An Open Letter to Zillow from a Realtor

An open letter to Zillow from a Realtor who believes his clients deserve better service, better data and a better experience.

Dear Zillow,

Congratulations on hiring Jay Thompson, co-owner of Thompson’s Realty in Phoenix and respected real estate blogger to be your new Director of Industry Outreach & Social Media. Also, in case you did not get my memo a few weeks back, congratulations on hiring Bob Bemis, the ARMLS (Arizona Regional MLS) CEO to be your VP of Partner Relations. Judging from your latest hires, it is clear your company is determined to hire talented folks rooted in the traditional real estate industry. It is also clear that you finally embraced the fact that you have a massive PR problem and you seem determined to spend your way out of it.

Zillow Senior Executives Dump Stock

Bloomberg reports that in late February, your Chairman and Vice-Chairman sold 885,400 shares of stock valued at over $27.7 million dollars. Curiously, that sell off came just one day after Zillow announced that fourth-quarter revenue doubled from a year earlier. However, that sell off caused the stock’s value to fall 6.1% and sparked speculation from investors that your business model is entirely unsustainable. Bolstering that fear, your stock trades at about 50 times estimated 2013 earnings, the highest multiple that Pacific Crest Securities Inc. tracks. Wow, if I could sell investment properties on a 50 multiple, I’d be a paper billionaire too. Did I mention that Zillow isn’t sustainably profitable yet? Ut oh, spaghettio.

Zillow CEO Spencer Rascoff Interview

Listen closely to what Spencer Rascoff says in the third minute of this interview. Mr. Rascoff confirms that Zillow’s principle business is selling advertising to real estate agents. There is no mention of fiduciary responsibility to agents or their clients, just sell, sell, sell. In fact, he goes on to characterize his company by saying “we have less than 1% wallet share of what agents spend on advertising”. Mr. Rascoff goes on to claim that “we are the biggest real estate company” and outlines an investor-like pitch on why Zillow is going to be able to sell more advertising to real estate agents.

 

Is anyone else offended by this brash, “we’re smarter than you” attitude? I think it wholly offensive to be told by the CEO of Zillow that real estate is not highly evolved. Especially from someone who is literally hijacking our work product and then selling it back to us. If agents stopped syndicated listings to Mr. Rascoff, the “biggest real estate company” would literally cease to exist overnight.

What is Zillow’s End Game?

It is clear that Zillow cannot continue to trade at 50 times projected earnings, so what can Zillow do to boost revenues? How can Zillow turn the corner to ensure profitability and win back agents?

1. Become a one-stop shop for agents where Zillow can serve all of their business needs;
2. Eventually morph into a VOW (ala Redfin);
3. Eventually morph into a referral brokerage; or
4. A combination of (1) and something else.

I do not see a clear path in any of the above scenarios.

In Memoriam (Yes, I am predicting Zillow’s demise)

Without the listings — all of them — cleanly delivered and refreshed, Zillow will crumble under their own weight. Once the general public realizes that Zillow does not display all of the real estate listings in their city (they do not in Nashville) they will begin to lose credibility. Consumer confidence will begin to erode slowly at first, but hastens as users find the multitude of errors, old listing information and sees a rather alarming percentage of listed properties are actually already sold or no longer available. This process further accelerates when the public learns that all real estate listings are displayed on Realtor websites only. The death knell will be heard when it is revealed that Zillow is not a real estate site, but an advertising site that simply regurgitates erroneous data in an effort to sell a disingenuous service. Zillow subsists in the seedy underworld of page hits, banner impressions, user click paths and dollars earned per visit.

So long Zillow, it has been a blast having you around. I wish you luck in your next endeavor (please do not get into the subprime mortgage business or create any credit default swaps).

Sincerely,

Grant Hammond, a multiple award winning real estate broker who wants his clients to have the most up to date, accurate information available.

  • http://www.NestingInNashville.com/ Stephanie Crawford @AgentSteph

    Ballsy man. Nice job. I still don’t understand why NAR and MOVE wont invest in us agents and make a stronger Realtor.com

  • PaulGaddes

    Interesting and thought provoking however I do not selll short Spencer Rascoff and his brain trust in the least.. The real estate industry has been vey slow to innovate and this wily crew has learned how to monetize what the industry took for granted. I don’t think the prediction of their demise is timely. Oh, you omitted Zillow’s(fairly) recent purchase of Diverse Solutions, a big step towards cleaning up their data. Keep up your analysis of this situation as I think too many practicing agents either don’t understand (or care) about the implications…

  • http://twitter.com/urbangrout Chad Grout

    This industry phenomenon drives me crazy and I have nothing but contempt for these horrible data aggregators.  The only listing platforms that will ever work are those where the stakeholders (listing agents, or even owners themselves) control the data and how it’s presented.  On the commercial side, CoStar and Xceligent are the worst examples of how you describe Zillow, and I choose LoopNet.com for all of my listings because the data is always current, and if it’s not it’s the broker’s responsibility, as it should be.  No service will ever be as accurate as one where stockholders have complete control.

