Specialist
Former Director at Zillow Group Inc
Agenda
- Zillow Group's (NASDAQ: ZG) operating environment – post-coronavirus implications for housing and real estate markets
- Flex programme outlook – comparison with average non-Flex Premier Agent spend over time and agent consolidation likelihood
- Outlook for iBuying – demand environment, unit economics and potential downside risks
- Outlook for 2021 and beyond – ability to facilitate better attach rates for mortgage, title and escrow accounts
Questions
1.
What’s your overview of the Zillow business? What high-level key trends or drivers would you expect to have the most impact over the next 1-2 years?
2.
Is the one-stop shop or, an Amazon-like “all one-click” option for real estate transaction becoming a long term trend? Is this likely to be a trend to follow over a decade? What might be the most challenging aspects to tie-in, given what Zillow is trying to accomplish? What aspects of the real estate transaction will be the most difficult for Zillow to execute on?
3.
What are the considerations for how long the tail is? Would you tackle it across the top-quartile-performing agents and the percentage of real estate deals represented? What would you consider as the “non-sexy” markets to represent the overall residential housing market?
4.
Do you think there will be a portion of the PA [Premier Agent] business that stays on pay-per-month in market areas where some of the top-performing agents might be unwilling to expand? Given what you said around Flex facilitating those expansions, do you think there will be a need for the pay-per-month model at a certain scale in the long term? Is it more a case of Flex taking over in 10 years or so?
5.
How is the broader housing market impacting the PA business overall? Zillow seems to be expecting a strong 2021 on the transaction and home-pricing fronts. Low inventory also doesn’t appear to be a risk, but more of a demonstration of the velocity at which the real estate market is moving. How do these key components play into the PA business more generally?
6.
What are the puts and takes for iBuying? What will drive the potential scalability of the concept? I would imagine that the buy box won’t be able to take luxurious USD 1m-plus homes, as of right now, and sell them. What are the limitations for a full-fledged iBuy?
7.
Does Zillow’s lead-gen platform provide a competitive advantage relative to Opendoor when the lead leaks because the offer is rejected? Does Zillow’s PA business provide a better opportunity to convert leads at a faster or higher rate on average, regardless of the leads going through the iBuying process vs a regular agent? Is the Opendoor and Redfin partnership an attempt to plug the leak, or mimic Zillow in the way it pushes a lead to the PA business on the occasions when they are rejected?
8.
How has Realtor.com evolved as a competitor? It is considered to be a bit of a direct comp on the PA side of things, in that it’s an MLS [multiple listing service], and it reported growing profitability in its recent Q2 FY21 earnings call, and outpacing traffic growth over Zillow for the last 19-20 months. Do you think Realtor.com is a formidable competitor?
9.
How does Redfin stack up against Zillow? Redfin seems to have improvements, at least at scale, on an MLS standpoint. What are Redfin’s strengths and weaknesses relative to Zillow’s business model?
10.
What’s the significance of Zillow cutting off direct-listing feeds from Realogy franchises? It was in the press around spring of 2020. What could that mean for the broader landscape?
11.
What’s your take on CoStar acquiring Homesnap? CoStar focused on the commercial side of things historically. Does Homesnap offer an avenue to increasingly move into residential? Is that a difficult transition, regardless of how strong Homesnap might be there?
12.
Does Opendoor have any other competitive advantages in its business model that we should be aware of?
13.
What threats or opportunities would you highlight for Zillow?
14.
PA retention was a slight concern around 2018-19 but has been improved on dramatically. Does anything continue to be a PA retention risk? Do you think Zillow has a fairly good grasp on any agent in the longer term
given that Flex is such a desirable product?
15.
Do you have anything to add about the supply-and-demand dynamics? It appears that demand has never really been the issue from all the leads generated, but you alluded to conversion and potential difficulty handling all the leads on a national basis. What will be most helpful to right that ship?
16.
How challenging is it for Zillow to round out and be the one-stop shop? Can you elaborate on the downstream services on the transaction – such as mortgage, title and escrow – and your earlier points?
17.
You mentioned the relationship-driven aspects in the real estate market more broadly, and how agents have a go-to mortgage servicing company and so on. What’s the extent of the agent buy-in for utilising an offer? How might that stack up for Zillow in being a streamlined process or the quality of mortgage servicing it can offer? Presumably there are premium companies with bread-and-butter services. How do those things play into the ability to drive the catch rate?
18.
To what extent are there inbound leads from the mortgage lenders vs outbound from the agents to the mortgage lenders? I would presume that the high proportion of inbound leads would drive up the value prop of the local mortgage lender for the arbitrary agent. What’s your take here?
19.
Is it difficult to do any of the ancillary services at a national scale? How much local nuance exists? To what extent would it be difficult to have one lender, one title, one escrow provider, and do things effectively across the whole of the US?
20.
How might the residential real estate market evolve over the next few years? It’s been behind the curve relative to other industry verticals on a technology disruption standpoint, and there largely seems to be an inflection at this stage, potentially due to the pandemic. It seems that a lot of those things are good for Zillow. What might be some risks or challenges in what the company is trying to achieve over these years?
21.
How could everything net out on the agent level? We talked about top-quartile agents driving an increased proportion of deals on average, but insufficient supply to meet the entirety of demand. Will that be immaterial as it relates to the big daunting slash of the total agents needed in the US residential real estate market? Would you still expect a meaningful rationalisation of agents over the next 5-10 years and beyond?
22.
Is there anything you’d like to reiterate or say in closing about Zillow and its growth prospects?
Gain access to Premium Content
Submit your details to access up to 5 Forum Transcripts or to request a complimentary one week trial.
The information, material and content contained in this transcript (“Content”) is for information purposes only and does not constitute advice of any type or a trade recommendation and should not form the basis of any investment decision.This transcript has been edited by Third Bridge for ease of reading. Third Bridge Group Limited and its affiliates (together “Third Bridge”) make no representation and accept no liability for the Contentor for any errors, omissions or inaccuracies in respect of it. The views of the specialist expressed in the Content are those of the specialist and they are not endorsed by, nor do they represent the opinion of, Third Bridge. Third Bridge reserves all copyright, intellectual and other property rights in the Content. Any modification, reformatting, copying, displaying, distributing, transmitting, publishing, licensing, creating derivative works from, transferring or selling any Content is strictly prohibited
