Like the Warren Buffett-Charlie Munger superhero partnership, Zillow founder Rich Barton and his wingman Lloyd Frink run the show behind the Zillow curtain.

New Zillow CEO Rich Barton will waste no time pussy-footing around. He’s ready to turn Zillow — a big company with a 10-figure valuation — into a huge company with crazed revenue growth and an 11- (dare one imagine, 12?)-figure valuation.

Wall Street bear hugged Barton: the stock climbed 26 percent when his appointment was announced, after the closing bell Thursday.

Rich Barton, co-founder and CEO of Zillow Group

Last year was messy for departing, high-profile and respected CEO Spencer Rascoff, who sputtered leading a changing company.

Wall Street was unforgiving.

Z lost half of its value, $6 billion, moving from almost $65 a share to less than $30 by the 4th quarter of 2018. That’s a big number, no matter how you move the moolah around the Monopoly board. Not easy for his many fans, Rascoff was a casualty.

A perfect storm of its own making hit the Seattle-based search darling, that in the past 10 years has shaken the real estate old guard down to its knobby knees.

A rolling management shake-up, missed financial numbers, a major business model pivot and a risky plan to reshape its core business added up to a stock market meltdown and a CEO exit.

Like the Warren Buffett-Charlie Munger superhero partnership, Zillow founder Barton and his wingman Lloyd Frink have always played a pivotal role. They not only control the firm’s voting shares, they always have a trick up their sleeve to take the company to the next level. Both share the same Microsoft DNA from the era when Microsoft just won. That deeply held competitive spirit is very much in play here as the two reshuffle Zillow’s deck.

What went wrong?

Though masters at spin, the company’s new story — the shift to iBuying — was going down like a kale salad without dressing on Wall Street. And for the most part, the real estate industry was somewhat clueless about what was really going on at Zillow.

It faced a slew of challenges, starting with a string of management coming and goings. Chief financial officer Kathleen Philips left in May of last year followed by the departure of chief of operating officer Amy Bohutinsky in October. Later last year, Zillow announced a new CFO, Allen Parker from Amazon, and Aimee Johnson from Starbucks came in as head of marketing.

The company was restructured around business units with three presidents running disparate divisions, including Zillow veteran Greg Schwartz, who was named president of media and marketplaces. The reorg seemed awkward at best.

The final shoe to drop was Rascoff exiting as CEO. Though he had a spectacular 9-year run as CEO, every champion is often unfairly judged by his last season. We have not seen the last of wonderkid Rascoff by any means.

The company made a major pivot

Launching an iBuyer program, Zillow Offers, the portal began chasing companies like Opendoor who came up with an on-demand solution for home sellers and became the new favored child on Wall Street and in the Silicon Valley. It and other iBuyers attracted billions of dollars from pedigree venture capitalists and private equity firms.

Suddenly, Zillow was standing outside in the cold and its name didn’t appear on the VIP list at the hot new club.

The firm faced the innovator’s dilemma: Innovate or die. It took a calculated risk and bet big on iBuying. That took courage. Name one $10 billion market cap company who could move so quickly to play catch up on a different business model. Sitting fat and happy would have been much easier.

But Zillow faced another challenge.

A fumble with its core business

In the third quarter, Zillow reported lower-than-expected revenue, $233 million, from its Premier Agent business because of “advertiser churn.” It fundamentally changed the program from selling ad links to agents to peddling expensive curated leads for a referral fee.

Clearly, some agents are leaving because the new lead program is not working quite yet. Zillow promised to fix it, but it will take time. In the end, a cut of each transaction will be a winning strategy for the portal, but getting there will continue to be clumsy.

Zillow has survived dark days before, like when it acquired Trulia four years ago for $2.5 billion. It took Wall Street a while to get comfortable with the deal, which started out higgledy-piggledy, but turned out to be brilliant. According to public filings, Barton led that deal — making the first call to Trulia founder Pete Flint.

Then Zillow got sued by News Corp. for poaching two executives, including Zillow exec Errol Samuelson. It had to pay out a whopping $130 million settlement after a controversial public airing of the nefarious claims. At the time, a Zillow insider told me it was like the company digested an enema.

A story for another time is how Rascoff stood up for his team during this legal mess.

It recovered from that debacle, and Zillow went from being a stock shorters’ lottery ticket to a gleaming $12 billion enterprise.

I suspect more management changes may be in the works. But the big one is done.

Barton and Frink never really went anywhere, but now they have raised the stakes for themselves and for the company that they founded 14 years ago.

Email Brad Inman

Brad Inman will be joining real estate’s leaders this April 8-10 for Inman’s annual retreat, Disconnect in the Desert, in Palm Springs. It’s an invite-only gathering, and tickets are limited. If you think we missed you, drop us a line.

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