I’m really, really, really slammed with work so this won’t be as in-depth and searching as I’d like, but I do think it’s important to put down these semi-brief thoughts, so I can figure out what I think about what Zillow’s recent personnel moves means.
Let me not bury the lede. L’Affaire d’Errol et Curt means that Zillow has written off organized real estate as a significant player in the future of the real estate industry.
I have no special insights, haven’t spoken to anyone from Zillow, and I seriously doubt they would agree with such a strong conclusion. But that’s what my tea leaves are saying to me. Commence calling me crazy at your leisure.
The How Mattered Here
Just the fact of Zillow snatching two of the top executives, and the two that were the public face of Move and Realtor.com, would be enough to get tongues wagging and people wondering. But the way that the entire thing went down is… simply amazing. Check out Inman News’s accounts of the hirings and the ensuing lawsuit by Move and NAR.
So let me give you my take on how this campaign unfolded.
First, Errol drops a bomb on Move with his surprise resignation and same-day move over to Zillow. I wrote about that and the impact it had on at least Steve Berkowitz, CEO of Move, here. He and the rest of Move team were absolutely thunderstruck, but with the limited time they had, they adjusted and came out sort of swinging. The key move there was to promote Curt Beardsley and assure everyone that it was business as usual at Realtor.com. As I relayed in my interview with Steve Berkowitz:
In terms of impact, Berkowitz thought that Move wouldn’t miss a beat with Errol’s departure. Curt Beardsley would take over the industry relations responsibilities, and with his experience and stature in the industry, Berkowitz didn’t think anything would change for the worse.
Second, NAR and Move file a lawsuit on the basis of protecting trade secrets. Since California doesn’t allow non-compete clauses in employment agreements, the next best thing is to allege enforcement of confidential information and trade secrets. We’ll see how this plays out, but here’s the thing: There’s no way that Zillow did not anticipate getting sued.
Spencer Rascoff is not a stupid man, and he’s advised by very smart people all around him. They were going to hire away the President of Realtor.com. Not some low-level tech developer, or some midlevel sales executive, but the President, and Chief Strategy Officer, and the face of Realtor.com. They had to know that in all likelihood, both Zillow and Errol were going to get sued at least by Move.
Third, twelve days after announcing the hiring of Errol Samuelson, Zillow announces that it hired Curt Beardsley to be the new VP of Industry Relations. And that announcement came literally minutes after the press release about the Move/NAR lawsuit crossed the wires. I was in the midst of uploading the complaint to this blog when I saw word of the Beardsley hiring crossed Twitter.
I have spoken to a source at Move who told me that the Beardsley hiring wasn’t supposed to have gone out as any sort of a press release. Well, either there was some miscommunication, or Zillow held off on the release until it saw the lawsuit cross its desk. Then dropped the other shoe. Making me and everyone else say,
I’m trying to think of an appropriate analogy/imagery here.
What Zillow pulled off here is nothing short of the most spectacular power move since this:
Call it shock and awe. Call it an effective beatdown of a competitor. But after you’re done admiring the brutal ruthlessness of high level competition, return to thinking.
The Move/NAR complaint makes clear that the way Errol Samuelson resigned really pissed them off. The lack of notice, the erasing of iPhones and iPads, quitting via voicemail, etc. etc. Steve Berkowitz said as much in his interview with me. We now know that NAR was plenty ticked off as well, since I’m not sure I see an angle to why a trade association would join a lawsuit against a tech portal. I suspect that the decision makers, senior executives, and board members at both Move and NAR had steam coming out of their ears.
Is it possible that Zillow did not know that would be the precise reaction?
Errol didn’t just burn bridges behind him. He set fire to the village, killed all the animals, salted the fields, planted land mines on the riverbanks, and then dynamited the bridge the smithereens. Not simply because he left to join Zillow, or because of the reasons why he did so, but because of the way he did it.
So… Zillow hires as its Chief Industry Development Officer a man who is currently persona non grata to the “industry”. And then hires away his replacement, whom Move just promoted and then spent a bunch of time and energy assuring everyone that all is well because he was still there. Is it possible that Zillow really thinks that Errol and Curt will be greeted with warm cheers by the “industry” after all that?
Twilight of the Gods
The short answer, to me, is No. There is no way that Zillow thinks that Errol and Curt will still find all those doors at NAR, Associations, and MLS boardrooms still open to them. Especially in light of a lawsuit by the National Association of REALTORS hanging out there, it is impossible to think that Errol and Curt will be able to have long lovely chats with their old friends in the MLS/Association world, in the “industry”.
So why invest the millions of dollars that it took and will take to poach Errol and Curt away from Realtor, knowing that their effectiveness to do “industry relations” is at a nadir because of how they did what they did?
