I’ve read Zillow’s S-1. I’ve discussed a hundred angles with smart people. I’ve challenged my own thinking. And I could break it all down right here for your reading pleasure.
But it all really comes down to this question:
Would you buy this stock?
My answer is “no.”
Look, I like Zillow. Their militant user focus is admirable. The company continues to challenge an industry not wont to challenge itself. And I will never casually denigrate the hard work of smart people aiming to make real estate better.
So I sincerely wish them well. I will be rooting for them in fact. But I can’t look at the opportunity they presented this week with excitement.
Five years of buzz, $87 million raised, $76 million spent, thousands of media mentions, and a top-flight management team has culminated in a loss of $7 million on $30 million in revenue?
Man…it’s kind of bumming me out.
Because while it surely says something about Zillow, it says even more about the prospects for creating a truly thriving online real estate enterprise.
It’s just damn tough.
One would be correct to point out that plenty of companies have gone public before they were profitable. But the success stories there are usually companies that were disruptive or created new categories. That’s not the case here. In fact, if you strip out the user interface and the Zestimate, one could argue that Zillow is more or less “Mini Move” – a smaller version of the current category leader.
And things aren’t exactly rosy into the future. This, from the S-1 itself:
“…we expect that our revenue growth rate will decline in the future as a result of a variety of factors, including the maturation of our business. At the same time, we also expect our costs to increase in future periods as we continue to expend substantial financial resources to develop and expand our business”
What I think we are facing then in the online real estate category is a war of attrition. No one is running away with it – including Move, which itself lost $15 million in 2010.
But Move has money. Even more than a post-IPO Zillow will. Much more. And while Move has shown more strategic energy in the past year than it had in the previous ten, and has executives who are every bit as smart as the crew from Seattle, I think it is this fact that will be determinative.
I hope Zillow makes me regret my “no.”
The Realty Alliance, a group of largely independent real estate companies, is leaning on NAR to repeal its decision to allow real estate franchisors to index listings from their franchisee sites. Matt Carter wrote it up nicely, but I have two quick thoughts:
- The effort to reverse this policy is almost certainly futile. And, really, it would be more constructive to direct energy toward creating a post-IDX world where everyone – big brokers, small brokers, and brands – could more effectively leverage their inventory. That’s harder than drafting a letter, I know, but is what’s really needed to break free from the shackles the industry has placed on itself in the name of safeguarding data.
- If I were an independent real estate company, I’d be pretty thrilled that it is now easier for a national brands to promote my listings on their websites. I am pretty sure my sellers would be too. Those sellers, of course, being “The Consumer,” the idol to which most brokers have paid such fulsome tribute recently.
Speaking of listings, this article from O’Reilly, An iTunes model for data may help you think about how we could make managing real estate data easier in the future. Yes, it’s naïve. But take it from a hard-bitten industry cynic: we’ll get there someday.
If you want to stare at something interesting for a few minutes this weekend, go here. There’s something almost novel-like in these images. They suggest a story. You could do some interesting things with homes in this way, but that’s not my point. It’s just cool to look at.
Enjoy the weekend!
[Disclosure: Move, Inc. is a 1000watt Consulting client]