WebHomeUSABlog

Do Business Models Matter? Woolworth, AOL, Microsoft, Google, Realtor.com and Zillow

My first informal introduction to Business Plans and Business Models was my Broker's introduction to Real Estate Sales Class. Later, as I wrote my own Business Plan, I got my introduction under fire to Business Models (Also, Revenue Models and Profit Models).

It's important to know where your business comes from, where your revenue comes from, where your profit comes from and where your bread is buttered.

Great stories in the history of Business Models are:

• The Xerox decision to lease, not sell, their 914 copier.
• Dell's Direct Sales Model to sell computers.4
• Google's decision to use Bill Gross's idea to monetize the Internet click stream.

My experience in Internet sales has taught me there are conceptual barriers and intellectual barriers:

• Most people have/know/succeed with only one business model.
• Most businesses have/know/succeed with only one business model.
• Most businesses fail adding a second business model.
• The more a business model succeeds, the harder it is to change it.
• The further from: a) Make it for $5, b) Sell it for $10 c) Sell 100 Million d) Make $500 Million you get, the less most people, even business people don't understand it.

This is why most people don't understand how Network TV makes money, Google makes money and Zillow makes money. This is why fears Zillow will take over Real Estate sales, and not Real Estate Advertising, are so unfounded. This is why the NAR, Realtor.com and Big Real Estate, not Real Estate Agents have the most to fear.

Google and Zillow are media companies, like ABC, CBS and Newspapers. They make money with the Media Business Model:

• Giving away valuable content
• Driving viewers, readers and traffic
• Selling advertising.

Their Business Model is:

• Free Valuable Content > Drive Traffic > Sell Ads

Microsoft is easily the best Software Sales Company. But can a successful software sales company, even the most successful software sales company, compete successfully in another medium with another Business Model? I think not and I doubt it.

In the early 1990's, AOL was the darling of the Internet, with its Subscription Portal Model. Everyone wanted to be "The Next AOL". AOL (like Microsoft and Yahoo) turned down an offer to buy Google for $1 Million (That's Million with an "M"). Now everyone wants to be "The Next Google".

AOL recently gave up its Subscription Model, changing over to Google's Media Model. IBM recently open- sourced many of its patents and Microsoft has even open-sourced DotNetNuke. But just giving things away is not the Network Media Business Model.

Google understands Traffic. Google understands the value of Traffic. Google understands what they have to pay for Traffic (And to keep Traffic away from MSN/MSFT, Yahoo and Ask). Why else would they beat MSFT and pay $1.65 Billion for $100 Million in YouTube Tech and 3.1 $ Billion for DoubleClick?

Google's Playbook also has them giving away all kinds of neat technology: Google Earth, Google Base, GMail, Froogle and Google Analytics, to name just a few. Will MSFT, Yahoo and AOL, with their successful Business Models of Yesterday, succeed in playing catch up (or ketchup, as the case might be), with the Monster of the Media Business Model, Google? Somebody still doesn't get it.

Who will be "The Google of Real Estate"? Will Google be "The Google of Real Estate"? Google was beaten at Video Search by YouTube. Google is still beaten at Blog Search by Technorati. Google is still beaten at Social Networking by MySpace and FaceBook. Google is still beaten at Real Estate Search by Zillow.

Is it surprising Zillow is offering so many Google-Like features for Real Estate, FREE!!!?

Who will provide the first National MLS? Will it be the NAR/Realtor.com, paid for by Realtor subscriptions? Will it be Yahoo or MSN? Or will it be Google or Zillow, with their knowledge of the Network Media Model, their Knowledge of giving things away FREE, and their knowledge of the value of Traffic.

In Real Estate 2.0, because of Business Model, Business Model, Business Model; Location, Location, Location is now Traffic, Traffic, Traffic.

Google Knows Traffic.

Zillow Knows Traffic.

Adapt Or Die!  Happy Searching.

WebHomeUSAblog; The Blog of Real Estate Search Marketing

Google, Microsoft, YouTube, DoubleClick. Will Zillow Have a Suitor?

