An Open Letter to Zillow from a Realtor

An open letter to Zillow from a Realtor who believes his clients deserve better service, better data and a better experience.

Dear Zillow,

Congratulations on hiring Jay Thompson, co-owner of Thompson’s Realty in Phoenix and respected real estate blogger to be your new Director of Industry Outreach & Social Media. Also, in case you did not get my memo a few weeks back, congratulations on hiring Bob Bemis, the ARMLS (Arizona Regional MLS) CEO to be your VP of Partner Relations. Judging from your latest hires, it is clear your company is determined to hire talented folks rooted in the traditional real estate industry. It is also clear that you finally embraced the fact that you have a massive PR problem and you seem determined to spend your way out of it.

Zillow Senior Executives Dump Stock

Bloomberg reports that in late February, your Chairman and Vice-Chairman sold 885,400 shares of stock valued at over $27.7 million dollars. Curiously, that sell off came just one day after Zillow announced that fourth-quarter revenue doubled from a year earlier. However, that sell off caused the stock’s value to fall 6.1% and sparked speculation from investors that your business model is entirely unsustainable. Bolstering that fear, your stock trades at about 50 times estimated 2013 earnings, the highest multiple that Pacific Crest Securities Inc. tracks. Wow, if I could sell investment properties on a 50 multiple, I’d be a paper billionaire too. Did I mention that Zillow isn’t sustainably profitable yet? Ut oh, spaghettio.

Zillow CEO Spencer Rascoff Interview

Listen closely to what Spencer Rascoff says in the third minute of this interview. Mr. Rascoff confirms that Zillow’s principle business is selling advertising to real estate agents. There is no mention of fiduciary responsibility to agents or their clients, just sell, sell, sell. In fact, he goes on to characterize his company by saying “we have less than 1% wallet share of what agents spend on advertising”. Mr. Rascoff goes on to claim that “we are the biggest real estate company” and outlines an investor-like pitch on why Zillow is going to be able to sell more advertising to real estate agents.


Is anyone else offended by this brash, “we’re smarter than you” attitude? I think it wholly offensive to be told by the CEO of Zillow that real estate is not highly evolved. Especially from someone who is literally hijacking our work product and then selling it back to us. If agents stopped syndicated listings to Mr. Rascoff, the “biggest real estate company” would literally cease to exist overnight.

What is Zillow’s End Game?

It is clear that Zillow cannot continue to trade at 50 times projected earnings, so what can Zillow do to boost revenues? How can Zillow turn the corner to ensure profitability and win back agents?

1. Become a one-stop shop for agents where Zillow can serve all of their business needs;
2. Eventually morph into a VOW (ala Redfin);
3. Eventually morph into a referral brokerage; or
4. A combination of (1) and something else.

I do not see a clear path in any of the above scenarios.

In Memoriam (Yes, I am predicting Zillow’s demise)

Without the listings — all of them — cleanly delivered and refreshed, Zillow will crumble under their own weight. Once the general public realizes that Zillow does not display all of the real estate listings in their city (they do not in Nashville) they will begin to lose credibility. Consumer confidence will begin to erode slowly at first, but hastens as users find the multitude of errors, old listing information and sees a rather alarming percentage of listed properties are actually already sold or no longer available. This process further accelerates when the public learns that all real estate listings are displayed on Realtor websites only. The death knell will be heard when it is revealed that Zillow is not a real estate site, but an advertising site that simply regurgitates erroneous data in an effort to sell a disingenuous service. Zillow subsists in the seedy underworld of page hits, banner impressions, user click paths and dollars earned per visit.

So long Zillow, it has been a blast having you around. I wish you luck in your next endeavor (please do not get into the subprime mortgage business or create any credit default swaps).


Grant Hammond, a multiple award winning real estate broker who wants his clients to have the most up to date, accurate information available.