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What Zillow Gains From Its Recent Acquisitions

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The Fool is exploring Seattle. Today, CEO Spencer Rascoff introduces us to Zillow (NASDAQ: ZG  ) , telling us how the online home and real estate marketplace works, what he considers its greatest strengths, and what investors should know about it.

Spencer discusses Zillow's approach to acquisitions, with a closer look at the disruptive success story of Diverse Solutions.

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Austin Smith: Looking at the competitive landscape, Trulia just landed the acquisition of Market Leader. I'm wondering if you have any thoughts, if this is anything that concerns you guys?

Spencer Rascoff: I'm very, very pleased with our portfolio of assets. We've made six pretty small acquisitions over the last two years. All of them have been small development teams, each of which had a small piece of functionality easily bite-sized, integratable into the mother ship of Zillow.

Especially in the agent tool space, I feel like we have the right set of assets to address that need. When you're integrating, you're not innovating, and it's very difficult for companies to swallow large acquisitions.

Austin: With regard to the recent acquisitions you've made, of course I'm sure they're all wonderful and they're all lending great things to the Zillow portfolio. Is there one that you really just see a tremendous amount of potential, and that you're most excited about?

Spencer: I think the one that has borne the most fruit so far would be the Diverse Solutions acquisition, which was about a year and a half ago. This is a company that, originally when we bought it, connected to about 150 MLSs and sold, wholesale, that MLS connectivity to other companies that created websites for agents and brokerages.

Fast forward to today, they connect to over 300 MLSs, so they've dramatically increased their footprint, and we've changed their business model. They now -- we now -- produce websites for real estate agents and we give them away for free.

We have a very disruptive business model here, where we're basically competing against the sales channel of Diverse Solutions by giving away free websites to real estate agents. That has been a very successful acquisition for us.

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