$87 million for Zillow - that’s all?
By Brian Wilson | September 20, 2007
Congratulations to the Zillow Team, your stock option net worth just had a significant emotional experience today. 
$87 million is spectacular and Zillow must have some pretty amazing plans since some very intelligent investors have partnered with them. However, this news struck a sour note with me for a reason unrelated to Zillow.
For me, this aggressive risk-taking by a smart, fearless industry outsider further highlights the complete lack of gusto, courage, and leadership from within the industry. I am not meaning to be exclusionary with my language but I am defining the industry’s insiders as the billion dollar international brokerages whose agents transact the real estate that makes all this work.
$87 million is just an annual budget line item to the Cendant’s, ReMax’s, and other leading brokerages. Can you imagine what our real estate industry today would look like if these brokerages 5 years ago each budgeted $87 million a year for innovation focused on providing tools for their agents to provide a better customer experience? In my imagination, this scenario would have left no room for a Zillow or Trulia. There wouldn’t have been the necessary need. The fierce competition for technological innovation fueled by this type of investment would have led to phenomenal progress.
Yet, here we are. The captains of our industry decided instead to play it safe and invest the hundreds of millions dollars paid by their agents in royalty fees on cute television ads, $40,000 magazine ads, and other safe, conventional strategies. Today, all of the leading brokerages now have larger technology budgets but they are used to adopt technologies rather than to innovate or take risks and lead. How else could Zillow take the AVM model that was commonplace in the industry, make it better, and raise $87 million based on it?
While attempting to raise venture capital for my upcoming startup Zolve, I met with two well-known venture capitalists from different states. It struck me as odd that they both expressed reluctance to invest in a real estate internet start-up for almost the same reason. It was almost verbatim like they had read the same venture capitalist magazine the month before or something: “the real estate industry is risky because it has several highly-capitalized, well-entrenched players.”
I mention this because I think that both of these very intelligent VC’s did not really understand the internet real estate industry. What they said is true for the real estate industry but it does not apply to the internet real estate industry, which is different. From my perspective, the real estate industry online is wide open which is good for me as the founder of Zolve, but is very aggravating and disappointing to me as a working real estate broker.
If there are any real estate industry leaders reading this, ask yourself, “what would Rich Barton do?” and stop managing and start leading. Your agents will follow you. We are waiting for you… and as soon as you decide to lead, we will start following.
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14 Responses to “$87 million for Zillow - that’s all?”
Comments
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September 20th, 2007 at 10:49 pm
Brian, you’re right. We need leaders in this industry and unfortunately they are non-existent right now from the brokerage’s. For the most part large brokerages lack vision for the Internet and cannot lead. All they know is what worked in the past and until another brokerage steps up and does something different to lead the way, they will continue to mile agents from their money…yet do nothing to help them with technology.
So far I have only seem half attempts at doing something great online. Nothing significant has come from a brokerage. They rely on others to bring innovation and then decide to adopt that innovation after they are dragged tooth and nail by the consumer.
Here’s hoping brokerages step up and make a real attempt at doing something great.
September 21st, 2007 at 12:31 am
[…] unknown wrote an interesting post today onHere’s a quick excerptCan you imagine what our real estate industry today would look like if these brokerages 5 years ago each budgeted $87 million a year for innovation focused on providing tools for their agents to provide a better customer experience? … […]
September 21st, 2007 at 3:06 am
I think the real story here is 87 million , with a stated specific focus on building out RE communities. That means zillow is coming to eat everyones lunch. What will zolve’s response be once zillow makes that play?
September 21st, 2007 at 4:52 am
Mr. Millstein, thank you for your comment. Zolve’s response will be, “Good luck Zillow, that could be good for the real estate customer if done well.”
I do not think that the $87 million raised in venture capital is the real estate story. For me, the story is why an industry outsider is doing things that should have been done by the industry players 5 years ago. Or, why these industry players are not even trying to compete with Zillow now.
No brokerages are even trying.
September 21st, 2007 at 8:15 am
Brian -
Thanks, we’re stoked and plan to keep pushing the envelope.
Leonard -
We’re a media company. Our job is not to steal your lunch but to feed you business. Please check out your advertising options on Zillow:
http://www.zillow.com/ezads/GetStarted.htm?s_cid=ez-site-adwithus
September 21st, 2007 at 10:53 am
I’m not sure why its shocking , the brokerages are working on making sure they are competing in there core competency.
Based on your logic Clark construction should make a contracting & construction social network. It’s not what they’re good at and its too risky and potentially not rewarding enough for them to get good at it in comparison to the revenue they get by focusing on there core competency.
I think it has to be done by a ‘outsider’ to avoid conflicts of interest.
To David G:
I didn’t mean it in that sense , I’m sure its going to only help the RE professional. I meant it just might be the online community that kind of wraps up all these niche residential real
estate communities/ online products into one immersive platform.
