Zillow Group: Premier Agent Pricing Strategies

Could you share some background as to when you joined Zillow and how your role progressed through the business?

I joined Zillow in late 2009, when the company was just about a hundred people and I think it was maybe third or fourth in terms of traffic, among North American US real estate sites. I started out as the Director of Sales Strategy & Operations and, over the course of the next seven to eight years, the business grew significantly and went public. We became the number one real estate website. Our monthly revenue went from in the order of hundreds of thousands of dollars to tens of millions of dollars and I was, effectively, the General Manager of that business.

What was the core value proposition of Premier Agent in 2011?

The core value was really providing leads to real estate agents. Basically, what we would call transaction ready customers; so not just customers who are vaguely interested in buying or selling homes but customers who are actually interested in visiting homes and are ready to purchase or sell a home.

Walking through the process, if I’m an agent working for a broker, I would pay up front for a certain share of traffic on Zillow for my listings?

That’s approximately right. Our business model, in terms of how we charged and the mechanism by which we charged, changed a lot over the course of the time while I was there and it’s still changing now. Essentially, that’s right; agents would pay a certain monthly fee up front and, based on that fee, they would get a certain portion of leads.

How did Zillow interact with the agent in the early days? What was that relationship like?

In the early days, we talked to a lot of agents just to get their feedback on what they wanted and what they were interested in and when I joined, we actually had a different product which was display ads for real estate agents. On the Zillow website, you would see an ad that says, Joe Schmoe Real Estate Agent and it would have their picture and their number etc. What we found pretty quickly is that agents weren’t getting a lot of value from that; customers weren’t really interacting with the ad. By interacting with agents and talking to them, we learned that the value wasn’t there and that’s when we started to switch gears and focus on this new product. We were really focused on leads and transaction ready customers.

A lot of the communication with agents happens through our sales force who try to sell the product and renew the product. So if we’re getting feedback that no one wants to renew then, obviously, we’re going to react to that. That was in the early days. Later on, we built and developed other mechanisms for making sure we had a clear line of communication with agents and we got very constructive, continual feedback.

What were the typical reasons why an agent would churn from Premier Agent?

Typically, their perception is they would not be receiving high return on investment for their leads. Part of the challenge is that many real estate agents aren’t focused on finance or quantitative analysis; they don’t do that. They may make more of a judgement based on the leads they received over the last month versus the value of the leads they would have received over the last six months.

Sometimes agents would have a few bad leads and then just cancel. Some agents just weren’t really effective at converting the leads we were giving them and so, for them, the conversion rate was low, the ROI was low and they would churn as well.

What is the alternative for the agent? Let’s say I’m paying up front for a share of that traffic, what are my options elsewhere?

There’s a lot of places agents can purchase leads and get traffic; I’ll give you a few examples. At some of our competitors, they can buy advertising on Realtor.com, Homes.com, Homelike.com. There’s a lot of other websites that they can buy on to; none currently as big as Zillow but the aggregate, when you combine a bunch of them, you could get that presence.

The other thing they can do is advertise directly with Google, they can advertise directly with Facebook and many agents do. They can also do direct mail, postcards, bus signs; it runs the gamut. I think Zillow has a really effective advertising program and it’s hard to compete with the effectiveness and high ROI that Zillow delivers, but if an agent really doesn’t want to work with Zillow, there are definitely other options out there.

How did you see the ROI compared to the likes of Facebook?

I think it was generally high. I think the challenge with Facebook is that you need a pretty high level of sophistication to make the best value of it. If you’re a Facebook advertising master, you could probably get a pretty decent ROI, but most real estate agents aren’t and our advertising program makes it super easy. As a real estate agent, you select what zip code you want, select how much you want to spend and that’s it. That’s all the decisions you have to make.

Just walk through what the experience is of setting up an ad on Facebook or Google; it’s a 30-step process with a hundred decisions along the way. It’s just a much more complicated process and it’s much more likely that an agent is going to make an incorrect decision and lower their ROI.

The one thing we have seen is that agents that are really successful combine them. They’ll advertise on Zillow and they’ll also advertise on Facebook and use Facebook and Google retargeting to target customers who have also visited them on their website or through their email campaigns. Agents have expressed that combination as super powerful, but most don’t do that because they don’t want to deal with a complicated ad platform.

Do you see Facebook as a risk to Zillow’s listing business in the long run?