Spencer Rascoff speaks at the 2016 Zillow Premier Agent Forum. (GeekWire Photo / Kevin Lisota)
“We sell ads, not houses,” Zillow Group CEO Spencer Rascoff declared in a conference call with analysts three years ago.
But times change, and Rascoff is now singing another tune.
The online real estate juggernaut, commanding a $10 billion market value, is now buying and selling homes itself.
It’s a big bet, and a risky move that some say is misguided.
But not Rascoff. He thinks Zillow — which has long made a majority of its revenue from advertising and lead generation tools for real estate agents — can now make a bundle in the volatile, and often unpredictable, housing market.
“We are confident that we can provide these consumers with a positive home selling experience,” said Rascoff, explaining how it would start buying and selling homes in Phoenix and Las Vegas as part of its expanded Instant Offers program. “We believe that Zillow Group possesses structural advantages in this space.”
The 14-year-old company showed its commitment to the new endeavor earlier this month when it revealed a new reporting segment in its financial results: “Homes,” which is specifically for revenue Zillow makes from buying and selling homes.
But not everyone is buying into the idea. In a conference call last month after the new effort was announced, Deutsche Bank analyst Lloyd Walmsley told Rascoff that it seemed “like an awfully big pivot in terms of business model” and one that comes with “inventory risk” and could consume “a lot of capital.”
“After deep study and consumer insights, we believe that there is a big opportunity here,” responded Rascoff. “…I can say without exaggeration, that no company understands the American homebuyer and home seller better than Zillow Group.”
Zillow does sit on mountains of real estate data, information it will surely use …read more