What is Zillow™?
Zillow is one of the leading online real estate companies in the US and has recently expanded its presence to Canada. The eventual public availability of sold data via the Competition Bureau vs Toronto Real Estate Board court decision in 2018 was a key milestone in this expansion.
Zillow™ (www.zillow.com ) was founded in 2006 by two ex-Microsoft employees and has since grown to $1.3 B in annual revenue. Headquarters is in Seattle and they are traded on Nasdaq. They have primarily grown by posting listings, attracting consumer clicks and selling advertising to real estate agents and other 3rd parties. The have also amassed a collection of real estate related businesses and generate a huge volume of online traffic.
Where do they see the future?
While today they would characterize themselves as a real estate advertising and technology company, in the future it seems clear they see tremendous growth for providing end to end “one-stop-shopping” via an online real estate system that connects buyers to sellers (with or without agents?) inspectors, photographers, stagers, mortgage brokers, lenders. Lawyers and any other party necessary to do a real estate purchase and sale. They already have a system in the US where consumers can sell their home to Zillow for a guaranteed amount and then Zillow will remarket that property either themselves or via their existing Premiere Agents.
In a recent conference call on their Q4 2018 results, the company apparently has growth targets to get it to $22B in annual revenue in the next 3-5 years. This is quite a leap from the current $1.3M !
Real estate market disruption:
Many consumers would agree that real estate has been ready for an Uber like disruption for some time and there is certainly some truth in that. There is even a new business segment called Proptech that has generated large amounts of venture capital and stock market investment in recent years and this alone will push the sector development and growth exponentially.
Zillow™ has either built or acquired quite a few real estate related businesses and technology for providing better service and information to both consumers and Realtors and at a recent presentation here In Ottawa, quite strongly presented the position that organized real estate was an important stakeholder in their system and would continue to be. In fact, we saw some US stats recently online that said that something like 93 % of real estate transactions in the US (National Assn of Realtors) involved a real estate professional which is actually quite higher than a decade ago.
Zillow ™ started up in Canada with its first hires in 2018 and has been publishing listings which of course are critical to getting the maximum online traffic. Having the data on sold properties will be huge and eventually allow them to offer their Zestimate ™ feature which allows a consumer to get a real time online estimate of their homes value, using their advanced AI algorithm that depends on the sold data. Consumers already see lots of these online but mostly rely on a Realtor on the other end to create an evaluation.
Getting this data and data from other sources (tax assessment, etc) and knitting it all together for Canada will take some time and the big challenges will be a) getting a significant % of Realtor listings and b) getting sufficient Realtor advertising funding and c) navigating the provincial regulatory rules across Canada to ensure compliance d) assimilating all the data and getting the word out to consumers e) dealing with all the local issues typical in Canada ie need for bilingual service, small widespread geography
Zillow is one of many but perhaps the best established:
There are many new entrants in the real estate business, and Zillow is but one of many. They seem to have (for now anyway) an expansion by co-operation with organized real estate. Many others do not and seek to simply eliminate and streamline the buying and selling process as much as possible and if that means eliminating the real estate agent and brokerage then so be it.
Purplebricks™ is another newer entrant to the Canadian market which is essentially a similar online business (though much smaller) disguised as a for-sale-by-owner company and a real estate brokerage. Purplebricks™ is a UK based company which bought the Comfree organization in Canada last year.
Interesting to note: like many technology companies and other start-ups, few of these new companies are profitable, including Zillow™ which showed a net loss of $119M in 2019 on sales of $1.3B.
We think Zillow with their long term development in the US, will eventually be a leader in this space, here in Canada.
Just because it’s feasible, doesn’t mean it’s completely ready for prime time:
So there are many interesting changes coming for consumers and organized real estate but things often take a lot longer to materialize on the ground than technology and streamlined visions anticipate.
We are fortunate that we are not on the leading/bleeding edge of all these progressive disruptors and by the time they get to us in Canada, the winners will have been largely decided. We have already seen failures and bankruptcies in this space in Canada.
In the meantime, Realtors must decide if and how they choose to participate with new entities such as Zillow™ and adjust accordingly. Given the history of real estate in Canada where a strong national MLS® program has been built on a very good system of “co-opetition”, we can expect Realtors to be wary but ultimately adjustable.
Interesting times ahead to be sure!