Zillow’s Good Fortune Is Good For The Industry. A Q & A With Zillow CEO, Rich Barton.

By Michael Price | September 22, 2007

Now that we know what $87 million means in Japanese, lets take a deeper look at what it means for the real estate industry. No matter what your opinion is of Zillow’s position in the world of Real Estate, we really need to look at their success in raising capital as something good for the industry overall. In my opinion, everyone from Dale Stinton to Glen Kelman should be rejoicing in it. Real estate tech companies with good business models can breathe a sigh of relief that the traction they have gained may not see nearly as much negative impact from the downturn in the market as they may have thought. Traditional real estate firms should see this as yet another wake up call to get their acts together with regard to technology and their online efforts. If you haven’t created a strategy that takes a long hard look at moving the lion’s share of your marketing effort to the web, you better stick your nose to the plastic lid of that Starbucks cup the next time you drive to that expensive brick and mortar office where half the desks set empty because the agents are working from home, laptops and PDA’s.

When I do presentations to agents and brokers, about two thirds have heard of Zillow. Truth be told, most have a negative reaction. Dig a little deeper and you’ll find out that probably less than 10% of that group have actually investigated the site and any opportunity they may have to take advantage of the astounding amount of consumer traffic generated by Zillow. Even if they think there exists a huge gap between perception and reality, the reality is that the consumers are there and they have an opportunity to bridge the gap and strengthen their brands. It’s sort of like the never ending MAC / PC debate. The vast majority of people that trash MAC users are usually just parroting things they have heard from other people. Most of them have never even touched one, let alone really investigated the features, the overall experience and true cost differentials. An uniformed opinion is worthless. Just scratching the surface of a concept isn’t enough to make a decision and if you’re just buying into hype, that’s all you get, no matter where you buy it from. This round of financing and the experience that Zillow has been able to gain from observing the landscape of the RE.Net should give them an opportunity to invest in people and products that work well for everyone in the industry. My jobs as a tech start up and consultant are to help agents and brokers get their listings and brands in front of as many consumers as possible. If I rush to one sideline or another without fully exploring the potential, I am doing my client’s a great disservice. I encourage all of them to take a look at everything that Zillow has to offer from free services like the Wiki and listings feeds to advertising and more. I had the opportunity to present a few questions to Zillow’s CEO, Rich Barton. Here are his responses.

Mike: Some may be surprised that Zillow was able to acquire additional funding giving the overall state of the real estate industry. What impact, good or bad, do you think the current state of affairs had on your ability to complete this new round of financing?

Rich: The current state of the sub prime market or real estate market just didn’t seem to be an issue for us in raising money, nor does it appear to be an issue for our business. The tidal shift at work here is the movement of people’s attention and advertising dollars from offline sources of real estate information to online. There’s a good argument, actually, that tough times accelerate this offline to online shift as people have more time to shop and advertisers look for ad media that are cost effective and accountable.

Mike: Where do you see Zillow investing the lion’s share of your funding in the near future? More developers / engineers? New Features? New Marketing Efforts?

Rich: We will continue to grow our investment in people not in traditional advertising. People who create great products and people who sell advertising, so that we can grow our revenues. So, these people will continue to build features like broker feeds so that brokerages can bulk upload for sale listings to Zillow for free and other fun stuff.

Mike: Do you see your recent success having a major impact, positive or otherwise, on others in the real estate technology space?

Rich: I think our financing is good news for anyone in RE technology. We are helping to highlight the huge opportunity that ZIllow and others have as this tidal shift from offline to online happens in real estate and home related industries.

Mike: What is the single most important piece of advice you would give to a new RE Tech start up with regards to the development of a business plan?

Rich: I always think great startups start with great people. Great business plans are a dime a dozen. Great engineers, marketers, testers, ops folks, recruiters, and sales people are golden.

My caveat to the final question is to remember that Rich comes from a different world than many of the guys and gals working a start up out of their breakfast room and a leased server. He’s already had a great deal of success via Expedia and with that, the contacts and influence to get to investors through less than traditional methods. If you’re a tech start up that is looking for that first or second round of love from an Angel or VC, you’re going to need a basic business plan. At the very least, a good executive summary along with meaningful projections and plans for revenue. Digg was able to do it with a one-sheet brief, but they had a great of traction in their user base. My advice? Devour everything ever written by Guy Kawaski, especially “The Art of The Start” Here’s a guy that’s seen about every kind of business plan on the face of the earth and he gives the unvarnished truth when it comes to what an investor really wants to see. We received our first (albeit very, very small) round of financing for our company without a business plan, the next one will be backed up by a basic business plan that includes something foreign to many RE tech start ups, a year’s worth of revenue.