Local Onliner

Zillow is set to provide its four million users, Z-estimate capabilities and EZ Ads platform and nascent set of national listings to 285 newspapers, including many members of Yahoo!’s newspaper consortium. It’s very much a two-way street. The newspapers, for their part, will share with Zillow their Open House listings, their own “for sale” listings, and their sales channels.

Spencer Rascoff, CFO, Zillow, briefed us on the deal yesterday. He says that the deal is likely to be “functional” in the first half of 2008, and that the company has been in talks for about two years with newspaper leaders, including Lincoln Millstein at Hearst Newspapers and Greg Schermer at Lee Enterprises.

At this point, participating newspaper companies include Hearst; Journal Register; Lee Enterprises; Media Genera;, MediaNews Group; Morris Communications; Paddock Publications; Pittsburgh Tribune-Review; E.W. Scripps; Times-Shamrock; and The Day Publishing Company. Rascoff says more are signing up practically “every ten minutes.”

While the news is important, it may not be as important as the fact that Yahoo! isn’t part of the deal. Yahoo’s exclusion doesn’t mean its relationship with the consortium is collapsing. In fact, just last week, The New York Daily News announced that it was joining Yahoo!’s 400 plus newspaper effort.

By several accounts, the consortium appears to have gotten off to a fairly good start, despite uneven implementation among the newspapers. But by not going with Yahoo! for real estate, there might be an inherent message from the consortium that Yahoo! only serves at its pleasure, and that the consortium has a life of its own. Newspapers have a long history of hedging its bets among its online vendors – if Yahoo! can be considered a vendor.

Certainly, it is a different world than last year’s vision of a rock-solid alliance between Yahoo! and newspapers, where both sides were set to deliver the goods for the other. Remember the somewhat paranoid theory that Yahoo! would ride the remaining strengths of the newspapers’ for a few years, before shoving them aside? That seems silly now.

Instead, what has happened is that some of the newspapers opt-in for certain services, and opt out for others. Just last week, a national advertising network among newspapers was announced that will ostensibly compete with Yahoo’s national offerings (and with McClatchy’s RealCities network).

I might be reading too much into this. It may be as simple that Yahoo! Real Estate – a good vertical site — lost a bakeoff. Or that there was no way to work with both Zillow and Yahoo!, which have some overlapping capabilities among themselves. Or that Zillow put a higher value on newspapers’ Open House listings, which are somewhat unique and remain a strong part of their real estate offering.

For the newspapers, another appealing aspect of working with Zillow may have been its recent efforts to aggregate broker listings. Since last December, it has aggregated deals to carry the listings for The ERA division of Realogy; ReMax Allegiance; and United Country. These deals constitute 150,000 listings, and simplify the process for agents to add three or four listings at a time. Deals with many more brokerages are apparently underway.

At this point, Zillow is looming large enough that the National Association of Realtors, which has had a longtime deal with move.com’s (Realtor.com) is prepared to directly take it on. Zillow was recently valued at $350 million, and appears to be a good bet. It provides a service that consumers like.

To be sure, Zillow has a ways to go being a comprehensive channel for listings. It may never get there. It also remains controversial in the real estate industry for its machine estimates, which aren’t always accurate, and can really muddle house sales.One of my wife’s listings, for instance, was recently Z-Estimated at $40,000 below its fair value because of an unfair comparable down the street.

But in my view, it reflects well on the newspaper consortium to sign a deal with Zillow. It is kind of nice to see. I’ll be watching to see whether the deal produces real synergies, new users for both sides, and changes brokerage impressions of newspapers and Zillow. The latter, of course, has been a champion of openness, while newspapers have been more accommodating in their bid to build special relationships with larger brokerages.