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Zillow CEO: "The Rentals Opportunity Is Massive"

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

Although it's currently something of a newcomer to the rentals market, Zillow has big plans. Spencer outlines the company's two strategies with regard to rentals, and some ideas for monetizing the platform when the time comes.

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Austin Smith: I'm wondering if you could discuss a little bit about the opportunity with rentals. It definitely seems like there's a lot of potential there. Obviously, more frequent transactions being done, but probably going to be a slightly more hands-on model in part of the transaction.

Spencer Rascoff: Well, the rentals opportunity is massive. The reason for that is, there really is no rentals marketplace. The closest thing to it in the U.S. is Craigslist, and Craigslist only has a fraction of the rental listings in the U.S.

Our strategy in rentals is to grow rental audience on the Zillow brand on desktop and mobile, and on the HotPads brand on desktop and mobile. We bought HotPads about a year ago. It was one of the largest rentals-only sites, or predominantly rentals websites. We're keeping it as a separate brand focused on rentals.

We bought two software companies, Postlets and RentJuice, which provide software tools to the property management industry, to the rental industry. So we have a two-pronged approach here, from a strategy standpoint. One is grow audience of rental tenants in order to be attractive to landlords, and two, provide software tools to the rental industry, something that Craigslist, for example, is not likely to go down that road.

It's still very early days as we're creating this rental marketplace, but the market opportunity is very, very large, probably in the $10 billion range, at scale.

We haven't focused overly on monetization yet. We're still in the marketplace creation phase, where we're trying to grow liquidity on both sides of the marketplace; tenants looking for rentals and property managers listing rentals. Late 2013 and into 2014 we'll start focusing more on monetization.

Smith: Maybe this is the secret sauce, but monetization on that platform, what does it look like? Is there a fee for brokering a transaction? Are you selling ad space? What's the -- ?

Rascoff: It'll be a hybrid approach of selling software tools, a SaaS software model, with selling sort order -- placements, basically paid inclusion -- for property managers, as well as cost per lease or cost per lead.

The answer to your question is kind of "all of the above." It'll depend on the market segment. It'll depend on what's most palatable to the partner on the other side of the equation.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 16, 2013, at 10:50 AM, DonkeyJunk wrote:

    I think I'll stick with craigslist for listing my rental properties and zillow for locating properties to purchase. Why pay for a service when the free service works VERY well.

  • Report this Comment On July 17, 2013, at 11:12 AM, bearsnsox wrote:

    can you please let us know why the CEO has sold 2.2 million worth of shares in the past 2 months? including 318k two days ago???? thought he sees a lot of potential

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