Zillow dreams of becoming the ‘Amazon of the real estate industry’

Accessing 'this platform' and visiting houses has become fashionable

Zillow, the largest real estate trading platform in the United States, is called the 'Amazon of the real estate industry'.

At the very least, a new word, 'Zillow Scrolling', was born, which refers to the act of continuously scrolling by accessing Zillow.

Today, I would like to talk about Zillow, one of the companies that has been the biggest beneficiary of Corona, and whose stock price has fluctuated due to the recent unpredictable real estate market.

Digging zillow

Zillow's housing database is about 135 million units, or 97% of all housing units. As of the third quarter of 2021, the average MAU was 227 million, and the number of visits to Zillow in the third quarter of this year was about 2.7 billion, which is about 30 million people per day.

[caption id="attachment_5173" align="aligncenter" width="801"] Zillow MAU- Monthly active users data of third quarter of 2020.[/caption]

Most popular real estate websites in the United States as of October 2021, based on unique monthly visits

[caption id="attachment_5174" align="aligncenter" width="739"] Most popular Real Estate Companies by in the U.S by October 2021[/caption]

With a population of approximately 330 million people in the United States, this means that one in ten Americans enters Zillow every day.

Zillow founder Richie Barton faced the same hurdles while looking for a home in Seattle.

You can only check the properties offered by real estate through phone or direct consultation.

It is said that even though the house is the same, the price of each property was different. I wondered if I had just found a house I liked, but I was troubled by various documents and verification work.

Barton envisioned a 'site where you can transparently check real estate listings online and even make purchases'.

He took pictures of every nook and cranny of the house, revealing all the necessary information.

So, are there really very few fake listings at Zillow?" Zillow requires you to enter your home address and information, and applies strict photo upload standards.

Upload may be restricted if certain information is missing or missing, or if the photo material is incomplete.

There are no fakes at all. Several media outlets have covered the case of Zillow for sale.

It was a problem to put up for sale by stealing contact information or attaching a picture of a completely different house.

Zillow said that while operating a real-time monitoring team, it frequently blocks items suspected of being fraudulent.

However, it is relatively rare for brokers or real estate companies to post false listings to induce visitors to visit.

This is because if caught, the use of Zillow will be restricted. Since 29% of online real estate transaction traffic comes from Zillow, there is no reason for brokers to post false listings at risk.

Zillow has since added one by one so that all the procedures you need to go through when looking for a house, such as connecting a broker, getting a loan, and registering documents, can be handled within the site.

In other words, from A to Z of real estate transactions within Zillow.

'Zestimate' downed the Zillow server in two days

[caption id="attachment_5175" align="aligncenter" width="1020"] Zestimate User Interface[/caption]

As soon as Zillow launched its beta service in 2006, over 2 million people visited in two days, and the server went down.

This is because of the core feature of Zillow, 'Zestimate'.

Zestimate is a system that informs you of the 'appropriate price' of a sale.

Since it is marked along with the price raised by the seller, it is a standard for the buyer to judge whether 'I've been ripped off or ripped off'.

People who want to know how much house they currently own have visited the Zillow website.

In the United States, even within the neighborhood, the shape, structure, and material of houses are different.

In this way, it is difficult for people who want to buy or sell a house to decide which price is right for them.

That's why we need a 'house appraisal' that determines the price of a house. This is especially important if you want to get a loan.

When a U.S. bank approves a loan, it checks the creditworthiness of the borrower and the results of the housing appraisal.

The problem is that this home appraisal is a costly and time-consuming process. If you apply, you have to wait at least a week, and it costs around 400-600 dollars.

Zestimate is the result of housing appraisal selected by the algorithm.

We collect and analyze as much data as possible to calculate the housing price to calculate the appropriate price.

Not only the fair selling price, but also rental fees and brokerage fees are all transparently disclosed.

At the time of launch, it took quite a while to calculate the house price and the error rate was large.

People who came in because they were curious about house prices voluntarily provided detailed data, so we got more and more data, and we improved the algorithmic accuracy with machine learning.

As a result, the error rate with the actual price has now been narrowed down to 1.9%.

From the point of view of the owner, even if they do not intend to sell immediately, they often log in to check the value of the property they have.

