Zillow, Trulia and Realogy – Lessons From Wall Street

The big news this week was the acquisition of Trulia by their rival Zillow for 3.5 Billion dollars.

The real estate world immediately ceased helping people to buy, sell and lease property to discuss what this meant. Though I don’t watch the HBO series, The Leftovers, I imagine that the people who found that 2% of the world’s population has, without explanation disappeared, acted much the same as real estate agents were acting in the Facebook discussions and blog posts I read.

Brad Inman wrote an article explaining that this meant that real estate as we knew it was over because of this acquisition – I don’t agree, even a little bit, but what do I know, I’m just a guy who sells used houses. I like Brad and admire what he’s built, but he’s regularly looking for the imminent disruption of the industry, and that may just color how he sees this event.

Joseph Rand wrote a counterpoint that Zillow and Trulia and the new merged company were just advertising platforms. I agree with this point of view far more, but mostly because Zillow and Trulia aren’t the largest source of consumer contacts for my company – which may just color how I see this event.

I have said before, and will continue to say that real estate firms and agents need to work to acquire new customers and clients directly, and that the abdication of that task to third parties is an expensive, and potentially critical mistake for practitioners. Spence Rascoff, who has, on a number of occasions proven himself to be a pretty smart guy, has indicated that he believes that real estate agents will pay for qualified leads in the same way they pay for qualified referrals – a prediction which I heartily hope is inaccurate.

As a business owner and a trainer, I teach my agents and agents around the country that they need to constantly work to find new clients and customers through their own efforts. There are no top producing firms or agents who are not the source of their own business, and I don’t expect that to change – but like I said Rascoff is a pretty smart guy.

What he did this week was what Realogy (Then HFS) did 15 years ago when the acquired their first franchise, and then startled the industry by acquiring several more real estate franchises. Today’s Realogy is the home of Century 21, Coldwell Banker, EWRA, Sotheby’s, and  Better Homes and Gardens,  but before they brought the concept of multiple franchise operations under one roof from the hospitality industry to real estate, the concept was unthought of – sat least in the real estate industry.

Wall Street – the home of Realogy’s founders and a place where Rascoff is most comfortable, is not Main Street- where real estate professionals live and breath, and the next direction that Zulia takes probably won’t be the direction that Main Street thinks it is.

Perhaps there will be price pressure from the newly merged company, but that could be met with strong resistance from the already concerned agents and companies that are the source of their income.

Perhaps the whole thing is a stock play, designed to drive the already unsupported value of the company’s stock. (Caveat: I know nothing about stocks, and am parroting blindly what I have read that was written by others who seem to know far more)

As a customer of the two sites, I wonder which philosophy will prevail. Zillow, who wants to capture the traffic and send leads to the agent, or Trulia, who has always sent  referral traffic to their customer’s websites. If it is the former, then the real estate professional and their firm really needs to think long and hard before they choose to spend their money there and allow their listings to be used as chum to gather consumer information, because you are on notice that your advertiser wants to remove your website from the competition for the consumer’s eyes.

What I do know is this. Whatever happens next will be designed to increase the wealth of Zillow and Trulia , its executives and stockholders. And that’s fine. Zillow and Trulia are not and never have been the friend of the real estate industry or the consumer. They are businesses that have been designed and positioned to attract consumer engagement and then to monetize that engagement by selling consumer information to real estate professionals. Whatever they do will be to further that goal and increase their income and the reliance by the agent on their product. And whatever it is – it will be based on the thought processes of Wall Street and Main Street will learn to live with it.