To Lead or Not to Lead
In an article from SmartBiz.com, author Rosalind Resnick reports on a recent panel discussion that led to a debate on the relative merits of Zillow’s advertising-based model vs. the pure lead generation model exemplified by House.com
As a consumer, I prefer Zillow’s advertising-supported model of information dissemination as opposed to cumbersome sign up process employed by House.com. Advertising is far less intrusive overall, especially when you employ a secret weapon.
As a marketer however, House.com’s lead capturing model is far more attractive to me – even if there are ways to defeat that processs as well.
I’ve questioned Zillow’s advertising strategy in the past. But Resnick brings up a great point in her article that’s reminiscent of Dustin Luther’s lively ‘Tragedy of the Commons’ post on Rain City Guide:
In essence, Zillow is biting the hand that feeds it.
It depends entirely on advertising monies from Realtors to sustain its business model, and yet clearly is in the business of providing the tools for consumers to circumvent Realtors.
Now, don’t get me wrong, I like Zillow. I love their product and I think Rich Barton is a smart guy. But I do think they’re being slightly disingenuous when they claim they are purely “a media site” – I would expect that they’ve anticipated this quandary (or at least that somebody at their VC, Benchmark Capital, has done their due diligence and asked the question) and that they have plans for other revenue sources. Now, as to what those sources may be, that’s anyone’s guess.
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wes | Jun 28, 2006 | Reply
The question as to whether be a website built on advertising or on a subscription base model is a question that I see many of the online Real Estate industry leaders debating about every day. Should we offer free services and count on advertising dollars to pay the bills or should we charge fees and hope people will pay them?
I think the Real Estate world needs to take a page out of the rest of the online world. Look at myspace free to use, free to search, free to have an account and supported primarily by advertising. But if you want to customize your page or add things you pay a small fee. Now I personally don’t get the myspace craze, but hey it works.
Another example: Look at craigslist. Again a free site. Now craigslist has a different model then almost any other site on the web, but it is a model that makes money. They offer a ton of free services and make you only pay for one or two services. Again craigslist works. ( as a side note here is an interview with craigslist about the future for Realtors and craigslist. craigslist interview )
Taking the idea of ‘free’ and ‘a small fee’ to the online Real Estate world is where the successful Real Estate websites will go. (that is my opinion and that is why we started emongoo) Give people free, get advertising dollars and have a service that people can pay for if they want. ( if someone is using ‘ad blockers’ maybe they will sign up for a service.)
Okay so with that said now you have Zillow, looks acts, smells like a media site (driven by advertising) but with all the traffic and all the potential why would Zillow not venture out in some type of subscription based service? I don’t think it is a matter of if, but when. Zillow’s founders have done this before and they know what they are doing. It is a great service, a fun and useful site and I am sure the Zillow Labs are working on something right as we speak.
Amy Bohutinsky | Jun 28, 2006 | Reply
Hi Joel, it’s Amy from Zillow. Here’s a post we did recently on our advertising model and working with the industry that addresses some of the things you bring up –
http://www.zillowblog.com/zillow_blog/2006/05/advertising.html
Quoting from this post… âWe also continue to get questions about whether our goal is to eliminate real estate agents and/or appraisers. The answer is no. Not even close. We think agents and appraisers will always be a critical part of real estate transactions. We view ourselves as a media company. As such, our goal is to create an audience of people who are interested in real estate.â?
realestatemarketing | Jun 28, 2006 | Reply
Thanks for the reply Amy.
I certainly don’t think Zillow is going to get into the business of buying and selling real estate.
I only suggested that I don’t think advertising alone will sustain Zillow’s business. There is of course premium subscriptions, licensing, third-party partnerships and many other ways for you to make money from your technology!
But I’m sure you don’t need me to tell you that!
Joel
Matt Heaton | Jun 28, 2006 | Reply
The problem with the model employed by many of the large lead generators such as House.com is that it’s going to end up collapsing on them in the end. Their process of lead capture not only annoys consumers (often tricking customers into signing up while providing little added value) but they are also facing a very large and growing backlash from their real customers the agents. Off the top of my head I can’t ever remember talking to a single agent who has had a good experience with one of these large lead generators and I’ve talked to dozens that are simply outraged by the experiences they’ve had.
I’m not saying that Internet based lead generation isn’t going to be important to the industry in the future, it’s gonna be huge… But the way the large lead generators have gone about it, they’re destroying their long term market. As brokers play catch up the online space, which they’re doing very quickly, lead generators will feel the squeeze.
An advertising model such as Zillow’s has better long term potential because how they are approaching it. They don’t seem to be alienating the real estate industry but rather augmenting it. Nothing they have done (so far) points them in the direction of trying to eliminate the real estate agent from the transaction. But like Joel mentioned in his post, with that big VC backing I would make bets there is something bigger in the plans than simply on-site advertising.
-Matt
Brock Harris | Jun 29, 2006 | Reply
As a long-time Realtor, I fail to see how Zillow could possilby supplant or circumvent realtors in any way.
Here’s why: I have yet to meet a seller who didn’t have a very, very accurate idea of what their home is worth. Although I, like many realtors, market to the public by promising to tell them the value of their home, it’s the rare phone conversation that doesn’t have the seller turning the tables on me and telling why and how I’m way off the mark (“you know, my neighbors house sold for X and mine is much, much nicer”).
List price is just one piece of the marketing puzzle (I once listed a home for $1 and sold it for $450,000), and as long as a real estate transaction remains as complicated and competitive as it is, realtors will do just fine, Zillow or not.
Cliff Jacobson | Jun 29, 2006 | Reply
“To Lead or Not to Lead” has Zillow all wrong. Zillow is not out after Realtors’ bucks alone. Zillow is out after the ad bucks of all home-sale related businesses (Lenders, Lawyers, Inspectors, etc.). Zillow shares Google’s business model of free content and sell ads around the content. Zillow’s first goal, like Google’s, is to drive traffic (top 10 Real Estate Web site since its 2/06 launch). It’s next goal is to sell ads. Zillow presently sells mostly national ads through Google. The present, almost unrivalled, potential for Zillow is to sell local (Zip Code or geo-coded) ads to local businesses on the street address, schematic map and satellite photo of a person’s own home. The only better platform for local ads would be to sell them on the Owners own Web site. I bet Google, Yahoo, MSN and Zillow are working on that right now.
Cliff Jacobson | Jun 30, 2006 | Reply
Every indication is Zillow wants to be the first Google of Real Estate, not the next NRT or REMAX. Zillow doesn’t want to say, “No one sells more homes than REMAX”. They want to say, “No one sells more advertising around homes than Zillow.”