The comments, emails and other responses to my posts about Google's acquisitions of YouTube and DoubleClick and the question, "Will Zillow be next?" raised many interesting points worthy of further discussion:
1) The comment of the Real Estate Carnival Host, Renthusiast.org: "Cliff Jacobson speculating on whether Google is going to buy Zillow, although he offers no insight as to whether he thinks Zillow is prepared to sell".
Insight: I don't know the nature of Start-Ups and Venture Capital (VC) in Great Britain, but Zillow bit into the "Forbidden Fruit" of the VC's for a second time when Par Capital of Boston coordinated Zillow's Second Round funding of $25 Million with Benchmark Capital and Technology Crossover Ventures (Total = $52 Million). Part of bitting the fruit involves an exit strategy for both Zillow and the VC's. Richard Barton's last strategy with Expedia was to sell to IAC/Barry Diller/Ask.com/LendingTree, not MSFT.
So, Is Zillow for sale? At the right price, certainly. In the Fortune Cover Story about Zillow, 2/19/07 issue, Barton and Frink showed no idication of selling. But, as my economics professor told me about equities: "Buy in the womb. Sell on the news."
What about an IPO (Initial Purchase Offer)? Sarbanes-Oxley (Aren't they 2 English names?) has turned the meaning of "IPO" into "I'm P O'd". It's so much simpler, cheaper and lucrative to be acquired.
2) MSNinsider2@hotmail.com makes a number of points:
- "Zillow's management team all used to work for MSFT...": I don't know the terms/conditions/spirit under which Richard Barton et. al. left MSFT, but Barton developed Expedia outside MSN and sold it to IAC owned by Barry Diller who owns MSN's competitor, ASK.com. Sometimes brothers don't even get along, let alone masters ad slaves; even well paid wage slaves.
- "...they (Zillow) already use MSFT Virtual Earth for mapping.": It's interesting you use the term "MSFT Virtual Earth". The most significant part of Zillow's mapping is not that it is from MSFT, but that it uses Pictometry's patented birds-eye technology. MSFT has a 5 year contract (over in about a year) with Pictometry to use its technology for B2B applications. When asked why MSFT didn't buy Pictometry, Dick Kaplan, Pictometry's CEO, half joked, "They couldn't afford us". Pictometry is backed by Tom Golisano of Paychex, a billionaire himself. The word on the street in Rochester, NY, is that MSFT's offer to buy Pictometry for about $100 million insulted Mr Golisano. Google has a great interest in Pictometry. I don't see Pictometry's sale until after their MSFT contract runs out; and until after the bidding war. If MSFT doesn't have Pictometry's technology, and Google does, who will Zillow sell to?
- "It's a foregone conclusion that Zillow will sell to MSFT.": See above.
- "Especially when both companies are located in Seattle. The acquisition integration would be easy as they would just close down Zillow's office in downtown Seattle and relocate all the employees in Redmond. ": Par Capital is in Boston, not even on the West Coast. Also, Zillow's Real Estate info and tech services could be done anywhere, even in Seattle-East, Bangalore. Isn't MSFT in Bangalore already? Google is just right down the coast, too.
- "Google doesn't buy vertical applications. They only buy technology infrastructure.": I'm not so sure your statement fully describes Google's buying intentions and practices. MSFT was the most prominent name involved in the DoubleClick purchase. Google bought it. Google sees MSFT as their biggest competitor. YouTube only had $100 million in technology to sell Google. That leaves $1.55 Billion for their Vertical Traffic. MSFT doesn't understand Traffic. MSFT doesn't buy Traffic.
- Googles' business model is: Free Valuable Content > Drive Traffic > Sell Ads. This is at Google's core and what they do best. Google understands Traffic. I can't see anything in MSFT's business model or core which sees the true value in Traffic. What did MSFT offer for YouTube? Maybe Pictometry only had $100 in technology. So that's why Gates and Co only offered what the technology was worth. We're in the Post-Technology Age now. We're in the Information Age. Price, Price, Price is now Traffic, Traffic, Traffic. Just as Location, Location, Location isnow Traffic, Traffic, Traffic.
- Jacobson's Law: Google's (Tech + Traffic) Price - MSFT's Tech Price = Traffic Value:
- Or, with apologies to Einstein: G=MC2 (where C= SFT)
- "Zillow is an app and would never scale to meet Google's needs.": I disagree that Zillow is just "an app". Google is struggling to get Local Search right. "All Real Estate Is Local". If Zillow continues to use the Google Playbook and the Google Business Model and not the MSFT Playbook and the MSFT Business Model; through Zillow (or with some combination including Zillow), Google will solve our/their local search problem.
- "Yahoo already has a partnership with Zillow so they don't need anything more from them." Yahoo is living proof of 1) The goodness of the Tech/Subscription/Commodity model 2) The Greatness of the keyword-relevant auction-sales model and 3) How difficult, if not impossible it is to do both.
- The real wildcard is Move.com. They should buy Zillow and dump Realtor.com: If MSFT has little clue about the true value of Internet Traffic, Move.com and the NAR have even less of a clue. The NAR was in negotiations with Google to provide its Real Estate Search. Google pulled out. I'm not sure what the taste was left in the mouth of Google.
- Zillow offers the eventual possibility of a National MLS, as FREE as a Google App to Agents and freely available to all.
- The only question for me is: Will Zillow get to a National MLS before or after Google buys them (for their tech and their traffic)?
- Will Google's Word, Excel, PowerPoint, Access and other familiar software Internet products be real expensive like MSFT's; or free to users; paid for with ad revenue?
Adapt Or Die! Happy Searching.
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