Planet Zillow.com: Burgeoning Realty.bot grows, potentially, to become a self-sustaining residential real estate eco-system

Here’s the news. We’ll circle back for details and implications.

Zillow.com, the national Realty.bot growing out of the popular automated home valuation service, is releasing a new version of its popular web-based real estate portal tonight. Dubbed Zillow 5, the new functionality comes in three broad categories:

• Any user of the system — not just homeowners or their real estate agents — will be able to report that a particular home is for sale and at what price. Only owners and/or listing agents will be able to create more elaborate listings for homes for sale.
• Any user of the site will be able to ask or answer a specific question about a home, whether or not it is listed for sale. The questions and answers will be stored with the record for that home, and each user’s questions, answers and Real Estate Guide (formerly known as the Zillow Wiki) contributions will be recorded on that user’s personal profile page on the system.
• Agents or other users wishing to promote either themselves or their homes listed for sale will be able to do so through a new “EZ Ads” system. In appearance, the ads will look like a cross between a button ad and a Google AdWords text ad: a headline, two lines of text, an outbound link and an image — a logo or a photo. Unlike AdWords ads, the billing will be pay-per-impression, not pay-per-click. The ads will be sold by the zip-code at a cost of one-penny per impression. Ads targeted at a particular zip-code will rotate at random to exhaust the advertiser’s pre-paid spend over a pre-set span of time.

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BloodhoundBlog features extensive coverage of tonight’s announcement from Zillow.com:

• A broad overview of the new functionality and its implications (this post)
• Zillow.com’s press release announcing the new software release
• A podcast with Director of Community Relations David Gibbons

BloodhoundBlog contributor Brian Brady will also be covering the story at these sites:

• Active Rain
• America’s Most Opinionated Mortgage Broker

BloodhoundBlog has published more about Zillow.com than any other weblog or publication.

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“With this release, Zillow becomes a community,” said David Gibbons, the company’s Director of Community Relations. That’s true, but it’s somewhat opaque. Web 2.0 is about community more than anything else, and yet most Web 2.0 communities are rich in everything except people. What Zillow.com is doing is giving people — particularly buyers and real estate professionals and other vendors — incentives to join its community.

How is that?

• As a Realtor, if I announce on Zillow.com that a house — listed by another agent or for-sale-by-owner — is for sale, I get to associate my name and my recorded profile page of system contributions with that home. What does Zillow get? A massive and immediate increase in the quantity of inventory for sale, which in turn will attract buyers to what has until now been an inordinately seller-attractive Realty.bot.
• Similarly, if I answer questions about homes listed for sale in my farm area or make targeted Real Estate Guide contributions, I enhance my reputation as a neighborhood expert, serving to attract both buyers and sellers to me, with my value-added content giving end-users added incentive to return to Zillow.com.
• That farming philosophy is replicated in the EZ Ads strategy: If I am willing to farm zip-code-sized pieces of Zillow.com’s vast territory, the site will reward me in two ways, driving organic and pay-per-impression traffic to my page of presence on the system — or to my own web site or weblog.

Taken together, what Zillow.com is doing is creating a community not in the sense of Web 2.0 but in the sense of a magazine: A target-marketed community of content consumers who are also interested in products and services conjoined with a community of vendors of those products and services. Zillow goes most magazines one better by giving the vendors the incentive to create much of the content at their own expense.

Realtors who had worried that Zillow might be building a national automated real estate brokerage — much as Zillow founders Richard Barton and Lloyd Frink built a national automated travel brokerage in Expedia.com — can relax. With this release of its software, it becomes clear that Zillow.com is building an advertising portal. The competitors most likely to be affected by this move are horizontal search advertising systems like Google.com and various types of lead vendors. In the long run, other Realty.bots and lead-pursuing mega-weblogs (such as ActiveRain.com’s new Localism.com system) might also be affected.

The food chain looks like this: Zillow wants agents (and possibly lenders) to bring it at least limited-data listings, which will in turn bring it buyers, which will in turn reward sellers and listing agents for inputting full-data listings and other information, which will in turn provide a stickier and more satisfying experience for buyers. By giving agents credit for their contributions to Zillow’s content database, agents have the incentive to drive the process, since content creation becomes a cheap form of prospecting. Assuming all this works, the agents will have the added incentive to buy EZ Ads, which is Zillow.com’s end goal. In the abstract, it’s a self-contained eco-system, a self-sustaining Bourse of residential real estate vendors and consumers.

