It’s Not All Bad News These Days…
Especially for real estate media.
Curbed, the popular local real estate blog network run by ex-Gawker Media editor Lockhart Steele, recently obtained $1.5 million in financing, as reported today by the New York Times. (see Not All Is Gloomy in Real Estate: A Blog Network Attracts Capital). Rain City Guide is predicting more investments in social media to be announced shortly too.
With the new cash now safely in the bank, Curbed hopes to expand its coverage and add several new cities to its roster. Makes sense. I’ve always maintained that even in a down market, media is a safe (ish) bet because, perhaps more than ever, people are looking for place to find analysis and guidance (or a mutual sense of Schadenfreude) in real estate.
The danger with any media play, of course, is the business model is predicated on having a stable base of advertisers to support it. And it remains to be seen whether the fallout from the sub prime meltdown and credit crunch will have any larger impact on advertisers’ marketing spends - a subject that I’ve been following with keen interest for a while (see Storms Ahead for Real Estate Sites).
Part of my curiosity is that I remember the years after the ‘00 tech bust being pretty lean for many technology publications. I remember this being illustrated quite vividly when my copies of Red Herring and Business 2.0 (R.I.P.) showed up on my doorstep and went from being the size of the local phone book to not much thicker than a pizza flyer in the span of no more than a couple of months.
Like most in this space, Curbed relies primarily on real estate advertising (a quick visual survey of their site reveals mostly ads for condo developments and one from Trulia) and so it is certainly at risk if there is a larger downturn. That said, I suspect their niche audience will still be attractive to smart advertisers and their low overhead makes them nimble enough to avoid any looming iceberg.
by Hugo*
The titan in this space (Zillow) however, is much more heavily encumbered and faces a corresponding greater degree of risk.
From the NY Times:
At greater potential risk are national-focused sites like Zillow.com and Realtor.com that depend on an active market of buyers and sellers to thrive. Nonetheless, Zillow, which estimates home values, last month obtained $30 million in its latest round of financing, bringing the total to $87 million for the site, which was started less than two years ago.
Now, to their credit, Zillow has reached out beyond the real estate niche and courted some brand name advertisers (I saw DirectTV and Verizon on there this morning) - but to what degree of success? I have to admit I was surprised to still see Google Ads filling their Leaderboard position on the search results page for my zip code this morning (YMMV).
[Aside - It wasn't even a well integrated Google Ad, either. The color scheme looked like one of the default palettes (Shadow, I think). Looked like someone had just slapped the Adsense code in there to fill out some unsold inventory. Pretty sloppy.]
So looking at Zillow’s ad mix right now - you’ve got some Google Ads, a handful of self-service agent driven ads (EZ Ads) and some big brand CPM campaigns sustaining a $90 million dollar investment. I feel like a bit of a broken record at times, but the big picture just doesn’t add up (pardon the pun).
In any case, the folks up in Seattle aren’t sitting idly by (they shouldn’t, they have some of the brightest minds in the biz on staff) and so I wonder if it’s not any coincidence that, alongside the article in the Times today, they announced their newest advertising product; Zillow Home Direct Ads. Home Direct Ads is a new intent-based advertising tool that allows advertisers to make an ad buy on Zillow that conforms to precise conditions based on consumer behavior on their site.
Pretty cool stuff. The two most interesting products in this release to me are the Move Predictor and Psychographic Clusters. From their news release:
Move Predictor: Because of Zillow’s extensive data on homes for sale and traffic activity around a home’s page views, Zillow can predic whether a household may be moving. This allows advertisers such as cable providers, financial institutions or home improvement stores to reach homeowners before purchase decisions around the move are made.
Psychographic Clusters: Advertisers can specify for their creative to be shown to households composed of any of the 65 psychographic clusters defined by the U.S. Census data, such as suburban households with children or high-income urban singles.
On Zillow Blog, Greg Schwartz, Zillow’s VP of Ad Sales, imagines a hypothetical scenario on how this could be used.
Imagine if a telecommunications provider could hone their advertising campaign to reach homes based on the products they have available on certain streets – down to a house-by-house level. For example, they could advertise sought-after high speed Optical Fiber Lines directly to the homes where the technology is available. Then target DSL to all other homes – as close as across the street!
This starts to make sense a little more. Zillow’s Intent based tools - which along with Facebook’s Interest-based targeting (see Marketing Yourself with Facebook Flyers) - should be intriguing to any sophisticated marketer and they have a right to be excited about it.
But - as cool as Home Direct ads are - the success of the site still depends on Zillow maintaining and growing its traffic (which by some measures, has been flattening lately). And that cuts to the heart of the matter.
Are people still even interested in real estate porn these days? Or have they just moved on to real estate gossip?