The only possible answer, as hinted at by my putting the word industry in quotes, is that Zillow does not regard the world of organized real estate as the real estate industry.
For years, maybe for decades, the “real estate industry” was synonymous with NAR and the network of MLS’s that its numerous local Associations owned/controlled. Even as recently as the NAR/DOJ settlement, the assumption by everybody, including the Federal Government, was that if NAR says X, then it means the real estate industry is saying X. Zillow’s initial play in the area of industry relations was to hire Bob Bemis, the former CEO of ARMLS, and a major respected figure in the world of organized real estate.
That went nowhere. As Bob himself said, “I was frustrated with the lack of inroads we made in the MLS community.”
Meanwhile, as the Inman News article notes, the Zillow Pro for Brokers program was a success with 120 brokerages setting up direct feeds to Zillow. And that was then.
I was working on a post about the recent CLAW brouhaha when the Errol news broke, wiping the deck clean of everything else. One thing I’ve learned while researching that story is that despite CLAW’s decision to delay the feed to Zillow by 48 hours, after the decision to allow brokerages to opt-out of the delay, Zillow was sitting at 93% of the listings in CLAW without a delay.
Read that number again: 93%. And Zillow was processing the new requests for direct feeds to Zillow from CLAW members just as quickly as it could at the time.
Why does Zillow need to have a relationship with CLAW again?
If Zillow is getting 93% of the listings direct from brokerages, from a market area where the MLS makes its distaste for and distrust of Zillow perfectly clear… why does Zillow need a relationship with any MLS, any Association? Of course, those guys would never ever breathe a word other than wanting to have a great relationship with the MLS and the Association. And I’m sure they’d love to have a fantastic working relationship with each and every MLS, and with NAR, and with everybody.
But they don’t need it.
Errol and Curt may have compromised their ability to have or build relationships with MLSs and Associations, given the circumstances of l’affaire d’Errol et Curt. But there is no reason whatsoever that they could not be effective — indeed, tremendously effective — when speaking to brokerages. After all, these two gents were building Realtor.com and the infrastructure for modern online real estate back when Trulia and Zillow were gleams in their founders’ eyes.
The CLAW experiment shows us that brokerages have no particular allegiance to the MLS or to the Association. They have allegiance to their own businesses, and will do what they think is right to be effective competitors against other brokerages. NAR can sue Zillow; doesn’t mean all these brokerages are suing Zillow.
By process of elimination, then, the only conclusion that one can reach logically is that Zillow no longer believes that organized real estate represents the real estate industry. No, Zillow believes that brokers do, and brokers will go where the agents lead them, and the agents in turn will go where consumers are.
‘Tis the twilight of the Gods, what the Norse call Gotterdammerung.
What Next for Move?
This next part probably requires a lot more thinking and work on my part, and likely won’t see the light of day as a blogpost. But here’s where my head is at today.
Although Zillow did kneecap Move quite a bit, and at a minimum embarrassed them, it is far too early to count out Move or dismiss them as dead. They’re hardly dead. At least as of 2013, Move’s revenues were still higher than Zillow’s, and it isn’t as if everyone at Move up and died or forgot how to run one of the top three portals in the real estate space.
I think the Zillow-Move story is going to play out quite a bit like the Seattle-Denver story. (What is it about Seattle and embarrassing opponents on the field of play?) For the non-football fans, the Seattle Seahawks utterly and completely dominated the high-flying Denver Broncos offense in Superbowl 48, beating them by a score of 43-8. It was humiliating.
In the offseason, the Broncos have gone out and signed pro bowl caliber defensive players: TJ Ward, Aqib Talib, and Demarcus Ware. That defense, a liability for the Broncos all year long, may now be one of the strongest in the AFC. And there’s no reason to think that the Broncos are done, what with the draft still coming up, and other moves that are possible. The offense took a hit with Eric Decker leaving, but as long as Peyton Manning is throwing the ball to Demaryius Thomas, Julius Thomas, and whoever else they stick in there at receiver (Sanders?), it isn’t as if the Denver offense is going to become the Jaguar’s offense overnight.
Denver Broncos, in other words, are becoming more like Seattle Seahawks. And I think they’re going to come back pissed off in 2015, and be very dangerous, playing with a chip on their shoulders.
I think Move may do the same. After this humiliation at the hands of Zillow, not just of Move but also of NAR (who joined in the lawsuit, remember?), we might see the gloves really, finally come off. Move may make some moves (heh) to become more like Zillow in the areas where they need to be more like Zillow, just like the Broncos needed their defense to be a helluva lot more like Seattle’s Legion of Boom. And NAR might just let them.
It might be too late, of course, and time will tell what happens from now. But it’s too early to write the epitaph for Move; let’s see what they do to respond.
I have to say though that I do not envy Steve Berkowitz. At all.
Final parting question: Where in the world is Trulia?