After getting off to a slow start, Zillow.com’s manually-entered listings now top 100,000 homes, although about a third of those are relatively slow-moving “Make Me Move” listings. With this release, the company still does not have an automated system for entering listings such as is used by listing.bots like Trulia.com and Propsmart.com. Gibbons speculates there may be some type of inbound listings feed later this year. He confirms that listings are policed to make sure the information is current and that the listing is removed from the system when the marketing effort ends. Keeping the new, more-informally-entered limited-data listings current may be more of a chore, especially since a home listing works just as well as “buyer-bait” whether or not it is truly available. This is why MLS systems fine members for not removing off-market listings in a timely fashion.

As a part of the Zillow 5 software release, a new page called “What’s a Zestimate?” will be linked off of every page in the system, including every page where a Zestimate — Zillow’s trademarked name for its Automated Valuation Method results — is shown. A thoroughgoing disclaimer, the page discloses in easy-to-read language what a Zestimate is and is not, what an AVM can do and what it cannot do.

Details and implications

We’ll start with the Home Q&A feature, because much of the new functionality turns on that. The actual Q&A content is presented in three places on the Zillow system:

• On the standing record pages for individual homes
• On the individual user’s profile pages
• On the Real Estate Guide (nee Zillow Wiki) pages

Only the latter are true wiki pages, but it is a useful metaphor to think of all three types of pages as exhibiting wiki-like tendencies: Content is permanent and accretive in wikiesque fashion.

When I wrote about the Zillow 4 software release last December, I pointed out that Zillow had effected a paradigm shift in the idea of a real estate database: Instead of a permanent application operating on temporary data, Zillow envisions a host of temporarily deployed applications acting upon a permanent and constantly-improving database of home — and now user — information.

So: Anyone can ask a question about a particular home, and anyone can answer that question, and both the question and the answer — or answers — will be stored in perpetuity with the database record for that house. Moreover, the questioner and any subsequent visitors can rate the quality of the answer in the style of user evaluations of Amazon.com book reviews. And: Every question that I answer, with its associated ratings, plus any contributions I make to the Real Estate Guide, will be recorded on my personal profile page. If I can establish myself as an expert about a particular farmed category of homes, the link to my profile page will show up again and again on the database records for those homes, potentially driving traffic back to my profile page.

There’s more: I can take it upon myself to report on the for-sale status of every home in my self-selected farm — reporting on my listings, on other agent’s listings and on for-sale-by-owner homes. If a seller or listing agent inputs the much richer full listing content, I can nevertheless associate myself with the record for that home by answering questions or supplying other supplemental content.

Still more: I can answer questions no one has asked about particular homes. If I wanted to provide contemporary — or historical — photos of every home on a particular street — whether or not they are for sale — I will have associated myself with every record for every home on that street.

We are BloodhoundBlog, and we live and die by dog metaphors. Our name for this kind of farming is “peeing on the tree.” If I pee on every tree in my territory, I will have “marked” it as being mine. Anyone searching for anything in the homes I am farming will run into me again and again — in a completely organic and non-salesmaniacal way.

Plus: I will in due course come to dominate the long-tail search terms for my farm on Google and other search engines, again reinforcing my dominance of that farm.

Plus, again: I can buy Zillow EZ Ads that will put a finer point on my presumptive ownership of that farm. The end user will see my organic contributions to the records for the home, and may at the same time see my ad promoting my expertise. Either of these will link to my profile page, which present my accumulated expertise. Peeing on the right trees will tend to lead prospects back to me again and again.

Who is doing this work? My guess is buyer’s agent’s and new or underemployed agents generally. As I have complained in the past, adding a detailed listing to Zillow.com is a pain in the butt. The site has more than tripled its quantity of listings since I wrote that post, but listing.bot Trulia.com still has about ten times as many listings. This should change fairly quickly with this software release, since anyone can now assert that a home is for sale. But an intrepid buyer’s agent could make a special effort to pee on just the right trees — homes listed by other agents who have not themselves entered their own detailed listings.