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.

WebHomeUSAblog; The Blog of Real Estate Search Marketing

Top Reasons Why Zillow Is Better Than Tax Day

We live in a great country. ("Nice country this America", as my ex-Uncle-in-Law used to say.) What helps makes this country great is all the tax dollars we pay each April 15th. But just think of the ways a Real Estate Search Engine could be better than Tax Day:

1. On April 15th we pay for our free country. Zillow is always free country.
2. The IRS has more agents than Zillow, RE/MAX and Realogy put together.
3. Realtors can be more taxing than the IRS.
4. With Zillow, you never have to file an extension.
5. With the IRS, April Showers bring May audits.
6. The Realtors tax rate is rarely over 6%.
7. Zillow doesn't gang upon you like the Feds with the State on April 15th.
8. I'd rather fill in the Zillow Search Box than a 1040 form.
9. Zillow doesn't care what your SSN is.
10. A Zillow value estimate is more accurate than your last audit.
11. IRS Agents are easier to deal with than Real Estate Agents.
12. IRS Agents have better senses of humor than Real Estate Agents.
13. Zillow is already in the top bracket of Real Estate Search Engines.
14. On Zillow you get to see all the houses the IRS foreclosed on you.
15. Zillow has a better Website, better blog and better content.
16. Our Country is free; so is Zillow.
17. Zillow doesn't need a Beatles' Song.
18. Zillow has fewer forms, schedules and penalties.
19. It's easier to say,  "Make Me Move", to Zillow than to the IRS.
20. Zillow doesn't care if you're a tax cheat.
21. So what, if you don't file with Zillow.
22. The IRS hasn't found a way to tax what you do on Zillow. But just wait.
23. It's better to be on Zillow's hit list, than the IRS hit list.
24. Zillow can take your breath away. The IRS can take your house away.
25. What would you rather hear: "I'm from Zillow, and I'm here to help" or "I'm from the Government, and I'm here to help".

Adapt Or Die!  Happy Searching.

WebHomeUSAblog; The Blog of Real Estate Search Marketing

Google Buys DoubleClick For $3.1 Billion. Is Zillow Next?

On Friday, 4/13/07 Google announced the acquisition of Internet service provider, DoubleClick, for $3.1 billion. Friday the Thirteen, was bad luck for Microsoft, Yahoo and Ask, but good luck for Google.

DoubleClick's purchase marks Google's second foray into the Web economy in the past 6 months. Google paid $1.65 billion for YouTube last November. Google's YouTube purchase was all about traffic (and Copyright legal hassles), while the DoubleClick buy is about Internet ad services. Microsoft had been in the hunt for DoubleClick, just as they had been for YouTube last year.

If Google keeps beating Microsoft to the punch, Bill Gates may no longer be the richest man in the world. And the world's richest duo, Gates and Allen, could go the way of Burns and Allen:

• B Gates: "Say, Good night, Paul."
• P Allen: "Good night Paul."

Many Web publishers, advertisers and their agencies rely on ad-serve companies, such as DoubleClick, to insert ads on the fly, when a searcher pulls up a Web page. Time Warner's AOL and News Corps' MySpace are two of DoubleClick's major customers.

In it's 2/19/07 cover story, Fortune reported Zillow's growth, in less than a year, to the fifth most visited Real Estate Website. Zillow's 2.3% of the market and almost 4 million visitors per month make Zillow's turf prime online real estate for a bidding war.

The Google/DoubleClick deal was a windfall for the private equity firm, Hellman and Friedman, which bought DoubleClick in 2005 for $1.1 billion. Two Billion in 2 years. Almost a 200% gain. Might Google do the Zillow's 3 VC's a similar favor?

With $57 million in Venture Capital, firms have invested heavily in Zillow's potential to deliver the home buyer and seller (eyeballs) traffic, the life blood of Search Advertising for Google, Microsoft, Yahoo and Ask/IAC.

