Method of home purchaseI like to sit at the heels of smart peeps in the real estate industry, folks who know the industry, the role technology plays,  and have a grip on where it’s headed with this tech/transparency marriage. One of my faves is Rob Hahn, who turned me onto James Dwiggins, Chief Executive Officer of NextHome, Inc. NextHome is a San Francisco-based real estate startup, independently owned, with a focus on changing the way consumers interact with local agents and shop for real estate online. When I saw that Rob Hahn had first posted James Dwiggins’ Facebook essay on “Zulia” — a buzzword for the Zillow acquisition of Trulia — I liked so much I just had to share it. Asked James for permission, he said sure.
Listen to what James says, and look at the chart above. From 2001 to 2013 the number of people who have used a real estate broker has actually increased, and increased a lot, almost 20%. This while all the online stuff was hatching! 
Consumers have been using agents more than ever in the era of the internet!
James says no way will Zulia become an on-line broker, and we should stop worrying about it here and now. He says that is not their model, and if it were, he cannot see how Zillow and Trulia becoming a real estate company “would make any sense whatsoever. So we should stop worrying about this. If we as an industry are scared of this idea, then we should be paying closer attention to Redfin who is trying to make this kind of model work to some degree. They are not the first and they certainly won’t be the last.”
Ah, Redfin!
Will Zillow and Trulia dominate online real estate space and continue to grow? Yes, says James, until a new mousetrap comes along. I want to add two things to his points: one, I think traditional media has failed real estate agents miserably, MISERABLY.  You pay through the nose for your branding ads and do they support you with editorial? NO! This is one reason why Zillow and Trulia were smart enough to become media companies themselves. As Kael Goodman of BlankSlate told me, traditional media doesn’t understand media, they don’t understand the potential. Of course,  Lockhart Steele did. Maybe that’s why he sold Curbed.com to Voxx Media last year for a rumored $20 million.
Here’s what James says:
I’ve been traveling the past week so I haven’t been able to comment on the Zillow/Trulia buyout and I know many of you have asked for my thoughts. Let’s set the stage first: Trulia was founded May 1st, 2004 and according to CrunchBase, they received 32.8M in venture funding before going public. Zillow was founded in January 2005 and according to CrunchBase, they received 92.5M in venture funding before going public. Both companies set out to change the way consumers search for real estate online and make money off the advertising revenue. According to NAR, in 2001, homebuyers used Realtors 69% of the time when purchasing homes. In 2013, that number is now 88% of the time. While homebuyers continue to search more and more on non-real estate company sites, ironically they are also using Realtors more as well. My take: finding a home online is the easy part and constitutes about 5% of the entire home buying process. The hard part begins once you want to make an offer and actually purchase it, which consumers understand to some degree. If they didn’t, those numbers would not be increasing like they have and lots of alternative models that past several years that tried connecting buyers and sellers online would have succeeded. In fact, almost all of those companies have failed. I’ve attached the actual chart showing the increase in Realtor usage from the 2013 NAR Profile of Home Buyers and Sellers.With regards to everyone worrying about Trulia and Zillow becoming a real estate company or franchise. We all need to understand that this is not their model whatsoever or for their shareholders sake, shouldn’t be. At the end of Q1 2014, Zillow had 52,968 premier agent subscribers. At the end of Q1 2014, Trulia had 66,700 premier agent subscribers. As everyone knows, their business model depends highly on having real-time listing data on their sites which is provided by brokerages and agents who in many cases are paying for premier placement. If they became a real estate company, you could almost guarantee two things: 1.) 52,968 & 66,700 premier agents subscribers would likely stop advertising on these sites, destroying their revenue, and eventually the companies as well… and 2.) If Zillow and Trulia were real estate companies, they wouldn’t want competing agents advertising on their sites either. That would be allowing competitors to take away buyers and sellers from their own agents which makes no sense. It’s exactly why every real estate company and franchise doesn’t allow its competitors to advertise on their sites now. That would be counter productive to making money. In other words, I can’t possibly see how Zillow and Trulia becoming a real estate company would make any sense whatsoever so we should stop worrying about this. If we as an industry are scared of this idea, then we should be paying closer attention to Redfin who is trying to make this kind of model work to some degree. They are not the first and they certainly won’t be the last. Are Zillow and Trulia dominating the online real estate space and will they continue to grow? The short answer is yes… until either “organized real estate” starts listening to consumer needs and builds something they actually want and will use, or another outside entity creates it. Lots of companies create game-changers and then lose the throne. Think AOL, Netscape, Internet Explorer, IBM. It can be done and it will happen again including our space.In closing, this is just two major online portals consolidating their businesses in a market that is fast becoming oversaturated as it is. They have just over 110,000 combined subscribers in an industry that has 200,000 potential subscribers at best. They’ll combine resources, streamline operations – (job consolidation) and hopefully become profitable. Please feel free to chime in if you see something different. RobKeithImranNobuAaron, I would love to get your take on this as well.

 

Zillow-logo

Candy already told you about this incredible, game-changing transaction. Of course, Zillow started out with a low-ball offer of $2 billion in stock, but the deal was sealed at $3.5 billion as Zillow acquired Trulia. This transaction will create a Goliath in a market where a new real estate internet start-up crops up seemingly every day.

Trulia shareholders will be getting compensated quite well, as each Trulia share will convert to .444 of a Zillow Class-A share, according to Business Insider. The acquisition will move Zillow head-and-shoulders above its next-closest competitor, Move Inc.’s Realtor.com. Just check out this chart from Inman News:

Zulia Chart Inman News

There are so many questions to answer! I wonder how the ongoing litigation involving Errol Samuelson’s defection from Realtor.com will affect the deal. And what about all of the duplication in talent? Both firms have excellent economists and analysts, so who will stay on? Will Trulia just become a Zillow brand? And what about mobile apps? Will Trulia be nixed? Or will they launch a new one that has access to all of that data?

One thing is for sure: All that data is going to change the way we do real estate. BubbleInfo.com’s Jim Klinge published a piece in BI about this very thing, and it will surely send shivers down the spine of any Realtor:

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