Rupert Murdock is a grown up. My opinion is that he may be the FIRST grown up that Zillow and Trulia have had to contend with. Effective April 2015, Move, Inc. has announced that Listhub will no longer be providing data (essentially) to their competitors at Zillow and Trulia.
While the previous Move Inc folks thought for some inane reason (my opinion) that they needed to feed their competition, finally we are seeing competitors compete. On a level playing field…to a degree. I cannot understand why they did not do this the day after they bought ListHub. Does Ford find ways to help Toyota reduce costs while letting Toyota pilfer its executive team? What would happen to their management team if they did? How is this different?
In short…I think the management team at Move prior to the News Corp acquisition were not wearing their big boy pants. That is the BEST light I can put that in.
Here is what I wish NON REALTOR investors in Trulia and Zillow actually understood. Too much of the value of these companies is NOT currently based on the income they are able to produce. It is based on either as a) pie in the sky bloviating about traffic and apps or b) the latest acquisition (which only means something IF it generates cash and when it is, it is some pie in the sky esoteric figure that is based on global dominance where they are less of a friendly advertising vendor and more of an overlord monopoly. I do not think they can become a monopoly.
In REAL Numbers this is how I personally see it:
Rupert Murdoch bought Move Inc for roughly 25% of Zillows current valuation. And he bought the right to cut at least SOME of their data feed. The ListHub data feed had value to Zillow or they would not have used it. With that option closing it makes it harder / more expensive for them to do business. We do not really know yet how much more expensive, but we do know that they MUST up their game to get or keep getting data from many individual brokers rather than one big hairy data feed. That is a BIG DEAL. We will not know the increased costs until the coming quarters. And I am sure that Zillow management will put the rosiest of lipstick on that pig, but the increased cost / drop in market share are there. So it is a pig of some size…regardless of the liptstick.
I wish Zillow and Trulis investors understood that.
And yes, I am sure Zillow has already been working on taking care of the data feeds issue ever since Listhub was acquired. They would have been stupid not to. How prepared are they? We are about to find out. How much of the data feed will be affected, area by area? That would be a GREAT question for the next investor conference call methinks.
The opther thing I wish NON REALTOR investors in Zillow understood is that rosy revenue potential figures that Zillow has floated (or other industry illuminaries have floated) are WAY overblown. Unless Zillow takes REALTORS captive and gives them NO other choice, which they cannot do since online leads can be generated via Paid Advertising, Branding still works, Referrals in the real estate space are still a HUGE factor and there are more that enough alternatives for REALTORS…then ANY attempt to raise the kind of revenue needed to support a 4.0 Billion dollar valuation will only lead to more of an exodus from the advertising at Zillow. It is supply and demand.
I wish Zillow and Trulia investors could have FELT the shift toward PPC that I did on the ground as Zillow and Trulia diluted (my opinion) impressions and the quality of the traffic they generate / advertising dollar went south in a hurry. If those investors could see that and the reaction that I saw from REALTORS, would they still value Zillow at $4 Billion..I dunno.
My final thing that I wish NON REALTOR investors were able to “get” about this is that Zillow does not have as many currently on the market MLS lisitngs on their site in many areas of the country as people would think (at least not as many as I thought).. Want to find out? I will be putting up on this blog a way to see how much of the listings in your MLS are ACTUALLY in Zillow. (Note that it will not be perfect…because the joy of comingled data is that it will confess to anything that they want to bend it to say…but I am going to look at what the consumer sees) Let’s call this the Zillow / MLS quotient. Right now Zillow SEEMS to be masking that by conglomerating data from Foreclosures, previously solds (in many cases YEARS worth of previously solds to pad the figures) . In short, while they appear on the surface to have ALL the listings, what I am starting to see is in some areas of the country, they are pretty thin. An April is going to tell us a little bit more about HOW THIN. If I was an investor in Zillow, or a credible analyst, I would be breaking down the CURRENT listings on REALTOR sites BEFORE and AFTER April and making notes of the variance.
But even if they have TOTALLY covered themselves by having agreements with MLSs and individual brokers, that comes at a significant cost. How much of a cost increase is expected and how will that impact the bottomline? Is Zillow going to go further negative in terms of earnings?
If I was an investor on the next investor call with Zillow or Trulia…THESE are the kind of questions I would be asking their management. NOT some silliness about the practical value of Trulia / Uber… #justsayin