Ben and James discuss Zillow’s shift in business model and the further refinement of Aggregation Theory through the incorporation of the ideas of disruption.

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  • Ben Thompson: Zillow, Aggregation, and Integration — Stratechery
  • Ben Thompson: Opendoor: A Startup Worth Emulating — Stratechery
  • Episode 098: Shattered Glass — Exponent
  • Ben Thompson: Defining Aggregators — Stratechery
  • Ben Thompson: Aggregation Theory — Stratechery
  • Ben Thompson: Netflix and the Conservation of Attractive Profits — Stratechery
  • Ben Thompson: The Truth About Windows Versus the Mac — Stratechery
  • Ben Thompson: Books and Blog — Stratechery


Podcast Information

United States


00:00:00hi James how are you I am a very good I'm very good with the Box just won a playoff game before recorded So what are recordable like to do, watching the game and to have to admit I was worried that they were going to lose and I was going to have to really struggle pull myself together I instead I'm on a bit of a high so it may be a little hyped up even more than usual for this podcast fantastic. I'm feeling the same way it's only one episode the past 3 weeks I was starting to go through withdrawal symptoms yes I am looking forward to talking to you and I am pretty excited about our talk today but first I want to thank wordpress.com for fucking exported as they do every week accepting was around recording as our sponsor whether you're building a personal block of is a side or both pretty website. Wordpress.com helps others find you remember you and connect with you you don't need experience they got to the process what part of the process that guide you through James setup process
00:00:59start to finish start-finish I did I did I did stuff to do before becoming increasingly nerve-wracking this ad read on my quiz on it I have to send it to me so I can memorize it before the shark and I have to actually listen to R5 cast and then everything that's it fate worse than death and take care of their customers here to help you with the most of your site and they're available to help you out I'll give you an easy one 24 by 7 there you go find start at this $4 a month that all plans include a custom domain name for the wife of the plan go to wordpress.com exponent to go today that's weird price.com exponent and again I run Expo I read on WordPress. Wordpress.com borders.com is a great place to start and in pacet you a perfectly if you want to go off on your own and do your own thing so I am very happy to have the best concert and I'm sweating and we haven't even started yet about privacy and you know that
00:01:59hey I think it's going to solidify the the main players up a topic that I think we've covered a bit and I actually would really like to talk about whatever about a week ago and we did last week cuz I personally thought it was interesting for all for all kinds of reasons yeah we've touched on this one previously and it's interesting to see how much was it a year ago when we talked about Open Door and we talked about Zillow and the news that they came out with like last week was pretty extraordinary yes other than just a backup and because it's been a couple weeks I just took how to refresh what were talking about Zillow the the what what what kind of company are they is an interesting question the I believe in their IP on a friend's house as a a real estate marketing company in the reason why that was an accurate description is one just we always say what I feel from the store like describing how that should money in the margins to expect in the business that that was that was correct because that they're not actually involved in the
00:02:59Define processed they are a basically a discovery like a search engine to find houses but the houses then today then hand them off to real estate agents and we talked about it but we do talk talk about a year or so ago in the context of Open Door and they're not a part of the transaction and the reason why that happened and why it's structured like that are long and complicated and we might get back into it a bit although you know again we will also put a wink to the previous podcast but the news here is that they are actually going to start inserting yourself into that into that transaction they're going to do it in the way that open doors doing it which is actually buying the houses themselves and then listing them and they're putting all sort of weird that there were you involved Russian agents Department over state agencies but make no mistake this is a pretty fundamental change right and at the interesting part about it is one on one hand it makes a lot of sense and it makes a lot of sense as used
00:03:59not to land in a position in the value chain and move out the value chain particularly if you've got the eyes of lots of lots of consumers bit the big risk and I think this is a while there are a couple of big risk sex without the obvious one is that they are biting the hand that feeds them in terms of the real estate agents are the ones that I actively listing the properties on Zillow because that's where a whole bunch of consumed is odd because Zillow had a price estimate for people's houses in that car that got lots of eyeballs consumers on the demand side there and then they started people started looking at houses that and it real estate agents realize that if they wanted it sell the house and obvious place to go is where the consumers are looking in Zillah became that placed and this just seems like a logical next step in terms of pushing further from the value chain but that's obviously the risk associated with fighting and a fidget there's another big risk which is going from a media company with super high margins into a property Investment Company those are very different business
00:04:59right exactly is always so there's so many angles of this. I think of that I think are interesting so just kind of like back out in and put some of a a frame around this because the reason why fathers angle that is really interesting inside of isolation which is a company as successful company is that that is changing its business model and and and they're changing of his mouth that's into number one or two isn't so the interaction with the stock market in their investors in the expectations for the company ties into that and number three would you just mentioned is the the competing with their suppliers right because the ways that will make somebody's real estate agent running ads on Zillow to make their houses are hiring in the search results brought them and so that that that's sort of the the narrow angle and we could I think easilydo whole podcast about that because I'll touch on issues that that we discussed previously the other thing. I think it's really interesting is thinking about this in the context of variation
