{"id":15325,"date":"2022-03-25T16:32:17","date_gmt":"2022-03-25T20:32:17","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/?post_type=hck-submission&p=15325"},"modified":"2022-03-25T16:35:19","modified_gmt":"2022-03-25T20:35:19","slug":"zillow-addressing-the-online-real-estate-market","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/zillow-addressing-the-online-real-estate-market\/","title":{"rendered":"Zillow: Addressing the Online Real-Estate Market"},"content":{"rendered":"\n\n\n

I learned from a young age that, no matter the group, one topic that the adults around me reliably came to talk about in any social gathering was the price of local real estate. My parents explained that people\u2019s sense of well being was strongly tied to the value of their home \u2014 it was like their stock portfolio (but often bigger!). But, at the time, there were no good ways to know the value of your home apart from community chatter.<\/p>\n\n\n\n

Enter Zillow. Zillow is a third-party data aggregator of real-estate data that creates products for both buyers and sellers of homes and rentals. You\u2019ve probably used Zillow if you recently were in the market for a new place to live. In this post, rather than emphasizing the business model, I\u2019ll focus specifically on describing Zillow\u2019s process for acquiring and leveraging data. I\u2019ll close with some of the implications of Zillow\u2019s data strategy for the best path for the organization moving forward.<\/p>\n\n\n\n

\"Zillow
The Zillow Landing Page makes it straightforward for anyone to find their next home.<\/figcaption><\/figure>\n\n\n\n

Aggregating Data Assets<\/strong><\/p>\n\n\n\n

The heart of Zillow\u2019s strategy is to maintain a up-to-date, wide coverage, home-level data set on which it builds other data assets. Interestingly, Zillow does not invest heavily in the development of it\u2019s own data assets. Rather, it relies on two sources: Real-estate transactions data and user-generated data.<\/p>\n\n\n\n

First, Zillow expends significant effort to integrate in data from many sources of real-estate transactions. The most common is the use of Multiple Listing Services \u2014 a database system developed by the National Association of Real Estate Agents (source<\/a>). This dataset comprises 580 regional databases that are developed by local organizations to aid realtors in selling homes (source<\/a>). Zillow also gathers data from other non-MLS auctions and from other public events like foreclosures.<\/p>\n\n\n\n

Second, Zillow allows users to post their own information. This includes \u201cfor sale by owner\u201d properties for housing sales (source<\/a>). However, this is particularly valuable for rentals, where Zillow serves as a large platform for coordinating landlords and renters (and where transactions are much more common) (source<\/a>).<\/p>\n\n\n\n

The heterogeneity of the datasets that form Zillow\u2019s data foundation provides a source of competitive advantage \u2014 it\u2019s hard to mimic the coverage of the data. However, it\u2019s also a source of fragility for the organization, in that it makes Zillow dependent on the relationships that it has with its data providers. For example, in 2016 Zillow was forced to go out and build relationships with individual MLS\u2019s and county records when their bulk data provider decided to not renew its agreement with Zillow (source<\/a>).<\/p>\n\n\n\n

\"Zillow
The Zillow website advertises listings in different areas to users. <\/figcaption><\/figure>\n\n\n\n

Creating Value but Struggles to Capture It<\/strong><\/p>\n\n\n\n

Zillow then proceeds to generate data assets on top of this foundation. The most famous example is the Zestimate \u2014 a per-house prediction of the market price. Zestimates have been foundational to Zillow\u2019s growth strategy; interestingly, they were intended to be controversial (rather than accurate) to increase word-of-mouth chatter about the website (source<\/a>). Zestimates are moderately accurate<\/a>, but are widely popular because of the completeness of their coverage.<\/p>\n\n\n\n

Zillow then capitalizes on its voluminous traffic to create value for real-estate sellers \u2014 both real estate brokers and financial institutions. For brokers, Zillow provides Premier Agent \/ Broker programs, which allow agents to track leads and market their services on the platform (source<\/a>). For financial institutions, Zillow aggregates many providers into a single marketplace for home buyers to shop their mortgage options (source<\/a>).<\/p>\n\n\n\n

There are two primary challenges facing the organization related to their data strategy. The first is reliability \u2014 Zillow struggles because of the publicity of its information means that it is accountable for the effects of inaccuracies. For example, a group of homeowners in Illinois sued Zillow over Zestimate accuracy in 2017 (source<\/a>). Second is Zillow\u2019s own ability to exploit the data effectively. For example, Zillow tried to enter the iBuyer market \u2014 where the organization bought homes for the purpose of reselling \u2014 in competition with Redfin. Interestingly, the organization could not make the model work and closed Zillow Homes in 2021 after taking large losses (source<\/a>).<\/p>\n\n\n\n

In summary, Zillow has built a powerful platform that coordinates a large segment of the market for real-estate via a powerful data set. However, they\u2019ve struggled to effectively find a way to capture value from that data through building other products and services. If they can do so, however, their data assets provide a competitive moat that should protect the company moving forward \u2014 they\u2019ll truly be home free.<\/p>\n","protected":false},"excerpt":{"rendered":"

You may know Zillow for enabling your \u201creal estate daydreams\u201d or allowing you to snoop on the price of your friend or boss\u2019s home. But where does it get this data, and how does it use that data to create value? Read on to find out. <\/p>\n","protected":false},"author":19172,"featured_media":15326,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-15325","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/competing-with-data-5\/","yoast_head":"\nZillow: Addressing the Online Real-Estate Market - Digital Innovation and Transformation<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-digit\/submission\/zillow-addressing-the-online-real-estate-market\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Zillow: Addressing the Online Real-Estate Market - Digital Innovation and Transformation\" \/>\n<meta property=\"og:description\" content=\"You may know Zillow for enabling your \u201creal estate daydreams\u201d or allowing you to snoop on the price of your friend or boss\u2019s home. 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