Jay Thompson is a former brokerage owner who spent over six years working for Zillow Group. He retired in August 2018 but can’t seem to leave the real estate industry behind. His weekly Inman column publishes every Wednesday.
Way back in late November of 2020, CoStar made a big splashing entry into the residential real estate world with its acquisition of Homesnap. The next day, Brad Inman posted an interview with CoStar founder and CEO Andy Florance with the equally splashy headline, “CoStar CEO to Zillow: Here we come.”
In that interview, Florance dropped nuggets like proclaiming Zillow’s business model is “unethical,” made clear CoStar will be the “fiercest competitor” Zillow has yet faced and laid out that line many agents love to hear, “your listing, your lead.”
Fast forward two months to Inman Connect in late January, and in another interview with Inman, Florance said, “We don’t compete with Zillow, the residential agent is Zilow’s competitor.”
More, “you’re listing your lead,” references along with statements, including “60 percent of remaining agents might work for Zillow,” and frequent references to “the Uberization of real estate,” seemingly stoking the fears a lot of agents have about Zillow, which celebrated the 15th anniversary of the launch of Zillow.com on Feb. 6.
So in a two-month span, we went from CoStar being the “fiercest competitor Zillow has yet faced,” to “we are not Zillow’s competitor,” with a lot of talking points agents love to hear tossed in for good measure.
What exactly is CoStar, who is Andy Florance, what is the company planning in residential real estate, and is it or isn’t it a competitor of Zillow? Will it be the savior for real estate agents Florance seems to make it out to be? Will CoStar ring the death knell for Zillow? Where does the consumer fit in a CoStar world?
So many questions!
Questions for which I certainly don’t have the answers. No one does. We are way too early into CoStar’s leap into residential real estate for answers. But let’s not let that stop us from speculating and forming opinions. Answers I may not have, but opinions are a whole different matter.
What is CoStar?
With a $35 billion market cap, CoStar is, in its own words, “the largest commercial real estate information and analytics provider” empowering commercial real estate denizens “with a combination of reliable tools, resources, and deep understanding on over 5.9 million commercial real estate properties across every market.”
It owns and operates LoopNet, easily the most highly trafficked search engine and marketplace for commercial real estate. CoStar dominates the online commercial space like Zillow dominates the online residential space.
CoStar is also a dominant force in the multifamily and rental space with sites, including Apartments.com, ForRent.com, ApartementFinder.com, LandsOfAmerica.com, and more.
It is an acquisition machine. According to Florance in the Connect interview, it spent billions acquiring “about 20” companies in the commercial space and billions more on seven companies in the multifamily and rental space.
In its fledgling residential foray, it nabbed Homesnap and the powerful domain name Houses.com (not to be confused with Homes.com, which it has not acquired.) It was one of the final bidders for CoreLogic, but it suffered a rare loss in that attempt.
In other words, CoStar has a lot of money, and it isn’t afraid to spend it to get where it wants to be. There is zero doubt there will be more acquisitions in the residential space. Some will likely be quite significant. Rumors have already begun about targets like Homes.com and realtor.com. No stranger to FTC investigations, it’s quite apparent that Florance and CoStar are willing to mix it up and go after companies CoStar feels will help achieve its goals.
It’s massive, powerful and not afraid to take big swings — all traits it shares with Zillow.
Who is Andy Florance?
If you pay any attention to the residential real estate space, you know names such as Rich Barton and Spencer Rascoff (Zillow) and Rupert Murdoch (realtor.com). You might not yet know the name Andy Florance, but rest assured you will.
According to his LinkedIn profile, Florance graduated with a B.A. in economics from Princeton University in 1986. He founded CoStar in 1987, took it public in 1998 and has been there for over 35 years. If you listen to his interviews with Inman (and you should) and other outlets, it will take you all of 30 seconds to see he is a very bright individual.
Like most intelligent people in similar positions, he appears to be a master of the sound bite. Headline writers have to love this guy. He talks the talk and walks the walk. My guess is there are a lot of people in the commercial and rental real estate verticals that loath the man. I’d also hazard a guess that they also respect him.
Like many who focus on residential real estate, I know little to nothing about the world of commercial real estate. I’ve done one commercial transaction in my career, and I’m far from an expert on how commercial works.
The opinions of my commercial real estate friends vary widely on CoStar and LoopNet. Much like the opinions of Zillow, some love LoopNet; others despise it. It’s virtually impossible to rule a space like CoStar rules commercial without garnering both fans and haters.
More speculation on my part, but I’d bet Florance doesn’t lose a lot of sleep worrying about what people think of him. He seems focused on building his company, as all good CEOs are.
Is CoStar a Zillow competitor?
Of course, it is. Despite what seems on the surface to be a bit of waffling on this subject, no one enters the online residential space without understanding the current big dog — Zillow Group — is a competitor and a target.
Rich Barton is a brilliant man, and Andy Florance knows that. Andy Florance is a brilliant man, and rest assured, Rich Barton is well aware of that fact.
Are Barton and Zillow Group shaking in their shoes at CoStar’s entry into the residential field? Highly doubtful. Are they aware of CoStar, watching their every move and working on solutions to go into battle with them? You better believe it.
Are Florance and CoStar afraid of Zillow and feel they can’t beat them? Highly doubtful. Are they aware of Zillow, watching their every move, and working on solutions to go into battle with them? You better believe it.
At this moment in time, and remember, it is very early, CoStar appears to be focused on the agent and less focused on the consumer. Zillow has always been focused on the consumer and less focused on the agent. This dichotomy is interesting.
I know a little bit about how Rich Barton thinks and works, and I’m on the record saying, “Never bet against Rich Barton.” I’ll stand by that bet. I know far less about how Andy Florance thinks and works, but I can guarantee there are people out there saying, “Never bet against Andy Florance.”
We’ve got two massive players, not afraid to take big swings, both willing to buy talent who are about to slug it out in a super-competitive and lucrative space. Competition is a good thing. It tends to cause the players on both sides to step up their games. It spurs innovation.
CoStar and Zillow competing might just make both companies bigger, stronger and faster. That prospect might frighten some. Others will welcome it. Regardless, it will be fun to watch.
Stay tuned; things are about to get interesting.
Jay Thompson is a real estate veteran and retiree living in the Texas Coastal Bend, as well as the one spinning the wheels at Now Pondering. Follow him on Facebook, Instagram and Twitter. He holds an active Arizona broker’s license with eXp Realty. “Retired but not dead,” Jay speaks around the world on many things real estate.