00:05:59struggle with or not stroller with but that it is going to missing piece up with our nation Siri for me but you doing in the last year or so which is why do some companies you know what what is a narrative writing I did that definition piece last year of defining alligators that kind of axle came out this podcast and there was a there's a piece missing in that and it was interesting is actually had that piece in the original version are going to be back in 2015 and I kind of forgot about it over there in time that pieces integration where where you make money in a value chain not just by being a player that value chain even if you're really valuable spot like owning the consumer relationship the way you actually make money it is kind of a separate question and that comes from immigrating to pieces of that value chain it's the immigration that drives a defensible strategic position and drives outside profits to be 8 to only own one piece that you can build a business there
00:06:59you're going to be squeezed sort of continuously and you do have a sustainable long-term business depends on that's part I think of understanding was it was doing here yeah I think it's a fantastic point I mean the integration piece that you pulled from aggregation Theory came from christensen's Professor christensen's work on disruption and understanding integration and modularity and this is something that I've thought about a lot in the context more of Destruction and aggregation but I think the application works exactly the same way which is when you come up with a disruptive technology it is not in itself enough that you have to come up with a destructive business model if you just take the technology and you leave the market as it is people will view it only through the lens of a sustaining technology and I I had this realization and I think I mentioned previously on the pug cost a good friend of mine co-founded a business in the finance bicycle dfl and what they did is they go out into emoji
00:07:59rockets and they do credit scoring through personality test and very predictive and in any markets where they don't have a credit scoring infrastructure this is huge sorry they would apply at Inn in Sutton ma cuts and they would take loan applications that thanks had rejected through their existing credit scoring process in a Pisces personality test and they would that predictive and not much stronger than the existing infrastructure that they would actually outperformed the bank loan the banks portfolio of wants which is crazy cuz it that taking the rejects that the extent to which that successful was limited by the fact that they were piping that that technology into an existing infrastructure and what you can do is if you think about really take getting a disruption to Market it's not enough just to have the technology you have to think about how to bring it to Market and if you integrate it on top of I'm not judge
00:08:59going to do this better credit scoring but I'm going to think about building an entire business predicated on this new technology that your ability to capture value and credit disruptive product is is obviously much greater and you'll capture a match-grade up a piece of the pie and that's that's the equivalent that I think applies here to Zillow and the broader Point around aggregation Theory it's almost like the ability to attract consumers in this way has the same effects in the market As A disruption it allows you to do something in the market that previously was not able to be done and often times it's his bed at customer experience that attracts consumers pitiful you do is do that and then pass it off into the existing parts of the market you're never going to have the same impact as if you integrate down and that's why I'm so bullish about Zillow doing this I love how you connect it to the idea of sustaining innovation in the in the trunk of innovation
00:09:59was before being you're basically making the current model better and sustaining aggregation if I could put it that way right now because they were absolutely and that's appropriately paid for it but they didn't change the market like another example of this I think it's Spotify Spotify is at least two Nate us sustaining aggregator they are actually propping up and strengthen the incumbents are the record companies are stronger today than they ever were before thanks to Spotify and and there's lots of examples of it in terms of disruption where a new technology comes along and it it's a great technology but the existing players are able to incorporate technology into their existing business model
00:10:59wake me up at the fine thing it'll be the component suppliers that made that technology you don't make money but you don't build transformed a businesses that change value change that change markets and you don't build a sustainable boat if if what you do is just sustaining it if it's not disruptive bright call moment right you making the analogy to sustaining versus you know disruptive and make sure we have the definitions right around I don't like business speak like like we're sitting in an NBA score right now in the reason I love the Mac was with so if you think about it in almost any sort of lens and it's so amazing most incredible it is like there are two completely rethink how computer
00:11:59how to make it so much more approachable and lay the groundwork for all of computing for the next no X note for decades it's it's an incredible incredible product right and get and what happened Microsoft 8 Apple's lunch why because the Mac was a sustaining Innovation doesn't make it a less valuable Innovation two ways to society Bradley and Mike historically speaking but from a business sense and a money-making sent it absolutely makes it OS valuable invention because Microsoft just copied it and then copied it and attached it to the existing business model that they had based on the IBM PC and dust which predated the mac and we talked was before right the reason the mcphail does not because Windows beat the matters when it was open the map of closed the reason the mack Falcons Windows already had the business model in play some cuz. Came first. Was already established in widespread before the Mac came out your head start