Yahoo's Real Estate information is provided by Prudential, who recently denied Zillow and Trulia booth space at Prudential's National Meeting in California. If I suspected Google, MSN or any of my other competitors were checking out Zillow, I wouldn't have let them in either.

With Sarbanes-Oxley putting IPO's on the endangered species list, Zillow becomes a prime acquisition target, like YouTube and DoubleClick.

Last year the WSJ featured an article about things Google didn't do well:

• Blog Search (Technorati)
• Social Networking (MySpace)
• Internet Video (YouTube).

Google went out and bought YouTube. Other areas of prime interest to Google are Real Estate (Google Base) and Local Search. Zillow in Real Estate (All Real Estate is Local) could help Google deliver in both those areas.

Zillow, with its high power computer algorithm, 2 terabytes of data, extensive national home coverage and user-friendly add-on services, is growing like Topsy (or Google). Will suitors, like Google, MSN or Yahoo, be far behind?

Isn't this prom season? Might there be a June wedding?

Adapt Or Die!  Happy Searching.

WebHomeUSAblog; The Blog of Real Estate Search Marketing

Top Reasons Why Zillow Is Better Than Heaven

A home can be a "Dream", a "Fantasy", or even a "Heaven on Earth". But can a Home Value Finding Search Engine ever be "Better Than Heaven"? Here are some reasons:

1. Heaven is somewhere up in the sky. Zillow is down to earth.
2. You have more than a prayer to get into Zillow.
3. Heaven has "The Ten Commandments". Zillow doesn't even have a Privacy Agreement.
4. Zillow has a better Website, blog and value estimates.
5. Zillow only gives hell to bad Realtors.
6. More people believe in Zillow.
7. Heaven has Agnostics and Atheists. Zillow just has Realtors.
8. On Zillow, you don't have to put up with any annoying harp music.
9. There are more bad songs written about Heaven.
10. Zillow has more VC Funding.
11. Zillow is free. Heaven has a higher price.
12. Heaven shows you where God lives. Zillow shows you where YOU live.
13. The alternatives on Zillow...are better than Heaven's alternative.
14. Realtors are Zillow's only Grim Reapers.
15. The Thunder Bolts from Zillow are only directed at Realtors.
16. Zillow has a higher Google Page Rank.
17. All dogs go to Heaven. And that's more than you can say for Realtors.
18. Zillow does better value estimates than St Peter.
19. There may be a Heavenly Throne, but Zillow tells you how many bathrooms.
20. Would you rather feel "The Wrath of God" or "The Wrath of the NAR"?
21. You don't have to die to go to Zillow.

More about Heaven and Zillow:

• With Zillow, doctors still act like God. God doesn't act like a doctor.
• Heaven may be "Pie...in the sky...when you die", but Zillow has better aerial pictures and you don't have to kick the bucket, croak or buy the farm.
• Heaven has The Bible, The Torah and The Koran. Zillow just has The Google Playbook.
• Even when you're about to die, you don't have to renounce the Devil to go to Zillow.
• It's more fun when Zillow opens up, than when the Heavens open up.
• "Heaven Can Wait". But you don't have to wait with Zillow.
• Zillow is a virtual Heaven.
• Richard Barton knows Bill Gates; But I'm not so sure about God.
• Zillow's only fallen angels are Real Estate 1.0 Agents.
• Realtors are the only ones who feel Zillow is the Search Engine From Hell.
• It's easier to look at "Painted Ladies" on Zillow.
• You can be an atheist and still believe in Zillow.
• Zillow is the Zeus of Real Estate Search Engines.
• With Zillow, you don't have to wait 'til you die.
• It's easier to find a higher Zestimate on Zillow, than a higher place in Heaven.
• Zillow will even show you "Hell's Half Acre".

Adapt Or Die!  Happy Searching.

