Online home listing aggregator, Zillow has announced plans to buy rival Trulia for $3.5 billion in stocks. The sale is pending shareholder approval and a minimum 30-day antitrust lawsuit waiting period. Zillow/Trulia expect the deal to close sometime in 2015, according to a Zillow press release.
Promised outcomes from the deal include more:
- innovative listing tools for real estate professionals (like mobile apps that manage agent listings) and consumers (like apps that display listings and offer home design tips);
- free access to real estate data, trends and forecasts;
- free distribution of listings from participating multiple listing services (MLSs);
- return for advertisers; and
- profit for investors due to reduced operating costs.
Zillow and Trulia claim they will remain separate websites and brands. While neither brand is explicit about their efforts to draw certain types of consumers, Trulia’s brand may be more tailored for homebuyers with each home’s school and crime data displayed prominently, while Zillow is more useful to sellers with their home Zestimates.
Zillow CEO Spencer Rascoff puts it this way, in an interview with Bloomberg:
“I think it’s very important to have multiple brands in the consumer’s minds eye… having multiple brands allows different brands to appeal to different consumers and it allows you to expand your overall reach. Today, the consumer overlap between Zillow and Trulia is actually quite small.”
How will this merger affect the daily practice of real estate brokers and agents?
Some have speculated the sale is going to lead to higher advertising prices for agents who use the sites, though Zillow and Trulia have remained mute on the issue. Of course, these higher prices may be justified by the greater number of visitors the sites are expected to attract. Advertising is the highest source of income for both Zillow and Trulia, whose combined annual revenues equal just 4% of the amount real estate professionals spend on marketing each year (most of this money is spent on offline advertising). Thus, profits have plenty of room to grow, as Zillow sees it.
Trulia is the most recent in a long line of real estate websites Zillow has purchased, and the sizeable real estate aggregator continues to grow. Between them, Zillow and Trulia allow sellers to list their homes directly online and reach a broad audience without the help of a real estate agent. Likewise, buyers are increasingly turning to on online listings and mobile apps to track down their dream homes.
But is a fundamental change in the way we buy and sell real estate on the horizon? Specifically, do the rise of these online real estate giants mean the end of real estate agents?
Hardly. First, Zillow and Trulia still get the majority of their revenue through agent advertising. Thus, as soon as they make real estate agents irrelevant, their bottom line goes out the window.
More importantly, listing or finding a home online are not the same as actually negotiating the terms of the purchase and coordinating the close. Most sellers and buyers still rely on the expertise of real estate brokers and agents to guide them through the process (and paperwork).
The prominence of these tech giants changes the playing field, but not the game. Even before the Internet, the broker who knew how to get their name and their listings in front of the most people got the biggest share of the pie. The same is true today – except instead of just plastering the neighborhood with signs (still effective, but less efficient), it’s a matter of building presence online to open the door for face time with clients.
For example, online listings make dual agency situations more common, since interested buyers contact the seller’s agent directly from online listings. Brokers and agents who have a presence where their clients are searching for homes — online — will keep the online business for themselves and their co-workers.
Rascoff perhaps says it best when he describes the future of real estate agents:
“If they’re technology enabled and savvy, their future is very, very bright… make sure that you are where you consumers are, where your clients are, make sure you have a presence on mobile and make sure that you’re using technology to grow your business.”