00:12:59so when the Mac came out it was amazing and incredible but it didn't build any nice business but it didn't build a transformative business because if I was able just adopted and plug it into their existing business Molly didn't change the business model sites such a good point and most of the most of the Innovation that happens in society today ends up in sustaining Innovation like which is fine yeah it is it's useful like a bed of a better mousetrap as they say when Steve Jobs said it's just a feature what he was saying was it's a sustaining technology it's not for informative and end that's why it he was in he was right because Dropbox tried and tried and tried in the consumer market and where they also we had to do they had to go to the business Market which is a different Market different value chain and again they are building a business so you all will be a nice business it's not a transformative business in the way that that perhaps your dress with out of my being
00:13:59super space because it's it was just a feature in just a feature it be like if you backup and squint a gooey ended up being just a feature in the same sort of way that's that's a great parallel actually I think what would be interesting here just to drive the point home folks is to think about a technology right now and how it could be applied as a sustaining innovation in a disruptive innovation and one of its been a less popular Topic in the more racing exponents but obviously if you go back far enough something that we would talk about a whole lot is self-driving cars and you pack that's going to have on society and other technology the technology is going to be very much the same whether you're an existing manufacturer or something like Google and maybe Google drops it into an existing manufactured this is a technology that he's in and of itself business model agnostic that you think about the incentives of different players and how they want to apply that technology you give it to someone like a BMW
00:14:59an existing car manufacturer and that instinct is to think how can I take this technology and sell the vehicle that I have four more money as a result and you get interesting and cool features like self-driving on Tesla or adaptive cruise control of BMWs or whatever impact BMW had the super cool video iMac on. They had to super cool video of they taught the self-driving vehicle how to slide around a track so does this guy just gets in it makes everyone look like they're I drift hero which I thought was super cool but it's fundamentally a sustaining Innovation this is exactly why self-driving Vehicles people love to talk about Tesla is disruptive and maybe there's something in terms of the way that thinking about building at a network and so on it's true but in terms of the actual Vehicles this is why Tesla vehicles are fundamentally not a disruptive products by using a technology to sell a better product to the existing paper for more money it is fundamentally the same business model but take that
00:15:5928 a very different context which is something like an Uber or Lyft and these guys are doing ride-sharing right and their primary cost of business paying for the the drivers is that in the vehicles and if you apply that is destructive to the existing car manufacturer is Uber and Lyft wanting to take self-driving technology they're not going to take that and then I'm going to try to sell the the vehicles for more money as a result of it they're going to take the technology and use it to drive down the cost basis of offering ride sharing the same technology applied in fundamentally different ways one is sustaining one is disruptive it's a great point this is why even like the technology will bring left with seems less impressive than likes a otezla for example there more meaningful from a business perspective because it's a different thing about this
00:16:59wife you know people who study to stop getting frustrated at the term disruption being flown about constantly is disruption is fundamentally about business models if there is no business model change there is no disruption right what's the classic example would like a hotel right to be a cheap hotel is not disruptive to a Ritz-Carlton because if you actually want to match the Ritz-Carlton and an acquired that's impossible you're going to end up being just as expensive as a Ritz-Carlton right away offering something completely different and experience that could measure is called it like people off for houses that are pretty freaking spectacular on there but doing it with a completely different business model is is disruptive in a way that you know that that's a OTAs not disruptive so I do want to mention I don't travel agents cuz they're there a piece that I I kind of struggled with it in defining when it comes to a Tara gation and Edison discover
00:17:59I think they are alligators in a meaningful sentence and the reason is so what is it on my travels until you go there and you search for instead of starting at a hotel brand you search for I can destination and then it was like the the the the rooms from all different brands so it's like a Priceline or something like that right argue that booking.com is not destructive because it's it's maintaining sort of the same business model and why is it why is it successful successful not because it disrupted the travel industry that's an Airbnb is trying to do but the reason why it's successful and extremely profitable and it and you're such the monster that is because it isn't so you can do air conditioners ruption are can be different sorry things are this is why they're there different concepts and what booking has has done is there not just a discovery service there are