  • http://www.granthammond.com/ Grant Hammond

    I also omitted the fact that 2 major MLSs have dropped Diverse Solutions because of that purchase.

  • http://fischer-realestate.com/ Greg Fischer

    Wow, well written Grant. Interesting thoughts. I’ll have to take a while to digest and see what I think about your position. Different and more detailed perspective than most I’ve read so far on this.

  • http://www.granthammond.com/ Grant Hammond

    I simply do not appreciate being herded like cattle by a CEO who does not give fair compensation for what he receives from the Realtor community.

  • Matthew Moellering

    I agree.  I have to tell almost every one of my clients to stop looking at Zillow because most of those homes they want to see are no longer available despite what Zillow says.  It’s really frustrating when clients go on Zillow and find a home that isn’t in the reports I’m sending them (because it has been pending for some time), and then they feel like I’m incompetent, when it’s really Zillow that is incompetent.

  • Eueut

    Well said, Grant!

  • http://www.theparkcitylifestyle.com Ben Fisher

    Wow, pretty strong words here but I must say, I agree with it for the most part. Well said. 

  • http://fischer-realestate.com/ Greg Fischer

    Grant – do you have immediate plans to change IDX providers from Diverse Solutions? (Zillow owned product)

  • http://allphoenixrealestate.com Jonathan Dalton

    Brilliant, Grant.

  • http://www.drewmeyersinsights.com/ Drew Meyers

    I’d encourage you to ask clients in those MLS’s who were using Diverse Solutions if they think NOT being able to use DS anymore is in their best interests. I think you’ll find the answer is no.

  • http://www.drewmeyersinsights.com/ Drew Meyers

    “Especially from someone who is literally hijacking our work product and then selling it back to us.”

    Hijacking your work? I’m assuming you mean listings. The goal is to sell the listing, no? Still don’t get how putting your listings in front of more people is a bad thing.

    Disclosure: i own zillow stock

  • http://www.granthammond.com/ Grant Hammond

    Actually yes, I have been working on creating my own IDX product for 3 weeks. I should be live in another month or so.

  • http://www.granthammond.com/ Grant Hammond

    There will be a very good replacement product for DS very soon.

  • http://fischer-realestate.com/ Greg Fischer

    Wow, thats impressive. Good for you man. Hope you make a great product!

  • http://www.granthammond.com/ Grant Hammond

    Drew: Here is what you are missing. A listing agent is responsible to their seller to ensure the accuracy of their listing information as it is disseminated across the web. My issue is not with the exposure as I want every single licensed Realtor to display my listings, but with any company who misuses those listings. In this case Zillow, a publically owned company, is misusing the listing information. Some statistics show that Zillow’s information is accurate less than 50% of the time. I have a real problem with that.

  • http://www.drewmeyersinsights.com/ Drew Meyers

    But the switching costs and time the MLS forced on those DS clients? Does the MLS truly believe they know what the best IDX providers are for their members? Why not let the market speak for themselves and vote with their wallets? If agents don’t think DS is a good company to use, then use a different product. Pretty simple. But the MLS being the gate keeper to who their agents can and cannot use? I’d be furious if I was an agent in one of those MLS areas — particularly if I was a current DS subscriber who had spent dozens or hundreds of hours customizing links, getting pages indexed, and a few years getting my clients to sign up for email alerts from the DS system.

  • http://fischer-realestate.com/ Greg Fischer

    Grant, I like your hard-line position (don’t agree with everything you’ve presented), but it gives us something to discuss. However, “misusing” is a powerful statement to make about Zillow. It’s not too much to ask you to substantiate this in some kind of semi-formal report format? You’re clearly well educated, if you produce it – I’m sure it will be read by many.

  • http://www.drewmeyersinsights.com/ Drew Meyers

    “I have been working on creating my own IDX product for 3 weeks. I should be live in another month or so.”

    Literally creating your own from scratch? or just switching providers?

