asking price by 3 percent for the convenience of a quick sale?

Zillow just developed a service that allows sellers to raise their hand and say: “Yes, I’m a seller. Please connect me with an agent.”

We’ve all heard Zillow’s promise — “We sell ads, not houses.”

Zillow Instant Offers may push the envelope on this promise but, in its present form, does not violate that promise.

Zillow is still “selling ads, not houses.”

In fact, in the test, they aren’t selling anything. And I’m not sure inserting itself into the institutional cash transaction is the plan.

With this release, Zillow just accomplished two goals: It developed a competitor to Opendoor and other similar companies. What it will do with that is a question mark.

More importantly, Zillow developed a funnel of seller leads for its agent customers.

Zillow doesn’t want Instant Offers to lead to institutional cash sales. Zillow wants to generate millions of seller leads, which could potentially double its agent advertising revenue.

Now, this isn’t entirely good news. Zillow and Trulia snatched the buyer lead market from the industry with great technology and branding.

Zillow is now moving to the next logical opportunity. If Zillow is as successful at capturing seller leads as it has been with buyer leads, it will own both ends of the distribution funnel — buyers and sellers.

Brian Friemel is president and COO of MooveGuru, a company offering custom email campaigns and providing move-related coupons to buyers and sellers. 

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