Example:
If I can take my zillow profile and with a press of a button generate my agent home page , why do I need uberator?
Example:
If I can mix in zillow’s already massive data collection with social aspects and ’spheres of influence’ why do I need zolve?
Thats what I meant by ‘coming to eat everyones lunch’.
September 21st, 2007 at 11:37 am
Leonard makes some good points, but his first sentence about brokers focusing on their core competency does beg the question, what is a brokers core competency? Is it simply providing excellent representation of their clients during real estate transactions? I think not. Of course marketing and client services are very important right now, and that is where the brokers continue to get a black eye. Based on what I have heard from 75% of the brokers I speak with lately, it isn’t that they don’t want to offer these services. In most cases, it’s worse. They don’t even know why these services are beneficial to themselves and their clients, and therefore don’t view it as something they should become competent at. If you want an excellent example of a company that refused to redefine their core competency until they collapsed, look no further than Kodak. They are still trying to dig their way out today.
September 21st, 2007 at 5:15 pm
[…] $30 million in venture capital. Actual analysis took until today with Joel Burslem and Brian Wilson. Required […]
September 21st, 2007 at 7:35 pm
“Based on what I have heard from 75% of the brokers I speak with lately, it isn’t that they don’t want to offer these services. In most cases, it’s worse. They don’t even know why these services are beneficial to themselves and their clients, and therefore don’t view it as something they should become competent at”
Which is precisely why a brokerage, even a very small one, that embraces — dare I say exploits — technology can run circles around the old schoolers.
September 22nd, 2007 at 11:15 am
Mr. Millstein raises a good point about what are the real etate brokerage’s core competencies. I have been thinking more about that and will create a blg post addressing that in detail. In general, I completely disagree.
I have owned two different real estate brokerage franchises and in exchange for your money a franchise purchase buys you two things:
1. A brand.
2. Systems.
If you really think about it, these are the only two things that separate franchise brokerages from independent brokerages. This is why the major franchises all look the same today. They all have watered-down, unenforced brands that look exactly the same and they are all offering either a gateway to or a discount to the sames Silicon Valley technologies.
I am writing another blog post about Redfin basically lamenting that it could have been something really special had it not decided to define itself as “cheaper than the other guys and a great website.” With more patience, they could be positioned as an emerging national brokerage to be reckoned with due to their leadership in technology innovation.
Mr. Millstein’s opinion that real estate brokerages should not be focused on real estate technology development for their brokerages is probably the justification that these national players are using to instead spend their billions on fluffy television ads that yield no direct benefit to their agents.
Technology is most important ingredient.
September 22nd, 2007 at 1:22 pm
@BW
You can’t see forest for the tree’s.
You have a bad case of technological myopia my friend.
What is the head of one of these brokerages gonna say to his board when he gets rocked by his competitors because he allocated to much time and resources to building a online community/application platforms to help a community who has largely shuttered at the sight of technology. Its much more than just code and engineering , its a massive marketing effort to make the community even embrace such tools.
Not that it’s not worth it , I whole heartedly agree with you that it is. But they are business men who have boards to answer to and bigger fish to fry.
And you still didn’t answer the part about how any of these smaller RE tech firms plan on competing with zillow. Who will I’m sure aggressively market and push THEIR BRAND to get over the hump and push back from the massive RE community. How can any the RE startups hope to compete against that?
September 23rd, 2007 at 8:02 pm
[…] Yesterday Zillow collected $30 million in venture capital. Actual analysis took until today with Joel Burslem and Brian Wilson. […]
September 23rd, 2007 at 8:02 pm
[…] Yesterday Zillow collected $30 million in venture capital. Actual analysis took until today with Joel Burslem and Brian Wilson. […]
September 23rd, 2007 at 9:39 pm
Brian, I couldn’t agree more, especially the part about Redfin. I have been wondering for some time now why most of the high tech brokerages in this country keep going down the discount road. It makes absolutely no sense to me that the two appear to be so closely tied.
Leaonard, you ask how the brokerages are supposed to compete, and my opinion is this. Brokerages can offer something that the technology companies cannot….brokerage services. One of the technology companies biggest challenges has been effectively connecting the agent and buyer/seller via their technologies. After all, for a tool to go from “cool” to useful, that is what has to happen. I’ve reviewed just about every real estate technology there is, and I am very comfortable saying that there is very little that a brokerage couldn’t do if they really wanted to. They would have such a tremendous advantage not having to rely on ad revenue for their technology to be successful. They would be able to tap into the biggest pool of money in real estate, which is the revenue generated from a transaction.
I look forward to reading your blog post Brian. Please excuse the plug but I wrote this a few weeks ago on my plane ride home from the RIS technology conference. http://www.incredibleagent.com/blog/?p=71
Needless to say I was frustrated when I wrote it.