Zillow buys
Trulia Active Rain.
Wisdom of the ancients predicts the future?
Mergers
are a tricky thing. It’s the same as a divorce but no one uses that nasty word.
Executives will be fired, employee benefits slashed, and offices closed.
Consolidation of this kind is aimed at increasing earnings. This merger makes
Zillow a powerhouse of old Real
Estate information. The combination of brands should capture more consumers. Why
do I say old? Because the information presented is outdated. Zillow is not in
the free real estate information providing business, company EBIDTA is based on
advertising.
A brief history: (history tells us everything)
Zillow is a
Seattle based company with 817 employees. (I owned 200 shares- sold in June 2014 as a full disclosure but I hear insiders at both companies dumped shares in the past few days- someone is in trouble...) Today the price is down, but it has soared about
eighty percent in the past six months.
Problems
with Zillow:
1. They have
been spending more on advertisements than earnings in the past sixty days. You've seen Adwords, television, Facebook, print, geez they spent on Warner cable…
2. They have a scummy sales force model that works as follows:
Zillow
salesman tells Realtors to convince Lenders to pay for their advertisements (the
right side banner shared with two other Realtors on listings that they have no
direct contact but is implied they are perhaps the listing agent). Zillow
salesman and Realtor tell the Lender to write the first check to the Realtor
directly then use a credit card for the area(S) desired. A high net worth area
may cost $400 a month, while a lessor one $290. Lender is told they are
exclusive, but this is untrue, the same area is sold to twelve to sixteen other
lenders. The assumption is Realtor and Lender will rake in leads and recoup the
cost tenfold.
Zillow’s
challenge now is to cut costs. Free user accounts on Active Rain, Trulia and
Zillow will become less visible. Meanwhile they will promise a paid account to
rise in rankings.
Trulia and ActiveRain employees I hope you packed up the
photograph of your son’s little league team, the sales trophies you have and
the pen given to you by the CEO because your days are numbered. Work smart,
volunteer to rescue market capitalization and become invaluable –it may or may
not open a job for you in Seattle, but the San Francisco office is imploding as
I type.
Consumers –
Good news. The new Zillow powerhouse can withstand the lawsuits from National
Association of Realtors (or others for copyright infringement) will add services enhancing user search for
property.
They will add better mapping, maybe drone photographs,
maybe intuitive advertising directed at the consumer (much like Facebook farms
all our traits and secrets). I see them adding referral sources for construction, remodeling, property management, title, and national escrow.
Consumers if
you would like to get on the Multiple Listing Service live (rather than Zillow’s
year old sold listings that appear open) please contact me.
These
opinions are my own and not reflective of stock future price or loss.
Name in- famous merger game:
Google – Motorola
New York
Central- Pennsylvania Railroad
Sears- KMART
My un-favorites
are the financials.
Trulians in
the Den in the Rialto building
today I wish you well. Perhaps the reason
Mayan culture fell wasn't climate change?
Merger?
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| Dragon fruit |
