To all the agents in the house,
One of my earliest childhood memories was watching some Super Bowl where the Buffalo Bills lost by a gazillion points and seeing a commercial playing a cheesy but kind of awesome Van Halen song that extolled the virtues of Crystal Clear Pepsi. The new beverage tasted like cola, but it looked like mineral water. The commercial, which I learned later in life was a total rip off of that Van Halen video, offered slogans like, "Right now, the future is ahead of you."
That brings us to Zillow. Apps haven't existed as long as cola, but the Apple slogan, "There's an app for that" has been around for 13 years. On Thursday, though, Zillow pledged to investors and the public a "Housing super app." This was really the title that the company gave its app in earnings report materials, and a phrase CEO Rich Barton repeated on Thursday's call.
That call highlighted that Zillow lost a lot of money in 2021 (the company lost $528 million in net income to be exact, and has $4.8 billion in debt) amid its ramp up, and then dramatic wind down of iBuying. Post-iBuying Zillow seeks a change of direction. The change…is the super app?
Agents, I have not done reporting on the super app beyond reading through yesterday's investor slides, and a healthy chunk of the annual report, so the following is rampant speculative theory. Very rampant. But here are some thoughts…
Hypothesis #1: Zillow and Barton don't know what they're doing
At one point on Thursday, Barton stated: "But really the big shift, that we are on the leading edge of, is the shift, in this giant industry, the largest perhaps in the U.S., of moving from the offline non digital way of doing things to the online digital way of doing things with us as a leader in that."
What is this, 1998? Who has not already moved to doing the bulk of their business online and digitally? Agents, how many of you are moving toward smartphones and home wifi?
Zillow could simply be making cosmetic changes to its app, calling it a "super app," and hoping it will somehow, someway restore investor confidence, until the company figures out a real plan forward.
Hypothesis #2: Zillow and Barton finally have some clarity on what they're doing
The super app will "expand adjacent services and create new seller services," explains the company's investor presentation.
The money Zillow now makes from real estate transactions is Premier Agent, the buyer agent advertising program you may love to hate, but a profitable and steadily growing enterprise for Zillow.
A better, more clearly presented app could, on top of Premier Agent, enable Zillow to do direct-to-consumer services. Most of the money here lies in Zillow's currently money-losing mortgage arm. But the company also has seller and closing services. And perhaps Zillow can monetize the home scheduling and touring process via its ShowingTime acquisition.
This stuff is not big and exciting. But that's precisely the point. Zillow tried something big and exciting with iBuying, were adult enough to acknowledge its failure, and are now picking at the low-hanging fruit of being an exceedingly popular website.
Hypothesis #3: The super app might not amount to anything, but it doesn't really matter
Let's say the Housing Super App is a silly but harmless idea, resulting from three months of writer's block for Zillow executives after the iBuying failure.
So, what? Maybe Zillow could just be content being a company with a really well-known brand that mostly makes money from Premier Agent. That makes Zillow a colossal failure compared to, say, Amazon. But in the fractured, nervous world of real estate, it makes Zillow the largest incumbent, and a company with the cash to defend its turf against CoStar.
…Again, loose speculation here, and agents you're more knowledgeable about what is going on. So please send me your thoughts anonymously to mblake@housingwire.com.
Sincerely,
Matthew Blake
Senior Real Estate Reporter
EmoticonEmoticon