CoStar Group founder Andy Florance is the son of a Realtor, a Princeton graduate and an engineer who coded the first CoreLogic product before there was a CoreLogic while he was still in college. Other than part-time bartending in college, his only real job has been running CoStar, which he founded when he was 22. CoStar recently made a bid to buy CoreLogic.
Today, CoStar is valued at $35 billion and Florance says he is ready to take on Zillow. While thoughtful, humble and measured with his words, he did not hold back when it came to politely trash-talking Zillow in an exclusive interview with Inman, his first since CoStar announced its planned acquisition of Homesnap for $250 million earlier this week.
For instance: the Zillow business model of selling ads on listings is “unethical,” Florance says. Can you imagine allowing Realtors to put their yards signs on your listing? he argued. He contends it’s bad for the consumer and for the listing agent.
In his 40-minute interview with Inman, Florance made clear that his is the fiercest competitor Zillow has yet faced. CoStar already owns Apartments.com and LandAmerica and, with this week’s acquisition, Homesnap.
Florance promises to spend billions on digital residential real estate and he believes that the CoStar-LoopNet business model for commercial real estate works well in residential. (Commercial brokers can upload listings for free on LoopNet and then pay for tools, a dashboard, digital marketing and other services to promote and monitor listings. LoopNet is owned by CoStar Group.)
“On LoopNet, if the agent wants to market their properties, we charge for promoting their listings.”
In his interview with Inman, Florance committed to never allowing competing agents to advertise on a home listing brokers digital listing: “I promise. Your listing, your lead.”
He explained that is why he gobbled up Homesnap: because its “DNA fit with ours,” which he says is about enabling agents with tools and services to help them be successful.
He was surprised that Rupert Murdoch, when he bought Realtor.com in 2014, did not export the same business model that he had found success with in Australia. Murdoch owns REA Group, the leading Aussie real estate portal; that company uses a “classified advertising” model.
“They have a successful model in Australia, why here did [the Murdochs go] against the agent and not follow the idea of ‘your listing your lead,’” said Florance.
He talked about Zillow founder Rich Barton’s roots disintermediating travel agents (during his time at Expedia). The inference, for the real estate industry, is not new.
“I thought up the Zillow business model years before Zillow did, but thought about it for a couple of days and realized it was unethical.”
Enhanced marketing is what Florance believes is the best business model for online real estate.
But do not be confused by his intentions, he says.
Everyone thinks that “we want to replace Zillow — we don’t. We will not create a billion dollar product putting other people’s names on the wrong listings. We will never create a brokerage firm, hiring brokers. And we will never be buying houses and flipping them.”
He went on to say, “I have a very clear vision of what we want to do that no one else is doing. People have failed to leverage the power of the Internet to help agents and homeowners to sell their homes and to help agents to do more deals.”
CoStar acquiring monster data company CoreLogic would give the company a huge advantage in its effort to create a beachhead in digital residential real estate.
But Florance is competing with Fidelity National Financial’s Bill Foley who is a master, like Florance, of acquiring hundreds of companies.
That battle is not over.
For now, picking one battlefront may be the best strategy for Florance.
My three cents: Costar’s entry in digital real estate is good for the industry. Competition puts pressure on everyone to do the right thing for their customers. That’s you.
Listen to Brad Inman’s complete interview with CoStar CEO Andy Florance below, an Inman Select subscriber exclusive.