This spring, Zillow CEO Spencer Rascoff quietly (almost secretly) bought a $20 million home in the exclusive Brentwood neighborhood of Los Angeles — a success symbol for the quirky CEO and for the Seattle company that he runs.
Allegedly, the berdy (banker + nerd) Rascoff likes to hang with the movie crowd.
He is certainly piloting a starship when it comes to Zillow.
Like a Hollywood blockbuster, the company’s stock jumped 25 percent in June. It booked $186 million in revenue in Q1, and there is little evidence that slowed down in Q2.
The Zillow/Move legal brawl ended, with Zillow settling for $130 million — a staggering sum, but half of what Wall Street expected. Out from under the Murdoch legal thumping, the company continues to grow its eye popping real estate footprint.
Zillow holds a staggering 63 percent of the online and mobile real estate audience, according to comScore. And consider: The term “Zillow” is more popular than the term “real estate” in Google searches. That was mind-bending to read.
For a long time, Zillow was a polarizing Wall Street stock with a big short position, which has come down dramatically in the last six months as the company beats many of its numbers and settles its legal troubles.
Zillow has also been a divisive company inside the real estate industry, but that has abated in part with the management overhaul that promoted Amy Bohutinsky to chief operating officer and Kathleen Philips to chief financial officer. These moves not only broke up the boys’ club at Zillow but also put two new faces forward to the industry.
Plus, Errol Samuelson is back keeping the industry’s nerves in check — he is the Buddha of real estate, rarely getting riled and making everyone feel important in the universe. (Caveat: He is slim and trim.)
Zillow is also refining its identity. It is no longer about an alleged monster that might jump out of the swamp, but instead about what it actually is.
Zillow’s strategy to focus on the best agents and reduce its advertiser count is a quiet shift to becoming a top producer hybrid-brokerage — not technically, but in a way that allows them to continue calling themselves a media company. Like a transgender person, it is slowly getting the acceptance that it feels it deserves, even though some people still don’t quite know what to make of it.
Zillow has 90,000 advertisers; what’s the difference between Zillow and a franchise or a brokerage other than semantics?
Instead of paying Keller Williams a “franchise fee,” the Zillow brokers (“advertisers”) pay Zillow an “advertising fee.” The result: Zillow is building a massive team of independent brokers (with teams of agents) who effectively represent Zillow (without saying it) and pay the online company a monthly fee that is higher than what the franchisors charge.
The strategy of de-emphasizing low-spending agents should be good for long-term profitability. A twenty-agent team spending $5,000 a month on Zillow is unlikely to churn, whereas one agent spending $300 a month often washes out. So Zillow’s selling costs should come down significantly.
(READER BEWARE: This is not intended as bait for the Zillow conspirators, as your rap has gotten tired, stale and dated.)
Another twist in the company’s future is its review data, according to a young Columbia MBA student, Brandon Cohen, who has been doing private research on Zillow for the last two years. He impresses me with his fresh outsider insight.
“When I called agents based on highest customer review count, I talked to many agents who don’t spend anything on Zillow, but get significant value from the reviews which work as a validator for people who find them through other channels,” Cohen noted.
He said that he imagines Zillow one day — once it’s more focused on monetization and less obsessed with growing its consumer base — charging agents per impression on their review pages.
He also speculates that Zillow might allow homeowners to replace their Zestimate with a human appraisal done by a Zillow-approved third party. Besides being an additional source of revenue, it would eliminate complaints from brokers and give them a proprietary data set that realtor.com wouldn’t offer.
Seems far-fetched, but who knows.
What’s next for the Zillow team?
I expect a slew of acquisitions — not whales like Trulia, but mid-range tech companies like dotloop that are building worthy technology that adds to Zillow’s product suite. Several companies come to mind who would love to realize a Zillow payday.
One of the only dangers for Zillow is hubris. When you get stars in your eyes, your head can blow up.
Beware, Spencer — Hollywood is littered with carnage.
