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This post has been republished with permission from Mike DelPrete.
Opendoor made over 2 million offers to curious homeowners in 2021, exponentially more than ever before.
Why it matters: This highlights the growing potential of Opendoor’s “top of the funnel” customer appeal — which is beginning to rival Zillow.
- Opendoor and Zillow are both in the game of attracting consumers and converting them to monetizable customers.
Dig deeper: Of the 2.1 million offers Opendoor made in 2021, it only purchased 1.8 percent, or around 37,000, of those houses.
- Based on the company’s numbers, of those 2.1 million offers, 5 percent, or 105,000, represented unique “real sellers.” Of those, 35 percent sold to Opendoor.
- That purchase rate has decreased over time as Opendoor has ramped up the number of offers it makes while automating the offer process.
A low purchase rate does raise questions of product and market fit.
- Based on the total offers sent out, a very small number of consumers are deciding to sell their homes to Opendoor.
- But of “serious sellers,” 1 in 3 ain’t bad.
Yes, but: Hundreds of thousands of consumers are actively deciding to visit Opendoor to request an offer.
- Even if Opendoor doesn’t buy the house, the company still touches a homeowner during their homebuying or selling journey, creating an opportunity to cross-sell adjacent services (brokerage, mortgage, leads to agents).
- And, as we’ll see below, overall customer conversion is on par with Zillow.
Zillow’s powerful top-of-the-funnel customer acquisition tool is its website, which generated an estimated 21 million leads in 2021.
- Of those, 1.4 million were “real buyers” and 26 percent of them (360,000) ended up transacting with a Zillow Premier Agent.
- That results in an overall conversion rate of 1.7 percent, exceedingly similar to Opendoor’s 1.8 percent.
Zillow’s dominance at the top and bottom of the funnel is clear: 10-times larger than Opendoor.
- But surprisingly, Zillow, the decades-old industry heavyweight, is only 10-times larger than Opendoor, which has made notable gains.
- There are variations in conversion rates throughout the funnel, but overall efficacy is nearly identical.
Remember: Zillow is optimized around homebuyers, while Opendoor is optimized around homesellers.
The bottom line: With similar conversion rates, neither company has built a better mousetrap, but Zillow’s mousetrap is exponentially larger.
- In terms of customer reach and the sheer quantity of leads generated, Zillow has a huge advantage.
- But with its ongoing national expansion, heavy advertising investment, and automation of the offer process, Opendoor is making significant gains — and the growing power of its top-of-the-funnel customer acquisition can’t be ignored.
A note on data: The last time Zillow reported the number of leads generated annually was 17 million in 2016. My assumption of 21 million leads in 2021 is a well-informed estimate.