    If the former, that’s scary. I know what it takes to build great software, and I’m sorry — but a good, or even decent, IDX product cannot be built in a month or two.

  • http://www.granthammond.com/ Grant Hammond

    I agree that I should be writing a white paper rather than posting a short opinion piece, but the foundation of my claim is that a publically traded, for profit, internet advertising company has many values and motivations that are at odds with a licensed real estate person’s fiduciary responsibility to his or her client.

  • http://www.granthammond.com/ Grant Hammond

    Indeed it is Drew, which is why I assembled a team. I am not ready to reveal it yet, but rest assured it will be a site hosted, fully optimized, innovative solution that will serve me well.

  • http://fischer-realestate.com/ Greg Fischer

    I mean, the opinion piece is great. You are gaining readership as I type this, trust me. Would love to see a follow-up just out of curiosity if nothing else. Again, I’m indifferent. I’ve experimented with Zillow a few times (Premier Agent currently, but haven’t always done it) Keep the discussion going. You’ll either change your mind or change other people’s minds.

  • http://www.NestingInNashville.com/ Stephanie Crawford @AgentSteph

    Did you notice his quote at 3:01 – “We’re the biggest real estate company” 
    Telling…

    I still really love the Diverse Solutions product. My guess is that they’ve got some CRM plans up their sleeve to try to compete with Market Leader, Top Producer, & eEdge.  

  • Robin4Homes

    I agree with you, Drew. We want to give our sellers all the eyeballs we can muster from the consumers who are looking for properties. it is up to the individual agent to monitor and make sure that their listings are current and accurate. I make sure to change the status, price changes, etc. on Zillow so that it accurately reflects the current listing information. It is, after all, a wiki, and it is the responsibility of the agent who represents that listing to ensure tha the information is up to date. Just my 2 cents 🙂

  • http://www.granthammond.com/ Grant Hammond

    I completely disagree with you Robin. Should a broker agree to syndicate their listings, they should be assured their data will be handled with care, obedience, loyalty and transparency. A broker should not have to spend valuable time going to dozens of websites to ensure an advertising provider is not misusing their real estate data. This is one of my major complaints. In fact, if Zillow were a licensed real estate company, they would be fined for such inaccuracies. The code of ethics is VERY clear about not misrepresenting any real estate listings and that includes advertising a listing after it is no longer available.

  • http://www.granthammond.com/ Grant Hammond

    I know, me too. I am very sad that Zillow bought DS, I loved using their dsIDXpress product.

  • Justin Chakos

    On the flip side…there is a place for all sites that have been mentioned. Although it may cause confusion to many of our clients it does keep them ingaged and creates additional opportunities. I usually explain that misinformation dot com is for the most part inacurrate and misleading. I have however picked up some good leads generated from these sites. If we take the time to communicate the differance between what we can provide and what the seek on the internet it will for the most part clear up the distrust that was mentioned earlier.

  • http://twitter.com/BradAndersohn BradAndersohn

    Hi Grant – Brad from Zillow here….  again! 

    As I stated on Jay’s post, I’m here to assist you with your questions and concerns, yet I’m a bit curious why you can’t or won’t simply pick up your phone and call? 

    Zillow is one of the largest real estate networks on the web with an average of over 31,000,000 unique users each month this year and we’re growing. I think it’s important for you and your readers to know and understand that consumers and agents do come to Zillow for more than just listings. 

    Consumers come to Zillow to find out about mortgage information, see what’s sold in the neighborhood or around the country, check out demographics, photos, use calculators, get home improvement tips, seek advice and join discussions etc.  And yes, hundreds of thousands even come to find an agent or lender just to write a review on their services and in many cases, hire them to help with a loan or buy/sell their homes.

    You see Grant, we provide a wide variety of tools and services for buyers, sellers, renters, lenders,and agents. We may not currently be a “one size fits all”, but we do provide and accommodate both consumers and industry professionals and continue to grow in both areas.
     
    I’m happy and more than willing to help clarify any concerns that you may have, the door and line are always open my friend.  Taking advantage of that offer is all up to you though…

    707.646.1876

  • Rqd

    Said the spider to the fly….

  • http://fischer-realestate.com/ Greg Fischer

    Hey Grant, just came back to check in on this. Noticed you are still rocking Diverse Solutions. Did you change your mind on the custom IDX? cc: @drewmeyers:disqus

  • Abc Visual

    I find this very healthy and very helpful thread when it comes to real estate advertising and many other things related. Thanks!

Comments