WebHomeUSAblog; The Blog of Real Estate Search Marketing

The Business Models For The Top Five Real Estate Websites

The Top Five Real Estate Websites ranked by Hitwise, an Internet data research firm:

       Company:    Market Share:  Revenue/Business Model          Capturing

• Realtor.com:   9.9%        Realtor Subscription Sales               Leads
• RealtyTrac:     2.9%        Foreclosure Subscription Sales         Leads
• HomeGain:     2.6%        Agent Subscription  Sales                Leads
• RE/MAX:        2.4%         House Sales                                   Leads
• Zillow:           2.3%          Sells Ads                                        Eyeballs

In early Web 1.0, everyone wanted to be a cash cow subscription portal like AOL. Nobody cared about a better Search Engine. Search 1.0 was just fine for the Portals. Search was an add-on. It didn't have to be good, just there.

Google was loosing $50,000/week before it borrowed/stole the Web2.0 business model of Bill Gross and Overture (now part of Yahoo) and monetized the click stream by auctioning keyword relevant ads to the highest bidder. Thus the business model for Web 2.0 was born: Free Content > Drive Traffic > Sell Ads.

Real Estate Websites, paid for by direct subscription sales,use the Web 1.0 business model. In the late 90's, everyone wanted to be the next AOL or Yahoo, with their monthly subscription fees. Google offered their Search Technology to AOL, Yahoo and even MSN. No takers. Who wanted to be the best Search Engine when you can be the best Portal?

That intermediate step, "Drive Traffic" is what made Google great, what sounded the death noll for subscription Internet Portals and what has forced AOL, Yahoo and MSN to change their business model.(Microsoft change their business model?) Will Zillow's use of the Free Content > Drive Traffic > Sell Ads revenue model kill the subscription/direct sales model of Realtor.com and the other Real Estate Websites? Time will tell.

Zillow's first birthday was 2/9/07. It now has 2.3% market share with as many as 4 million visitors a month. Zillow uses the Web 2.0 business model of Google and Network Television: Free Content > Drive Traffic > Sell Ads.

Realtor.com, RealtyTrac, HomeGain and RE/MAX are all about getting leads, selling leads and driving lead traffic. Zillow is all about driving traffic, getting eyeballs and selling ads. Real Estate 1.0's mantra is "Location, Location, Location", while Real Estate 2.0's mantra is "Traffic, Traffic, Traffic".

Zillow sells eyeballs to advertisers, not houses to home buyers or leads to Agents. Realtor.com et. al. is all about Real Estate Web 1.0 and Real Estate 1.0, while Zillow is all about Web 2.0 and Real Estate 2.0.

Realtor.com is the official site of the NAR and gets its data from the MLS's. The NAR negotiated with Google some years ago to supply its Real Estate Search function, but Google pulled out for some reason. The NAR's protectionist attitude toward its data directly conflicts with Google's stated vision to: "organize the world's information and make it universally accessible and useful".

No one ever got fired for buying IBM. Would anyone ever get fired for posting data on Google? Or Zillow?In Real Estate 1.0, maybe; but not in Real Estate 2.0.

Race ya' to Real Estate 2.0. Last one there's a rotten Website.

Adapt Or Die!  Happy Searching.

WebHomeUSAblog; The Blog of Real Estate Search Marketing

Top 10 Principles To Prepare Your Home For Sale

General Principles of Home Sales:

• You only get one chance to make a First Impression.
• Home buyers want the least expensive home in a neighborhood they can afford.
• The well-polished home: draws more buyers > increases demand > sells for a higher price > sells in a shorter time; than its shoddy appearing neighbor. (aka, "The Clampets")
• When home buyers see a well cared for home, they assume what they can't see is well cared for too.
• Even if the home isn't new, most home buyers want it "ready for sale". More and more home buyers want to do less and less to their home after purchase. "Handyman Specials", "As Is" and "Works In Progress" sell for much less, and are on the market longer.
• Remember Fernando's: "Looking Good is Better than Feeling Good." And more profitable for home sellers and their Agents.

