If you’re in the real estate industry — and why wouldn’t you be if you’re reading this blog — then you know by now that our lords and masters have approved Zillow’s $3.5 billion acquisition of Trulia. The new entity is not named TruZilla, Destroyer of Tokyo; it’s named Zillow Group.
I’ve had the opportunity to spend a few minutes on the phone today with Greg Schwartz, Chief Revenue Officer of Zillow (or is now Zillow Group?), and Paul Levine, the former COO of Trulia, who was named as the President of Trulia in the reorganization. I’ve known both men for years now, and consider them both to be among the best and brightest in the industry, and in the interests of revealing all possible conflicts, I’ve done some work for Paul and had Greg buy me a drink or two at various events. You decide whether I’m incorrigibly biased or not.
In any event, based on those conversations, as well as general stuff floating around, here are my initial few thoughts on the Zillow Group. I have no doubt that we’ll be talking about them much, much more in the future days to come.
The Reorganization
The most surprising detail, to me, is that Pete Flint, the CEO and co-founder of Trulia, is out. He’s not out completely, as he has joined the Board of Zillow Group, but both Paul and Greg confirmed that Pete no longer has an operational role at Trulia or at Zillow. Paul is now the head man at Trulia, reporting to Spencer Rascoff. It’s surprising because at least in October of last year, Pete was fully expected to continue leading Trulia. I suspect that perhaps Pete would like a well-deserved break and enjoy his money for a change. He and his wife had a new baby not too long ago, after all.
Also curious is that Sami Inkinen, Trulia’s co-founder, is completely out as far as I can tell. Given that both Rich Barton and Lloyd Frink, co-founders of Zillow, are members of Zillow Group’s Board, I thought it interesting that Sami is out. Perhaps he too would prefer to spend his wealth and time doing adventurous stuff.
Having dealt with both Pete and Paul, I don’t think Trulia is going to miss a beat. Yeah, you can’t replace a Pete Flint, but it’s not like he’s disappearing completely. He’s on the Board. I’m certain he’ll be available to Paul as needed. And Paul is quite capable, trust me. Plus, he’s sorta like a paisan to me, as he’s married to a Korean-American.
Already reported is the news that some 350 positions were eliminated across both Trulia and Zillow. Most of the layoffs came from the Sales department, with the inside sales team at Trulia’s San Francisco and Bellevue office eliminated. Apparently, a number of people were offered positions in the remaining offices: SoCal, Denver, and Seattle. In addition, a number of the “back office” functions, like accounting, legal, and HR were consolidated, eliminating a number of jobs. All of that was fully expected by everyone involved, and I’m sure that those laid off were offered generous packages. I don’t expect either Zillow or Trulia to be stingy on that front. (If you were one of those laid off and would like to provide details, please contact me.)
To be fair, while I’m sure the companies made some of these plans anticipating the approval, a lot of the heavy lifting simply could not be done until the deal was consummated. You can’t really talk strategic alignment when something could go sideways and the two end up having to keep operating as fierce competitors at each others’ throats. So a lot of the details were (a) unknown yet, (b) in the process of being decided, and/or (c) not ready to be shared.
With that said, there are a couple of interesting tidbits here.
Two Brands, One Company
The most interesting question was how the new Trulia-Zillow combination would work as two brands and two leading properties under one roof. Spencer Rascoff in the past had suggested that Zillow might focus more on the “top of the funnel” as homebuyers start the whole process, while Trulia might focus more further down the funnel as homebuyers start to get more serious. Both Greg and Paul said that they were still evaluating that strategy, since both Zillow and Trulia have been enormously successful with consumers. They allowed that the two sites have some subtle differences (they didn’t elaborate) and that might lead to changes, but it was all sort of TBD.
Greg brought up the fact that Zillow Group operates Hotpads and StreetEasy as pretty separate brands as well, and that he expected that Trulia would be kind of like a semi-autonomous province. Over time, perhaps the two would diverge slightly in focus, but at this time it doesn’t look like Zillow is pursuing a differentiated brand positioning strategy. I suppose it’ll be more like GM with its brands that overlap significantly and compete with each other, rather than Lexus-Toyota.
I don’t know if I buy that just yet. Hotpads is rental-focused, and StreetEasy is all NYC. They’re not the same thing as Trulia which goes after the same national audience that Zillow does. I imagine we’ll begin to see differentiation as time passes, probably along the initial strategy of “Zillow is for tirekickers, and Trulia is for serious buyers” type of approach. It won’t be that dramatic a statement, but perhaps the tools/products may lean one way or another. (For example, maybe Zillow would have more celebrity homes stories on its blog, while Trulia might have more home values information or something. Like I said, a lean one way or another rather than a clear difference.)
In that vein, everything “consumer oriented” is staying within each company/division. Trulia’s product and consumer marketing remain with Trulia, reporting to Paul. Things that are more advertiser and industry oriented are consolidated. Sales, for example, all reports to Greg. Industry Relations will report to Errol Samuelson.
