Where Real Estate Gets Its Dirt

Regarding the rumor of Zillow acquiring Trulia

A few thoughts on this.

“Blue horseshoe loves….”

This could all be just Wall Street trickery. Remember how much MOVE stock bounced when it was rumored they were going to be bought by Trulia? It was significant. So maybe someone got the idea to make a bigger play by spreading a Zillow buying Trulia rumor.

Seattle vs. San Francisco

Executive leadership at both companies couldn’t be more different. Think Frank Underwood and Mr. Chips (you make a guess of which CEO fits the part) It’s really hard for me to imagine both teams being on the same page of anything, besides all money they will be making.

A deal could be a good for MOVE.
A Zillow and Trulia merger could be a good thing for MOVE, Inc. Such a large acquisition would be a huge distraction for Zillow, something MOVE could act upon. Plus they immediately bump from the #3 listing site to the #2 listing site. : )

LinkedIn ripple
If you start getting LinkedIn requests from anyone at Trulia then you know the deal is real.

Is it a good or bad thing?
Personally I think it would be bad for the industry. Competition is a good, and with less of it the industry will suffer.

The biggest loser.
Another thought occurred to me. Dominion Enterprises (a privately held company) owns Homes.com. Zillow and Trulia’s market cap is about 8 Billion. Hindsight is 20/20 but you gotta wonder if back in the day Dominion spun off Homes.com and did an IPO what that asset would be worth. Is it too late? Or is the Batten Family too fat and happy? There is big money in this space, without proper investment it will be harder and harder to take them seriously.

28 Billion Dollars?
In an article yesterday the CFO of Trulia was quoted:

““Long-term, we see this as a two-player market and evolving much like e-commerce” with EBay Inc. and Amazon.com Inc., Sean Aggarwal, chief financial officer at Trulia, said at the Bank of America Merrill Lynch Global Technology Conference in June.

He also described online real estate as a “very large category,” with real estate professionals spending about $28 billion a year on marketing. Trulia and Zillow collectively are doing about $500 million to $600 million a year in revenue, he said, leaving $27 billion plus of “potential money” that could come into that realm over the next several years.

Does anyone else think that number is crazy?

Will a deal happen?
No comment from either side. Typically where there’s smoke there’s fire, but I say no.

UPDATE: 7/28/2014 Looks like I got this wrong. Zillow is acquiring Trulia for 3.5 Billion in an all stock deal.

  1. re: $28B

    Macquarie published their take using crazy assumptions and Zillow and Trulia seem to believe it…or Macquarie heard it from Zillow and published it. Either way it’s a ridiculous equation.

    Example from @ModestProposal1: $80B in commissions, 25% spent on ads, 75% of ads spent online, 34% share for Zillow.

  2. Yeah, I’m curious to learn more about where that $28B is being spent today on “marketing”. Surely not the newspaper, not on software, and apparently not online advertising yet. Flyers? Greg, you should be killing it! Seriously, though, I’d really like to understand more about that number.

  3. RE: $28B

    It used to be $8-12B and traditional media spend was shifting from $4B down to $3B and the difference was shifting towards digital. I would guess the agent/broker total addressable market is between $1-2B based on those reports, and could grow to $3-4B if completely replace the traditional media. Growth will be achieved by increasing the average revenue per user (ARPU) by increasing traffic and time on site, thus increasing the impressions and rates. If considering mortgage and rental space, perhaps there is more but it appears overly optimistic.

    RE: Good/bad for others

    Consolidation could be good for agents in decreasing the number of sites they have to spend $ on but who knows since costs are based on traffic and if not too much overlap, they could spike – tough call. The good thing is like having multiple phone books in a market forcing businesses to advertise in them all instead of consolidating their marketing efforts to a primary source; I’m an advocate for one phone book, not 3-4, knowing my family’s towing company’s primary advertising back in the day was Yellow Pages and radio. Yellow Pages, once more publishers added to the market, was very costly until consumers gravitated towards one (DEX) and then became more efficient and could double down in one place. 😉

    RE: cultures

    I’d suspect they run independently for some time to capitalize on that dual income and potential overlap. Meanwhile consolidate data aggregation, analytics, call center, API. The last I’d expect is consolidate client interfaces but potential drop due to overlap likely offset by dual spend on $45-80M TV ad campaigns each. If this does go through, it will be interesting to see how it all plays out.

    Okay, speculation mode off and back to work for this guy. 😉

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