There is a side issue here, one that need not matter to Zillow.com but may well matter to working Realtors: MLS rules and the NAR Code of Ethics colorably forbid the type of activities we are talking about. From the Arizona Regional Multiple Listings Service’s rulebook: “A listing shall not be advertised by any Participant, other than the listing broker, without prior written consent of the listing broker.” From the NAR Code of Ethics: “Realtors shall not offer for sale/lease or advertise property without authority.” Subject to a specific ruling to the contrary, my take would be that whether a home is for sale, the price at which it is offered for sale and its physical appearance from a public street are material facts, not listings or advertisements. MLS or NAR officials may ultimately rule otherwise — but nothing they say will prevent lenders — or landscapers! — from farming for business by reporting on homes for sale.

In any case, if an agent — or a hungry lender — wants to lead-capture actively-searching buyers on the cheap, Zillow 5 provides the means. What does Zillow gain in return? Scads of fresh, new highly-buyer-attractive content. Agents looking for buyers create content for buyers looking for homes, and to gain access to those homes, the buyers contact those agents. If this works at all, it should work synergistically to turn Zillow.com into a site as attractive to buyers as it already is to sellers.

It seems plausible to me that other vendors, beyond Realtors and lenders, may avail themselves of these new capabilities in Zillow’s system. Local merchants, landscapers or home improvement contractors, as examples, may want to purchase zip-code-targeted EZ Ads, or even answer questions or supply Real Estate Guide content as a means of peeing on their own trees, as it were.

Moreover, we’ve seen a host of real-estate-related social sites crop up, some with amazingly limited market appeal. It’s not that no one is interested in details about a particular street in Phoenix, for instance, but simply that no one will make a special trip to a special site just to investigate a street — or to report on one. The Web 2.0 answer to this dilemma is: Mash-up! But it seems to me that Zillow.com is — or at least is becoming — that mash-up. People will ask and answer questions about streets as a function of asking and answering questions about everything else.

In the same respect, I see the proliferation of Realty.bots as a barrier rather than as an opportunity. To promote a listing, I must either navigate to and negotiate with each one, or dumb my listing down to some lingua Franca apprehensible to all. Just as there are many search engines, none of which mean anything in the Googleized web, I think that Zillow.com can become the ne plus ultra of vertical real estate search. This is not a necessary consequence. Another vendor could rise to the challenge. But Zillow so consistently out-thinks its competitors that it will be hard to beat. And the advantage for buyers, sellers, brokers, lenders and other vendors of having one real estate marketplace — Planet Zillow.com — is crystal clear.

Nothing happens as quickly or as dramatically as I expect it to, but, again and again, the Zillow management team seems to come up with completely unpredictable innovations that, in retrospect, seem to be completely perfectly-matched to the true needs of the marketplace. Where other Realty.bots are making corporate partnerships with vast brokerage franchisors — putting more and more middlemen between Realtors and their clients, even as they make it harder and harder for buyers to obtain vigorous representation — Zillow.com implements a system that puts people in direct contact, with no intermediaries at all. And who stands to gain the most from this change? Buyers and buyer’s agents.

Will it fly? Everything depends on buyers identifying a need to come to — and to keep coming back to — Zillow.com. If users supply enough enticing content, if buyers express enough interest, if listers and sellers enhance their content, if the quantity of available listings surges, if Realtors and other vendors advertise on the system and if that advertising turns into profitable click-throughs — if all of these things happen, more or less simultaneously and synergistically, then we will have witnessed the first — and possibly only — grand slam home run in the Realty.bot epoch. Clearly there are no guarantees, but if you could have a one-percent pre-IPO stake in any of the extant Realty.bots, would you bet against Zillow.com?

Elsewhere: TechCrunch, Drew Meyers, Jay Thompson, More from me: A screen-shot tour, Joel Burslem at tFoREM, Robbie Paplin at RCG, Webware, ClickZ, Brian Brady: Farming Zilliow, Brian Brady: Zillow for mortage lenders, Brian Brady: “Ask Questions, Share Answers”, Jonathan Dalton, Ardell at RCG, Zillow Blog, Seattle Post Intelligencer, Reuters, Inman Blog, TechMeme, Marlow Harris at 360Digest, FBS Blog, Jim Duncan at Real Central VA, Greg Sterling at Screenwerk, Realty Baron, VentureBeat.

Visitors: BloodhoundBlog is a national real estate marketing and technology weblog written by, for and about real estate professionals — Realtors, lenders, investors. A team of 14 webloggers cover real estate industry news and trends in great depth, exploring details and implications often missed in other media. If these topics are of interest to you, consider adding BloodhoundBlog to your feed-reader or blogroll.

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