Oh yeah, news on that front. Errol’s judge-imposed time on the beach will come to an end on March 22nd, according to Greg. Good for him; I imagine he’s been chafing on the sidelines. (But see this story from Realuoso, which injects a bit of uncertainty into everything.)
The CRM Question
On the whole, I think the integration will go fine. Yeah, there are cultural differences between Trulia and Zillow, but fundamentally, the two companies were trying to pursue the same goal and doing the same thing.
The one area of real difference between the two is around how each dealt with the critical CRM question.
As I’ve explored in depth before on this site and on my reports, Trulia made a ginormous bet by buying Market Leader to be the CRM backbone of Trulia’s offerings. Its corporate strategy prior to the acquisition was that it can cross-sell and up-sell its Market Leader offerings to Trulia’s customers, because lead-management and reporting would be better on Market Leader than on some other CRM software.
Zillow, on the other hand, pursued more of a “open platform” approach offering out extremely simple CRM tools, while allowing third-party CRM vendors to connect to Zillow. It was the “Google Apps” approach.
Now that the two are one, I wondered about that key difference and how Zillow Group would resolve it.
I wish I had some fascinating answers for you, but fact is, this is one of those “we have to figure it out” things. Greg reiterated his commitment to the “open platform” concept, at least for Zillow, and Paul said nothing to contradict him. But then again, it isn’t as if Trulia is selling off Market Leader either. I think they’ll continue as usual, while trying to figure out how to make that Market Leader component work within the framework of “open data”.
(This is rank speculation on my part, but I think if someone offered Zillow Group a bunch of money for Market Leader, it might be available for sale. Given Realogy’s acquisition of ZipRealty, if I’m HomeServices of America or RE/Max, I’m making a phone call.)
Advertising Sales?
Greg was not prepared to answer the question of how cross-platform ad sales would work. I didn’t expect him to, especially this early.
But I imagine the big brokerages with the big contracts, like Realogy, is likely to seek discounts on the whole package. If they were paying Zillow $5 million a year, and Trulia $5 million a year, I’m sure they’d be looking to get both now for $8 million a year. (Those are made-up numbers, y’all.) It’s natural inclination.
Finally, They’re In the Honeymoon Phase
Both Greg and Paul emphasized time and again just how excited they were that the deal was done and now they could work together. Did I say excited? They said EXCITED! So perhaps a better word is “ecstatic”. Or “thrilled”. Or “orgasmic”. Well, maybe not that last one.
Point is, both of them reiterated time and again just how much they respected each other, how they’ve known each other for years and years, and it’s just so great to finally be on the same team.
It’s almost like the Texans and the Colts merged into one team and you have J.J. Watt just gushing about how GRRRRREAT it is to have a real quarterback for a change, while Andrew Luck is just THRILLED at having a defense that can, well, defend.
Few Random Thoughts…
First random thought is that these guys really, really need News Corp to up Move’s game in a big way. Zillow made Trulia better, and Trulia pushed Zillow to be better. Move had and still has some really smart and talented people there, but they were always hampered by NAR. Well, if Move can’t push Zillow Group hard, they way Trulia pushed Zillow (and vice versa), I can see stagnation setting in, and the ambitions of people turning inwards to corporate politics rather than out to the competition.
In that light, perhaps a Broker Public Portal that could pose a real challenge would be best for everybody. (Though by now, you know my concerns about the BPP.)
Second random thought/suggestion is that they really should rotate people between the two companies (and including the Hotpads and StreetEasy properties as well) frequently. They want to be more like P&G, which has brands, and less like Realogy, which has companies. Realogy sometimes resembles a dysfunctional family where they compete more with each other than they do with the outside world. Paul did say that they fully anticipated employee movement amongst brands and companies to be a big opportunity, especially as people climb the ladder, so that’s a positive sign.
Third random thought: I can’t wait for Redfin to go public now. Zillow Group is not a startup anymore; one could argue they haven’t been one for some time now, but definitely, after this, it’s a Big Giant Company. It is too big, too important to the industry, and too wedded to the status quo to be rocking the boat much anymore. Move is a division of a multi-national company, so they’re in the same boat. So I’m looking at Redfin, the next contender in line, to do the more radical, revolutionary stuff. An IPO would provide the funds and the stock-as-currency to give Redfin more resources with which to make moves.
Fourth random thought: I am genuinely happy for my friends at both Trulia and Zillow. They sure do seem like newlyweds madly in love. Hope the honeymoon lasts at least a year or two, before things devolve into arguing over toilet seats and who’s gonna do the laundry. Oh wait, did that get sidetracked into my personal experience with marriage? Sorry about that. The point, however, stands. The Zillow Group people are thrilled and excited and exhausted, but… this is not the end. It’s not even the beginning of the end. It is merely the end of the beginning.
I suspect the next chapter will be unexpectedly fraught with difficulty. I wish everybody luck.
-rsh
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