Top Ten Principles To Prepare Your Home For Sale:

1. Buyer's Eyes, What they see is what you get: Look at your home through buyer's eyes. If you can't yourself, get an honest friend, a Realtor or a Professional Home Stager. Sellers often are too close to their homes to get an honest buyer perspective. You need to present the picture appealing to the most buyers. Many Realtors won't even offer a home until it's ready for sale. You want buyers to fall in love with your house. House Love produces multiple offers, bidding wars and over-the asking-price-offers; The Holy Grail of home sellers.
2. Clean: Sparkle and Shine: "A Shiny Penny". Good looking things almost always sell better than their not-so-good-looking relatives. Much of the "Cleaning" part of Sparkle and Shine, the Spic and Span part, you can do yourself. Sparkle and Shine can smell good too. You could consider hiring a professional cleaning service while your home is on the market if you are too busy.
3. De-Clutter, Less is More: Remove all clutter. This will make your home look bigger and brighter. You want a "clean", sleek and spacious look. When in doubt, Get it out.
4. Maximize Space: the majority of home buyers are up-sizing, not down-sizing. As opposed to fishing where you can catch a big fish on a small hook, but you can't catch a little fish on a big hook, it's better to have a small house look big, than a big house look small. Your home should have a "clean" look, like the Google Home Page. Put unneeded/unused furniture in the basement garage, or better yet, donate it or put it in temporary storage.
5. Neutral Colors: Neutral colors allow the home buyer to more easily project their furniture and furnishings on your home. Those colors are easier to paint over and they coordinate with more styles of furniture.
6. Depersonalize: It's fine to have a few signs of life around the house, but an overly personalized home appeals to fewer buyers. If your home is poorly maintained, it may not be good for buyers to know who you are.
7. Cosmetics vs Cosmetic Surgery: For your first date, is your strategy Cosmetics or Cosmetic Surgery? If your bait looks the most delicious, then all you do is set the hook, cast the bait, and reel 'em in. As a seller you want to do the least expensive things that have the most visual impact. You won't get back the kitchen renovation, but the upgrade in the cabinet handles may mean thousands. Often, the amount you spend to prepare your house in the months before the sale can be deducted from your capital gains tax. But check with your lawyer and accountant.
8. Exterior Appeal/Curb Appeal: a) Lawn: watered, edged, weeded and mowed. b) Garden: watered, edged and weeded c) Trees and Hedges: pruned and trimmed d) Driveway: Reseal e)Foundation, Walks, Steps, Walls and Patios: check for cracks, crumbling and other damage f) Gutters: clean and align g) Chimney: inspect and clean h) Roof: repair or replace damaged roof shingles i)Loose Siding: repair,replace and re-caulk j) Doors and Windows: inspect for chipped and peeling paint, wash the windows, consider painting the front door k) Garage Door: Keep closed l) RVs and Old/Beaten Up Cars: Store elsewhere while house is for sale m) Plantings: In spring or summer consider adding a few showy annuals n) Winter in the North: keep the walks and driveways free of snow and ice.
9. Interior Appeal(See Clean and De-Clutter above): a) Kitchen: counter tops should be cleared of unused/rarely used small appliances (consider a garage sale or a donation) making this area more inviting b) Closets, Attics Basement and Garage: cleared and de-cluttered (more for sale and donation), check for cracks, leaks and dampness c) Walls, carpets, linoleum: repair, repaint or replace (See Neutral Colors above) d) Check Plumbing, Heating, Cooling and Alarm Systems: in working order. e) Faucets and Shower Heads: Repair or Replace dripping ones f) Showy New Towels (only for showings, take the tags off) and a new shower curtain for the bathroom.
10. Get a Pro: If the above 9 Commandments don't work, it may be time to get a pro. Realtors have experience in what homes selling in your community look like. Realtors often have an agent in their office who has a special interest, talent or training in home staging. There is always the Professional Home Stager, if you have a particularly trouble-some problem, or a house that is on the market too long.

Adapt Or Die!  Happy Searching.

WebHomeUSAblog; The Blog of Real Estate Search Marketing