Disrupt Like Zillow: Transforming the Real Estate Industry
Zillow is a serious player in the U.S. real estate market. Founded in 2006, Zillow now contains a database of 110 million homes and apartments across the U.S., with buyers, sellers and renters using the platform to move house.
Beyond the core platform, Zillow owns several prominent consumer and business real estate brands, including Trulia, Mortech and Bridge Interactive. With over $1.1 billion in revenues and nearly 200 million unique users, it is safe to say that Zillow plays an important role in the U.S. real estate market.
Although we now think of searching for property online as a normal part of the process, that wasn't always the case. It has taken over ten years and $96 million in funding to grow Zillow, including the acquisition of several rivals and complementary businesses in the same space. The largest of those was the acquisition of Trulia in 2014 for $3.5 billion. Since then, Zillow went public and listed on the stock market, cementing its position in the competitive and lucrative real estate sector.
Impact of Zillow on real estate
Before the launch of Zillow and other real estate tech companies, buying, selling and renting property was expensive and time-consuming. Listings were done through the media (in print and online), with physical signs (which is still part of the process) and through real estate agents.
In the early days of real estate platforms, some commentators and investors speculated that realtors would go out of business. But in reality, that was never the game plan. Buying or renting a property is still the most important purchase that most people will ever make. Although a small percentage of buyers and renters might make that choice without seeing a property in person, most need a realtor to show them around, answer questions and guide them through that decision.
With that in mind, Zillow has created platforms that make it easier for sellers and realtors to reach a wider audience. For buyers and renters, a large part of the buying process happens online, before booking an appointment to view a property. Photographs, descriptions, maps form a key part of that process. Zillow has expanded on that, giving realtors and sellers a whole suite of tools across their portfolio of platforms to improve the chances of selling/leasing a property.
One of those platforms is Buyfolio which the Anadea team is proud to be a part of. It started in 2009 in New York, as a way to improve the buying and selling process.
Founded by Matthew and Susan Daimler, the platform was designed to extract and arrange property data from multiple external sources. The sources supplied information in different forms and formats, e.g. the data could be stored in XML files or provided by API. Customers could also upload property details online, and over time Buyfolio developed tools that made it useful for brokers and agents.
After launching, the project took off, with over 2 million homes listed, 32,000 home buyers and thousands of brokers using the platform. It didn't take long for Zillow to take notice. In 2012, Buyfolio was acquired by Zillow. This deal was an important step in Zillow's strategy of expanding its suite of services for real estate professionals and home buyers. In the next couple of years, Buyfolio got a new name Agentfolio and new design, scaled in scope and size, and was rolled out across the U.S. At the time it was the only real estate platform offering collaborative home search options for multiple parties.
Another evolutionary step was acquisition of StreetEasy, a renowned NYC-based real estate marketplace, in August 2013. This purchase helped Zillow make deeper inroads into the New York City apartment market.
Under Zillow's roof, StreetEasy evolved into even more powerful and streamlined solution for apartment-hunting. However, evolution often comes with a sacrifice. While StreetEasy was on the rise, Agentfolio faded away from the Zillow Group family of brands. Zillow closed Agentfolio two years after acquiring it and the Agentfolio team was shifted to other strategic initiatives within the group.
Housing market predictions
In 2018, Zillow founders took action to buy stock which helped to prevent further slides in the share price. Growth is slowing. In many ways, no one should be surprised by this. The global economy and U.S. real estate is cooling at present, after several years of healthy growth.
In response, real estate technology companies need to continue to add value for clients and innovate to find new growth areas. Some analysts are predicting that the company is sitting on another billion dollar market, in the form of the Zillow Offers iBuying business, whereby Zillow calculates the value of a property and homeowners can sell their house online. No need to involve an agent, unless a seller wants to. For Zillow, this could be the next big growth area, showing once again that they can disrupt the real estate market.
What real estate startups can learn from Zillow
Undoubtedly, Zillow is one of the most innovative companies in the real estate space, which has dramatically changed the way we search, buy, and rent homes. Many current tech startups are inspired by Zillow's success. Some of them are aiming to create apps and websites like Zillow for new niches. Others are paving new ways with some revolutionary PropTech solutions and services.
Whatever the future of real estate technology holds, there are some important takeaways from Zillow's story that property tech startups should consider:
Identify and exploit blind spots in the market.
There is always a space for reimagining existing approaches and improving existing systems. One of the first breakthroughs of Zillow's founders was shifting the focus from answering the question "What's for sale?" (beaten on every real estate site by the time) to another one "What's my house worth?".
They decided to shed a light on what's happening with the homes that are not for sale at the moment, which was a terra incognita of the housing market. This is how Zestimate was initiated and they got about a million of visitors right on the first day of launch!
Brace yourself, success doesn't come easy!
The road to recognition and profitability is not a straight line, there are sharp turns, rocks and bends. Sometimes you need to re-rank your priorities and re-focus your efforts. The housing crisis of 2008 hit Zillow hard but it was also a blessing in disguise.
Hard times make your company stronger as going through difficulties bounds your team together and forces you to take hard but right decisions that otherwise wouldn't have been considered.
Democratization of data is the way forward.
Information is an incredibly powerful tool for engaging clients - be it home buyers, real estate agents or commercial real estate investors - everyone wants easy and open access to real estate data. Zillow was and still is a pioneer of data transparency in the real estate industry. They founded the business on making real estate information accessible to everyone and won consumers' loyalty by empowering people with information that only real estate professionals could previously access.
However, Zillow didn't solely help to eliminate informational asymmetry between real estate consumers and realtors. This information was also used in important academic studies which in their turn had an impact on urban planning and other housing-related issues.
While there is no magic recipe for startup success, there is a great deal to learn from a legendary real estate tech hub which has forever changed the way properties are discovered, purchased, and rented. As they say, long way starts with the first step, and similar to Zillow, today's PropTech startups will alter the real estate landscape of tomorrow.
The property industry keeps growing and presents an incredible variety of opportunities for tech entrepreneurs. If you want to disrupt the housing marketplace like Zillow, with a proper strategy and a great team, you can succeed on this challenging journey. Good luck!
About author: Dariya Lopukhina is already over 6 years a part of the Anadea team where we leverage our strong domain expertise to help property businesses digitally transform and grow through developing efficient real estate apps and software solutions.