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10 Comment(s)
3 Trackback(s)
- From Property Info Source » Blog Archive » Late breaking news | Oct 30, 2007
- From Curbed Raises $1.5 million « Alaia Technologies | Oct 31, 2007
- From This week in online real estate | Move Trends | Nov 2, 2007
David G from Zillow.com | Oct 30, 2007 | Reply
Hi Joel - Thanks for checking out some of our advertisers. It also pains me somewhat to see Google ads on the home page but I’m quite confident that those days are numbered.
What you don’t see by visiting the site is the extent to which we have optimized both ad placement and revenue. Hopefully today’s news provides some insights into that piece of the puzzle.
The NYT story actually does answer your question about Zillow traffic - you seem to have missed that part of the story. Despite the down market, traffic to Zillow in Q3 increased 20% YOY.
Joel Burslem | Oct 30, 2007 | Reply
Didn’t miss it David. As you said, 20% Year-over-Year.
Stats can easily be spun to tell whatever story you want - I spent far too long in a PR agency working the same magic to not know to read between the lines a bit.
What about Month over Month traffic? Or the last six months since the subprime/real estate mess really started to unravel?
Bert Sperling | Oct 30, 2007 | Reply
Joel,
I’ve been enjoying your insightful analysis lately. You’re asking the tough questions that I’m sure many of us have when reading the latest industry stories, as well as presenting new ideas for us to consider.
Please keep it up!
Bert Sperling | Oct 30, 2007 | Reply
BTW, in the nothing-new-under-the-sun category…
Z’s Move Predictor is identical (as far as I can tell) to Domania’s secret sauce before it was sold to IAC. Three or four years ago, Steve Kropper’s Domania touted its ability to identify movers-to-be months in advance by analyzing patterns of online searching for geographically clustered addresses.
Just to give credit for a good idea where it’s due…
David G from Zillow.com | Oct 30, 2007 | Reply
Joel - I know you’ve been in real estate long enough to know that YOY is how real estate related businesses measure their growth. It’s a cyclical industry. There’s no spin there.
Dustin | Oct 30, 2007 | Reply
Joel, interesting article, as always…
I just wanted to clarify that I wasn’t so much making a prediction in my article on RCG as much as surprise at who got the funding.
Mike Parker | Oct 31, 2007 | Reply
Hi, Joel
Another insightful post. Like you, I wonder just how long investment money will continue to embrace splinter adjuncts to Google adwords? Isn’t Facebook’s recent equity bonanza evidence that the only thing appealing about these sites to the real behemoths is eyeball views? Companies like Zillow , despite loads of capital, have a long way to go to generate anywhere near the number of eyeballs that a general purpose social networking site does. Thus, like you, I wonder: how long will nvestors support an investment of $90 million that is not returning profit in any meaningful ratio? And, does the investment community still think Google and You Tube and now Facebook are replicated because their business model seeks to sell various forms of pay per click?
All those answers must be known by better minds than mine. My question is: other than people like us, who really even knows about the Zillows of the world? Does anyone think consumers are going to abandon search engines as the place to shop and go to a Zillow?
Perhaps the thought is that if even a small copy of Google web revenues can be generated by one or more of these entities, the market will give it a huge capitalization and the backers will profit.
It all sounds like the bad old days of dot.coms: huge amounts of money being handed to business ideas that don’t make a profit. One quarter of a billion dollars for 1.3% of a social site that has yet to earn a profit? Perhaps Microsoft has the way to realize a return on that, but by any investment measure, these boutique real estate websites are not what any stretch of the imagination would classify as conventional investments, and I think it likely that once the model is seen to be flawed, it will be adios to many of them.
The real estate market will always bounce back, but will the consumer embrace a wide variety of ways to look for homes on the internet and be willingly bombarded by banner ads, text ads, bvvideos and more?
Am I the only one to remember Yahoo’s foray into banner advertising in the 90’s? you know, the banners that spawned software now known as pop-up blockers? People want simple, and these sites aren’t. I think there already are too many portals and a shake out is coming.
Desmond | Oct 31, 2007 | Reply
Sensing some hostility from the ladies at Zillow!
Arizona MLS | Oct 31, 2007 | Reply
It will be interesting to see how Curbed fares in other cities. The LA edition is decent; NY is so unique in terms of its neighborhoods and buildings and I don’t know if they could have the same depth of stories in an urban sprawl type cities/areas like Phoenix or the Inland Empire.
retrove.com | Nov 1, 2007 | Reply
The conversations are simply shifting following the normal cycle of real estate. The sites that will last are those then can provide value and be engaged in the conversations of real people at every step of the cycle. The new real estate porn will be in bank reo listings, how to get out from under real estate and conversations regarding the real value of a property and the market continues to soften. Then it may become about downsizing real estate when baby boomers start selling. Until the market picks back up then it will be about listings again. If you want to pick / create a winner, simply listen to the non-industry cocktail conversations going on. I also agree with Berts comments… Steve Kropper & Domania where the first ones to do this.