Zillow Group is betting big on a new “iFlip” model that will refocus its energies towards directly buying and selling houses, perhaps overtaking agent and brokerage advertising in importance. The bets are big – the company thinks it is looking at a market that might be worth $20 Billion, which would dwarf its 2018 revenues of $1.3 Billion.
Most of those 2018 revenues came from the company’s “Premier Agent” platform, which features Zillow, Trulia and niche listing services like Hotpads.com and Streeteasy. It also includes Zillow Group Mortgage Services, transaction software (DotLoop) and MLS software (Retsly Software).
iFlipping, however, is a risky “moonshot.” While the company is charging above market-rate commissions of 6-9 percent, profit margins may be 1.5 percent per house and the company will be susceptible to market trends. Wall Street doesn’t like it yet and the company’s stock has dramatically fallen in recent weeks. As Business Week notes, Zillow may be seen as “moving from a high-margin business—online advertising—into a capital-intensive, low-margin one.”
To accelerate the new direction, Zillow announced today that co-founder Rich Barton is coming back as CEO, replacing Spencer Rascoff, the HotWire founder who has been CEO since 2010 and will stay involved with the company as a board member. Barton, who co-founded Zillow in 2005, is well known among investors and the local community as a verticals pioneer, not only with Zillow, but also for his involvement with Expedia (Travel), GlassDoor (HR) and Avvo (legal.)
Barton told Geekwire that “this is why we founded Zillow, to actually change the way people bought and sold houses, and the way they found a new place.”
But Barton will not only need to contend with the vagaries of the new market, but also with plenty of competition – some of it well-funded. Other players – so far — include RedFin; Offerpad; Opendoor, founded by PayPal co-founder and VC Keith Rabois; and Perch, which is led by former Yodle CEO Court Cunningham.