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Zillow, Inc.'s Retsly Acquisition Isn't Entirely Selfless

By Steve Symington - Jul 21, 2014 at 10:30AM

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Investors don't seem too excited about Zillow's acquisition of Retsly -- but here's why they should be.

Zillow stock, Trulia stock, Move.com stock

Zillow recently announced the acquisition of Retsly, Credit: Zillow, Retsly

Last week, online real estate specialist Zillow ( ZG 2.62% ) announced its eighth acquisition to date: A one-year-old Vancouver, B.C.-based software company called Retsly. For its part, Retsly focuses on normalizing real estate data from multiple listing services, which in turn helps developers more effectively build data-driven products for the industry.

Financial terms for the deal weren't disclosed, but investors let out a collective "meh" at the time, driving shares of Zillow down more than 4% as the broader market pulled back.

Retsly has admirable goals ...
And at first glance, it's admittedly hard to get excited from an investor's perspective; Zillow's press release seemed delightfully selfless, touting Retsly's platform as an extension of its efforts to "provide innovative productivity tools to help brokers, agents, franchisors, and MLSes be more productive and successful." Retsly also provides MLSes with tools to manage software applications in their own markets and ensure that their content is being used appropriately.

So what does that mean? In short, Retsly has built a widely praised, eloquent solution to take disparate data from the roughly 1,000 different MLSes around the country, and then put it in terms both developers and MLSes can easily understand and use. In the end -- and to borrow Retsly's words -- this should help create "a safe and transparent real estate data platform faster than we ever imagined."

Said Zillow CEO Spencer Rascoff, "Retsly's platform will spur tremendous innovation in the real estate space, enabling developers to build software that works across MLS boundaries and without the overhead of dealing with local data formats." Meanwhile, Retsly gets to continue operating with its current team in Vancouver.

... but don't forget Zillow's end-game
That's all well and good for MLSes, developers, and Retsly itself. But why should Zillow investors be happy?

In short, by gobbling up the leading platform in MLS data normalization, Zillow gets to further bolster its position at the center of arguably the industry's most important technological revolution. As developers, MLSes, brokerages, and agents alike increasingly embrace Retsly's technology, they'll also be embracing Zillow as a crucial piece of their chosen solutions. And this is, after all, a logical extension of Zillow's recently launched Zillow Tech Connect program, which is already used by 25 separate technology companies that represent tens of thousands of brokerages, and that have directly integrated their existing proprietary real estate productivity and CRM systems with Zillow's supplementary technology.

As Zillow makes itself all that much more indispensable to the real estate industry, it will only extend its lead in online real estate in the face of furious competition from the likes of Move (NASDAQ: MOVE) and Trulia (NYSE: TRLA) -- a step that should prove increasingly crucial, given recent reports that Trulia might be in talks to acquire Move as all three companies shuffle for market share in the burgeoning space.

To be sure, Zillow's monthly unique users rose 51% in Q1 to nearly 70.7 million. By comparison, Trulia -- which incidentally employs its own Trulia Data Connect program -- enjoyed 42% year-over-year growth in Q1 to 44.6 million, while Move's network grew just 10% to 30.8 million over the same period.  

In the end, the positive effects of Zillow's acquisition of Retsly may be harder to quantify. But rest assured: As technological innovation in its chosen market continues to accelerate, Zillow should now be much better positioned to benefit than its rivals.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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