What will the proposed giant merger of Zillow and Trulia mean for San Diego real estate agents and investors?
The proposed takeover of Trulia by Zillow, as to create a new online real estate portal powerhouse, has captivated industry media streams. If it happens, it will be big news, with big ramifications for San Diego County real estate professionals. Will it be good for the industry and individual professionals, or really bad? What opportunities would it create, and what directions will it force those that want to succeed?
‘Zulia’
Dubbed ‘Zulia,’ the new monster sized online real estate portal would dominate the U.S. property industry on the web. If it managed to maintain the results seen with the two companies separately; ‘Zulia’ could draw 89% of real estate related traffic, and bring in around $600M a year in revenue.
Share prices of the two firms rose on the talk of a merger. This may be due, in large part, to talk of the new conglomerate going after an expected $27B annual real estate marketing spend. Of course, they haven’t made much of a dent in it yet, even after raising money in two recent IPOs. The FCC may also have good reason to stall, derail, or deter any potential deal, especially if well-funded lobbyists from the National Association of Realtors gets to work. The NAR could potentially find a way to smash the new company as one easier target, after the deal.
Analysts also predict a single portal may make it easier for Realtors to pull their listings and ignore them out of business. Others speculate that the heads of these firms are far over estimating the amount of spend which is up for grabs. This could seriously undermine long term survival, especially with Zillow losing so much on new customer acquisitions. Neither company is profitable right now.
According to a poll by Inman News; as of July 24th, 2014, 54.4% of readers believed the merger would be bad for the industry. 30.3% think it could be good. 15.3% said they didn’t know.
6 Ways the Zillow – Trulia Merger Changes Business for San Diego Real Estate
1. Online Marketing Costs to Go Up
The biggest fear is that the new monopoly would give Zulia the control to dramatically drive online marketing costs for San Diego County real estate agents and brokerages. What was once $1,000 a month, could quickly demand $2,000 per month, with more competitors side-by-side, and far more expensive plans for those desiring prime placement.
2. Quality will Trump Volume
Zillow’s quality has not allowed the company to establish the reputation it desires. From the numbers that Zillow is losing on new customer acquisition, marketing, and turnover, it is not hard to question the firm’s viability. More importantly, if the merger occurs, there will be less of an emphasis on quality. However, a distinct lack of detail may be harmful to the company. In the meantime, serious San Diego real estate buyers, sellers, and investors are likely to continue to bounce to local websites and services offering higher quality, specialized attention.
3. Necessity to Own a Niche
Zulia might become some sort of ‘Amazon for real estate.’ Attempts by new real estate tech startups to be everything to everyone will have the cards and millions stacked against them. Amazon itself might be the best positioned to compete against Zulia, directly, or via eBay. Still, there will be plenty of opportunity for those that hone in and specialize on a niche in the Southern California real estate market.
4. Offline Real Estate Marketing
There is no question that online real estate marketing has great advantages and can be very successful. However, many small San Diego real estate companies, and independent professionals could find their businesses well complimented with the introduction of more offline advertising to stand out, as well as in-person networking to forge connections and relationships in a way Zillow isn’t capable of.
5. Devaluing the MLS and Realtor Profession
Despite the many arguments for such a merger, unless NAR stands up and forces new regulation, pushes back, or at least creates a larger deal directly with Zulia, the real estate profession could suffer. This would detract from the value of the MLS, discount brokerage services, and all but the high end, and perhaps lowest end Realtor services. Ultimately, Realtor membership and the organization could suffer. Not that these things aren’t valuable, and even more valuable than another online listings site. This is about perception amongst consumers.
6. The Need to be Tech Savvy
There is no argument that can stand up and support ongoing ignorance of real estate technology, and using it. It isn’t all perfect, nor effective. Yet, the agent that isn’t wired is not serving their clients as well as they could, and is not operating as efficiently as they could. Sooner or later, that means being irrelevant and out of business. Use the fax machine, a beeper, and a house phone if you like, but be aware of tech trends.
