INTRODUCTION
BUSINESS MODEL
Zillow is the leading real estate and rental marketplace dedicated to empowering with data, inspiration, and knowledge around the place they call home and connecting them with the best local professionals who can help (zillow.com, 2018). Its five brands (Zillow, Trulia, Naked Apartments, HotPads, Dotloop) account for nearly two-thirds of the total online real estate category and nearly three-quarters of the mobile segment (Graham, 2017). According to Graham (2017), Zillow is out-innovating its competitors in augmenting the basic listings data with other data, including listings of homes not for sale, and by investing heavily in mobile. Fontinell (2017) explains that Zillow makes money by selling advertising on Zillow.com and the Zillow mobile app to property management companies with vacancies, real estate agents looking for buyers and sellers and mortgage lenders looking for borrowers. And it also sells to general advertisers, especially ones in the real estate industry.
Zillow is primarily a media company, generating the majority of their revenue through the sale of advertising products and services for real estate, rental, mortgage and home improvement professionals (Colombo et al., n.d.). Schoultz (2017) added that the system has more than 110 million U.S. homes and features a wide breadth of property facts, listing information, and purchase/sales data. Its vast size gives visitors access to more types of content than they would normally be able to get. The current model's shortcoming is converting the volume of leads generated into commission (Wiggin, 2015). Real Estate Agents have trouble recruiting Inside Sales Agents (ISA) to work out of converting leads to improve their Return On Investment (ROI) on Zillow advertising (Wiggin, 2015). Figure 1 illustrates the current business process.
Figure 1: Zillow's Business Model
ZILLOW SERVICES
AGENTS/BROKERS
Ignite Business with leads from the largest online real estate network
PROPERTY MANAGEMENT
Showcase your property and reach millions of renters on Zillow, Trulia and HotPads
Join thousands of loan officers who connect with potential borrowers on Zillow and Trulia
MORTGAGE LENDERS
BUILDER
Drive discoverability of your new construction listings to home buyers
source: Zillow.com
PROPOSED BUSINESS MODEL
Premier Agent revenue made up 70 percent of Zillow Group's overall revenue in Q3 2017 (Brambila, 2017). Premier Agent revenue grew 24 percent year over year due to increased consumer traffic and engagement (Brambila, 2017). According to Fontinelle (2017), if Zillow's user base dwindles or its competitors become more attractive advertisers for mortgage lenders, property management companies, and real estate agents, ad revenue could decline. With the current model, although successful, agents are getting overwhelmed by the volume of leads they are receiving (Wiggin, 2015). Saxton (2015) explains that the average response time of engagement with their leads was eight hours while consumers were expecting a response within 45 minutes or less. The new proposed model will include either a virtual assistant to respond or an agent assist program (engagement done by a human) to engage the leads. The virtual assistant will respond within 120 seconds, and the Agent Assist will contact the leads via phone or email up to 15 times within 30 days. Figure 2 illustrates the new model for Premier Agent program to increase their conversion and realize their ROI quickly.
Figure 2: Zillow's New Proposed Business Model
COST ANALYSIS
Assumptions: The following cost analysis for the new proposed model is focused only on Premier Agent Subscription revenue. Premier Agent Program is the bulk of Zillow's income according to Graham (2017). The analysis does not take into account the expenses incurred for the program as far as the technology spend and the new hires for the Premier Assist Program. Table 1 illustrates the potential increase in revenue assuming that 50% of the total subscribers for 2017 will use the virtual assistant program at $100 per month and the other 50% will use the Premier Assist at an additional $500 per month. Zillow Group can potentially add 4.4 million and 22.3 million in revenue for virtual assistant and Premier Assist respectively.
