There have been some interesting conversation around the web on Zillow’s business model…
- Will it really just be ad-supported?
- Will they list homes at some point (or at least their own subset of homes)?
But I’d argue that it is way too early to know their business model. In an interesting interview with Inman News (The link is dead) Rich Barton stated that the purpose of building a home estimation service up front was to get people comfortable using the web to find the value of their home.
Rich also mentioned that when he started Expedia he was frequently advised that he needed to “lock-in” potential ticket buyers before giving them flight information because many people (myself included) would to go the site to find good deals, but go to their travel agent to actually purchase tickets. (Marlow, doesn’t that remind you of something that is going on in real estate right now?). However, Rich stuck to his guns in giving the information up free because he recognized how important it was to get people comfortable with finding travel information on the web. In due time, people became comfortable enough with finding travel information on the web that they did away with the travel agent altogether.
I don’t think Rich’s intentions are the same with real estate agents, but I think he’s looking down the road a few years and seeing that agents are going to be more and more marginalized as home-buying and -selling consumers do the bulk of their purchasing research using web technologies. (I’d also bet that Zillow’s business plan is closer to a sketch than a detailed drawing as he likely recognizes the importance of making things up as he goes along.)
Giving away (for free!) great tools like Zillow’s Zestimator is simply a means to getting people comfortable using the internet to set a value on a home. Nothing more, nothing less. And recognizing that Zillow is a long-term project, I don’t think it is a stretch to say that Rich is developing a bunch more tools that will be a more obvious threat to the status quo of the real estate agent commission structure.
Without a doubt, it is a much softer play than with Expedia where he went head-to-head with travel agents. But then again, the stakes are even higher in the real estate industry.