Zillow's 3 Business Models So, how does Zillow make money?

In the early days, advertising was the only source of revenue. Zillow's granular customer segments and advanced information not found in other portals, such as consumption and credit levels, allowed for more efficient ad targeting.

Since then, we have started diversifying our revenue model based on accumulated big data.

There are three main business divisions.
ㅇ Homes: 6% of total sales
ㅇ IMT (Internet, Media &Technology): 85% of total sales
ㅇ Mortgages: 9% of total sales

Homes' Stock Price

Homes' stock price plunged more than 25% in November of this year, when Zillow announced that it was abruptly suspending 'Zillow offers' (actually permanently).

 

[embed]https://www.youtube.com/watch?v=S8NL1EvPdYM[/embed]

Zillow Ops is a home resale business. It is a method of buying a house at a low price, remodeling it through cleaning and remodeling, and selling it at a higher price to make a profit.

For those who are selling a house in need of urgent money, it is said that it can be disposed of quickly instead of being cheaper than the market price.

There are advantages. When Zillow buys a house, the seller receives 6-7% of the average brokerage fee in the US as a 'sales commission'.

Here, we charge 1-2% for additional services such as tax processing, registration agency, and escrow payment.

In fact, this is not the first system Zillow introduced. In the name of 'instant buyer'

It is one of the most promising proptech business models for growth. There are several companies established in this area, such as Redfin and Open Door.

"I will buy it at the Zestimate price" are the words of Zillow COO.

He believed in the Zestimate Algorithm and declared war. As a result, in less than a year, the white flag is raised.

It was pointed out that the cause was a much larger loss than expected as uncertainty in real estate prices increased due to the impact of COVID-19.

It's a model where you have to buy cheap and sell high, but real estate prices fluctuate so badly that you buy high and sell at the bottom.

"I realized that predicting the exact future house price in the midst of various variables such as Corona 19 and the economic crisis is outside the realm of algorithms."
(CEO Rich Barton Zillow)

[caption id="attachment_5178" align="aligncenter" width="1200"] Zillow Home value Index Dec 2021.[/caption]

IMT (Internet & Media & Technology) - 85% of total sales

In fact, advertising, B2B solutions, and brokerage commissions account for the majority of revenue.

At its core is the 'Premier Agent', i.e. Marketing Advertising Solutions Software (SaaS).

It is a solution that enables real estate agents and brokers to efficiently manage, market, and advertise properties.

Like real estate brokerage fees, it operates under a 'charge per transaction' system. Depending on the sale price, they range from $20 to $100.

Mortgage (U.S. Home Mortgage Loans) - 9%

In October 2018, Zillow acquired a mortgage lending company, secured a license, and rebranded it as 'Zillow home loans'.

* In fact, a mortgage in the United States is more like a 20-30 year long term installment.

It seems that Zillow's purpose was not only to earn interest on loans. We've brought together over 50 lenders to create the Mortgage Lenders Marketplace.

Based on the personal information and housing information provided by the customer, it shows the loan amount, fee, and interest rate by company at a glance.

There is no need to visit the lending company for review, and the company that offers the most reasonable conditions can start the screening process. Zillow charges a brokerage fee.

Why is Zillow counting on millennials?

Zillow is the Amazon of the real estate industry, but it hasn't turned a profit yet

However, Zillow is currently valued at $38.6 billion.

At the time of listing, it was 540 million dollars, so it has grown more than 80 times in 10 years.

This high value was recognized because the growth of the proptech market is accelerating due to the rise of the millennial generation, who are familiar with the Internet.

In particular, 2021 is the first year in which millennials emerged as the main consumer in the real estate market.

As millennials, who solve everything online unlike the older generation, have emerged as a real estate purchasing force, there is a natural expectation that the 'culture of buying and selling houses only online' will be established soon.

U.S. real estate transactions in 2020 will be approximately $2.5 trillion. Among them, the online transaction amount is less than 0.3%, or $730 million.

[caption id="attachment_5180" align="aligncenter" width="921"] Millennials and Gen-Z Housing Decisions.[/caption]

The growth potential of the proptech market is limitless. Zillow, which continues to innovate in the real estate sector with an overwhelming proportion of offline

Kindly keep an eye out for the changes that will be made in the future.