Did Zillow Just Wrap up Industry Dominance?

The real estate market needs a destination site on a domestic and possibly global basis, and that's what makes Zillow (NASDAQ: Z  ) such an interesting investment prospect. The top online real estate marketplace could eventually rival the valuations of a LinkedIn or Priceline.com, which average more than $40 billion now.

The biggest issue in the real estate sector continues to be the lack of a comprehensive solution that incorporates all houses listed for sale. Several listing networks limit real estate listings to internal networks, hence the reason for the Trulia (NYSE: TRLA  ) purchase of Market Leader. The other threat has been Move, (NASDAQ: MOVE  ) which runs Realtor.com. But both of those situations involve operating under the influence of Realtors instead of home buyers who want an independent website to view.

The recent announcement of Errol Samuelson joining Zillow as chief industry development officer ushers in an industry shift that Zillow has worked on for the last decade. Prior to this news, the shift was already manifesting in the monthly user numbers, but this move could help consolidate the industry.

Realtor.com and Market Leader
Both Realtor.com, run by Move, and the Market Leader products purchased by Trulia focus on having home buyers view the individual websites of real estate agents. This traditional process of limiting exposure to the whole real estate market in order to focus sales on agent- and broker-related properties isn't going to work in the modern economy.

Back at the at the time of the merger with Market Leader, the platform offered Trulia access to 150,000 professional users, including the top brokerages of Keller Williams and Century 21. Also, the platform powers 120,000 agent websites, generating around 6 million monthly unique visitors. In total, Trulia saw only 35.3 million monthly unique visitors during the fourth quarter. Move, via Realtor.com, generated only 23.9 million monthly unique visitors.

The numbers just can't compare to the 54.4 million monthly unique visitors for Zillow during the fourth quarter, and the record 70 million reached during January.

Errol Samuelson
The most immediate implication of hiring Samuelson is the addition of a top executive in the real estate market and more importantly directly from competitor Move. Samuelson is the former president of Realtor.com and chief strategy officer at Move. His primary goal is to build and strengthen Zillow's relationship with brokerages, franchisors, MLSs, and trade associations. Also, he assumes executive oversight for the business-to-business products and tools, including Diverse Solutions and AgentFolio.

In essence, Samuelson's goal is to convince the industry to shift from building internal websites to listing homes for sale directly on Zillow.com. His deep knowledge and connections in the industry from running Realtor.com could be instrumental in further turning Zillow into the dominant website in the industry.

Bottom line
Like all online markets, the real estate marketplace is quickly heading to one site that dominates the sector. The company will carve out a sizable valuation that could eventually match the riches of leading online travel site Priceline.com or the professional networking site LinkedIn. Zillow estimates that roughly $6 billion is spent annually on agent advertising, and that amount could skyrocket with a more efficient lead-generation platform. The recent hire by Zillow and market trends provide the company a giant leg up on being the dominant site for the online real estate market.

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Read/Post Comments (4) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On March 17, 2014, at 6:31 PM, regotoguy wrote:

    LOL. Zillow is for novices. More often there information is off significantly. Costar moves into the space and Zillow and the rest drop 80% in value.

  • Report this Comment On March 17, 2014, at 8:56 PM, Nplay1 wrote:

    This author clearly does not understand the significant nuances of the real estate industry. Portals such as Priceline, LinkedIn, etc. can scale because they charge users (consumers) for using the service. Zillow charges real estate agents, the very same people that provide the data for which Zillow exists! People who really understand how the industry works, who owns the data, how it can be displayed, the laws that govern, the politics, the money flow and all the other things that make the real estate industry what it is (for better or worse) know that what this author has written about in this article about Zillow will never, ever occur. Not even close and IMHO a disservice to your readers.

  • Report this Comment On March 18, 2014, at 5:28 AM, bourse wrote:

    seems that the stock market is following this author's opinion instead! Z is up significantly!

  • Report this Comment On March 20, 2014, at 3:02 PM, maholder wrote:

    regotoguy/Nplay1,

    Users go to Zillow to look for houses and the real estate agents will follow to gain clients. For novices or not, it is where all the users go. Nobody wants to view anything else and especially not one off portals or individual broker websites.

    I've found zillow to be accurate going back over 5 years. Found my last house on the website prior to my agent finding it.

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