Business

Jobs, Benefits, Business Model, Founding Story

Zillow’s mission is to build the world’s largest, most trusted, and vibrant real estate marketplace.

Zillow was incorporated in 2004 by Rich Barton and Lloyd Frink, former Microsoft executives and co-founders of Expedia. The website, an online real estate database, features information such as home values and rental rates for homes that are for sale and for rent. It uses a proprietary formula (a “Zestimate“) to calculate these values. Its name is a combination of the words “pillow“ (where one’s head is rested) and “zillions“ (the number of data points it aims to offer).

In 2005, as the company was in the process of developing its website, Barton set a goal – within six months of its official launch, he wanted it to be attracting a million visitors per month. The task was not going to be easy, as the firm did not have an ad budget. It had to be creative, and rose to the challenge – collecting data for homes in 300 cities. It even included data on foreclosed homes.

The site was officially unveiled in 2006, and the launch was a huge success. Barton’s expectations were wildly exceeded, as it generated a million visitors in its first three days and five million in its first month. Initial visitors were intrigued as they could observe their home values rise and fall. Zillow heavily publicized it by writing blog posts and articles on other companies‘ sites. Marketing Director Amy Bohutinsky prioritized the use of social media, creating Facebook and Twitter profiles. In 2007, at the start of the housing crunch, the site advised its audience that it was not a good time to buy.

Zillow grew to the point that it felt comfortable pursuing an IPO. It went public in 2011, and over the next few years acquired a number of companies, including Trulia. The company changed its name to Zillow Group in 2015. Its advertising budget was now huge – that year, it planned to spend $100 million, with expenditures peaking during the summertime home-buying and selling season. More importantly, the company’s revenues were forecasted to reach $690 million by the end of the year. Zillow now has a more than 50% market share of online real estate visits across desktop and mobile.

Business model of Zillow

Customer Segments

Zillow has a multi-sided business model, with two interdependent customer segments that are both needed in order to operate:

  • Consumers: Individuals assess their home values, research home listings, and contact agents.
  • Real Estate Agents: Professionals advertise their services and connect with consumers.

Value Proposition

Zillow offers three primary value propositions: accessibility, customization, and brand/status.

The company offices one of the most comprehensive real estate databases on the market, covering the full cycle of home living, including buying, selling, renting, financing, and remodeling. The system has more than 110 million U.S. homes, and features a wide breadth of property facts, listing information, and purchase/sales data. Its vast size gives visitors access to more types of content than they would normally be able to get.

The database gives customers a personalized experience. They can save home listings as “Favorites“ on both the website and the firm’s mobile app. They can also sign up for monthly e-mail updates on changes in these homes’ values, price changes, listing status, and other data. Users also have the option of creating “Saved Searches“ for a given zip code or neighborhood and obtaining daily e-mail updates on new homes listed for rent or sale, as well as price changes for already-listed homes.

Zillow’s brand name is powerful due to its success. Most of the website’s traffic come from direct look-ups rather than through general queries on search engines. In the quarter ended December 2015, site traffic rose to 123.7 million average monthly unique users, an increase of 61% compared to the quarter ended December 2014

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Channels

Zillow’s main channel is its website, through which it markets and enables usage of its services. The company also engages in large-scale national TV advertising. Further, it has its staff of real estate industry experts provide commentary in national broadcast and print media outlets, as well as write blog posts and guest opinion pieces.

Lastly, it communicates with customers through social media.

Customer Relationships

Zillow’s customer relationship is primarily of a self-service, automated nature. Customers utilize the company’s database while having limited interaction with its employees. Also, its website has a detailed Help Center that provides answers to many potential questions and a forum for receiving assistance from other users.

However, there is also a personal assistance component as its website features contact information (addresses) for Zillow locations.

Key Activities

The company’s business model involves maintaining a common platform between two parties: consumers and real estate agents.

The platform consists of the main website and its suite of mobile real estate apps.

Key Partners

Zillow maintains partnerships through the following programs:

  • Affiliate Program: This program recruits website owners with a real estate focus to promote the company on their platforms. Partners receiveaccess to a customized dashboard which they can use to monitor traffic to Zillow through their sites. The more visits, the more they get paid.
  • Zillow Pro for Brokers: Zillow makes companies establish a direct feed to Zillow; afterwards their logos and an outbound link to their websites are included on their listings, making it simple to for buyers and sellers to connect with them. Zillow puts the firms‘ listing agents first in buyers‘ contact options so they can start receiving leads right away.
  • Zillow Partnership Program (ZPP): This is an alliance between Zillow and MLS (a real estate property listings company) that improves listing accuracy and accessibility through a direct listings feed to Zillow. The collaboration gives buyers the latest information, gives sellers timely exposure for their homes, and provides agents with relevant outreach on properties.
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Key Resources

Zillow’s main resource is intellectual property — its proprietary algorithm that enables the calculation of home values (“Zestimates”). It has 18 patents covering techniques for this purpose. The company also relies heavily on its technology platform that provides customers with powerful online tools to carry out their customizable database searches.

Lastly, its sales team is an important resource, marketing its services to consumers and real estate agents alike.

Cost Structure

Zillow has a cost-driven structure. It tries to keep expenses low through heavy automation on its website. Its biggest cost driver is sales/marketing expenses, as it utilizes a variety of advertising channels. Other major drivers are technology/development and administrative expenses.

Revenue Streams

Zillow has two main revenue streams, which are as follows:

  • Subscription Revenue:  The company generates revenue from the sale of subscription packages that allow real estate and mortgage industry professionals to promote their services on its site.
  • Display Revenue:  The company obtains revenue from the sale of display advertising packages to companies of all kinds who desire to promote their brands on its website, its partner websites, and its mobile applications. The packages are sold on a cost per thousand impressions (“CPM”) or cost-per-click (“CPC”) basis, and pricing is based on ad positon and size.

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