The Zillow-Trulia Merger: How It Impacts Real Estate Agents and Brokers
By Matthew Bushery
About Agent Basics
“Long-time competitors merge companies” — certainly a storyline we’ve all seen in years past. Comcast and Time Warner. Exxon and Mobil. And now it looks as if Zillow and Trulia are ready to unify into a single real estate listings conglomerate.
While the magnitude of the deal has everyone’s attention — not only in the real estate industry but in the business world at-large — agents and brokers should pay special attention to this mega-transaction, given the ramifications the move could have on their real estate marketing and sales efforts.
The “Zebra” and “Tiger” become one. (Allow us to explain).
On July 28, Zillow reported it intended to purchase Trulia for a cool $3.5 billion. Zillow Chief Executive Spencer Rascoff told The New York Times’ DealBook he approached Trulia in April to gauge if they’d be willing to sell. According to the DealBook report, despite little or no intention of selling initially, Trulia decided to hear Zillow’s offer. After negotiating for an undetermined period with Trulia’s management team, using the code names “Zebra” (Zillow) and “Tiger” (Trulia) to keep the media off their tails, the two companies ultimately struck a deal that appeased both sides.
One of the early consequences from the merger — and a positive for both companies — is a projected savings of roughly $100 million combined, due in large part to a projected curb in hiring for the newly formed service. The move potentially also strengthens two consistently growing businesses — ones that have already made acquisitions in recent years (StreetEasy and HotPads by Zillow; Market Leader by Trulia) to bolster their businesses and prevent other competitors from making names for themselves.
Advertising and other charges may increase post-merger.
For agents and brokers who use both Zillow and Trulia, the company promises “shared services and marketing platforms for advertisers that enhance agent productivity and marketing and deliver greater return on their investment.” However, some real estate professionals are already voicing concerns over the merger. As Wall Street Journal investment and personal finance reporter Joe Light notes:
- “Giving one company so much market clout is concerning to the brokerage industry and some real-estate agents are approaching news of the merger with trepidation. Although Zillow and Trulia might not try to replace agents, they say, a combined company could be able to charge agents more for advertising.”
Similarly, online brokerage RealDirect CEO Doug Perlson told The Verge he thinks rises in ad charges are inevitable with the merger, as an increase is the primary way in which the company can grow in the short term. He told the news source:
- “If these two combine, the only way they can really grow would be to increase their prices, and I think that would definitely push the big brokers, especially ones that have a dominant position in certain cities, to stop feeding them their listings.”
Perlson added that this potential price raise would lead to a mass exodus for major brokers who don’t want to pay to get more exposure for their listings.
“Chase the vision, not the money; the money will end up following you.”
— Tony Hsieh
Real Trends Editor Steve Murray shared a comparable outlook with CNNMoney. He said the merger may lead to increases in fee charges for agencies and brokerages to appear on listings pages — many of whom already spend roughly $20,000 advertising on both sites.
Inman News has even polled its readership to determine the mindsets among real estate pros regarding the deal. Results from the 400-person poll indicate more than half of respondents believe the merger is bad news for the real estate industry, while 15% are unsure of how the deal will affect agents and brokers.
Other changes stemming from the deal are difficult to determine.
While it may seem all industry members are against the merger, a former Fannie Mae executive offered up a positive take on the transaction. Collingwood Group Partner and Managing Director Tim Rood stated:
- “[Realtors] just want to win more customers. So if Zillow wants to spend all of its money advertising and Realtors can get more targeted, pre-qualified buyers, they’re perfectly happy.”
Despite this sentiment, Rood added there will be a strong likelihood of smaller agents and brokers being negatively affected by the deal, since they hypothetically wouldn’t receive as much exposure on the listings sites as higher-producing agents and brokers who are able to afford higher ad prices.
Given the clout brokerages still have with Zillow, Howard Hanna of Howard Hanna Real Estate Services told Inman News he doesn’t believe there will be substantial ad spikes — or at least high enough to push out many brokerages. “Without our listings, they can’t make money,” he told the site.
As for the sentiment that Zillow may want to eventually compete with brokerages to facilitate real estate deals for consumers, representatives at the company stated that’s simply not the case. In fact, Zillow noted it wants to attract more agents and brokers to the site. In a note to business news source Pando Daily, a Zillow rep noted:
- “There is no way to [compete with brokerages], we provide marketing and branding exposure to help agents get more clients. These are highly complex, expensive transactions that happen once every seven years, on average. We don’t see the real estate agent’s involvement diminishing, we see their role evolving as consumers become smarter about real estate.”
The future of the listings market? Nobody’s quite sure … yet.
Now that the deal is all but done, industry insiders are beginning to wonder how the merger will affect other real estate listings websites. The economic news site 24/7 Wall St. reported that Zillow and Trulia combined get 130 million-plus unique visitors monthly, per data from comScore. The now-second-place listings site behind the new conglomerate? Realtor.com, which secures roughly 24 million uniques each month.
Agents and brokers may think this deal means Zillow will eventually dominate the listings market and potentially make multiple listings services extinct. However, data shows the new Zillow would still only have a 4% share of the agent advertising market, which is estimated at around $12 billion annually worldwide. This means there are still plenty of other sources and outlets where agents can spend their ad dollars. The question is if this move will affect how much of real estate agents’ ad spend is allocated to Zillow moving forward.
How this merger will affect other listings services remains unclear. Once the dust settles, though, you can be sure there will be more agents and brokers to voice their opinions on the deal and the changes in Zillow’s services yet to come.
Learn more about the debate surrounding Zillow’s latest feature in our post What Agents Need to Know About the Zillow “Coming Soon” Debate.
What are your thoughts on the merger? Share your insights below.
Published on July 31, 2014
Written by Matthew Bushery
I'm the Sr. Content Creator for Placester, where I educate real estate professionals about modern marketing and, in turn, help agents and brokers make the most of their online presence, earn more traffic, and generate more leads and business.