00:18:59are there are sites that just help you find hotels actually integrated backwards into the transaction itself right until the integration is the actual reservation and the finding of the hotel and then on the backside what happened exactly predicted with arrogation through where hotels come onto the platform and put their inventory on to booking.com in a way that booking prefers modularizing themselves and commoditized themselves and why because book booking.com has made an integration in the value chain that is Warped in change the value chain right so in this case it's actually a sustaining technology but it is very successful because it is an aggregator that has that has achieved Integrations with it again Integrations like the end point that's where you make money that's where you that's where you transform value change you can get to a point of integration through disruptive technology or you can get to it through in a Turkish to Gator
00:19:59if you don't get to it then you're not you're not a Transformer company you're just not right it's it's fascinating listening to describe the RTI process because in many respects what they have done the booking hotel rooms Zillow is kind of moving very closely to Wards in terms of the North American real estate market right long as you're not involved in the transaction but you have to give you have to integrate but I think you have to be involved in the transaction that's really the case you think about all the Alligators that we talked about they're all involved in the actual transaction right and that transaction made the case like Google and Facebook that maybe the drink that contains all the advertising but but all the other agent have they managed the exchange of money and Zillow was not a part of that today they were completely separated from the actual changing of money in the real estate market and again it was a very successful
00:20:59but the reason why is a fundamentally fragile position is that Zillow was going to rise and fall with the sort of the sustainability of the real estate market as a whole and everyone knows that the real estate market North America is just is Bonkers it makes zero sense again to Sora reiterate in a real estate transaction the seller pays 66% fee and that feels then split between the buying real estate agent and the selling real estate agent half and half and it's it's bizarre because one it's so huge than the fee is so high and to the incentives are completely screwed up you end up in a situation where the buying real estate agent who theoretically should help you get a better price on your house is actually motivated to keep the price High everything about this Market doesn't make sense of why people have kept trying to attack it and it is very in trenched for lots of reasons and put his very very decentralized the MLS
00:21:59multiple listing services that are unique to each geography and to be a part of it to be certified broker and there's all these for like Redfin would come in and they just wouldn't show people control the buying process they cannot show a buyer the house they can point out all kinds of problems in the house that makes you not want to buy it like all houses have problems right it's like it's like an NBA game on every possession you have to decide what to call right and you can so you can make you not want to buy a house even though they can say they're doing their job but it's a red panda house so they don't they don't want to lose by can someone come in and tried to use her people cut their fees and and those are all messed up but the proper Zillow is they know it's messed up and it if you are hitching your trailer to a messed up industry you are fundamentally susceptible to a new player coming in and actually finally figured it out and breaking the whole thing open I mean it's interesting in terms of
00:22:59finding it as they rise in full on the market but there's another way if you ain't it which is the the size that the Quantum of the opportunity is a function of what you integrate over the top off and you'll point around getting your hands dirty and taking a cut of the transaction and and having Capital At Risk in that sense or or having something at risk in that sense as opposed to just selling subscriptions in super high margin fantastic in terms of high margins but there's always going to be a limit in terms of the size of the opportunity and and this is where I would draw the parallel back to wet where where I talked about that initial sustaining versus disruptive innovation yes that going to rise and fall on the back of the market on the back of the health of the real estate market but there's also just this massive pot of gold for those guys if they can figure out how to integrate down into the purchase and sale they will have control not only of the uses coming in to look at the site but the whole process and
00:23:59kiss you so much more control to reshape all those elements like the incentives and they will make so much more money as a result if they crack it just to reiterate it's not just his rise and fall of the market what I mean is if the real estate age the real estate industry like the value chain and the structure of it is fun it's flawed it's clear from anyone looking at it that there's something not right here right the antennas are wrong in the fees are way too high there's reasons why wasn't I get together thing I did mention is your people rarely buy houses right to the motivation to push for change was real estate agents are involved in every transaction every single day is there incentives to keep it the way it is our way higher and motivations are way higher than sore people just kind of dipping in and out you know every few decades is the way it is but it's also a situation we can see it like is this really sustainable and what I mean by Zillow rising and falling with it is if someone actually does disrupt the market and then Zillow is
00:24:59exactly right and this is why your Open Door is was so interesting that we talked about last year because their model reiterate is they go in and they buy houses they like you but you put in an address and they do an inspection and they make you an offer and he's like to take it or leave it at end their bat is that through like data science and understand the markets that they can consistently buy houses at a price and then sell them at a premium fee so like being cheaper like red fence trying to do they're winning by by base with the people who are the worst shape in the process of the sellers because they're stuck in the house they often have deadlines have to go with your buyer you can look at lots of houses write you an option if you're a seller you can only sell one house and so they're coming in and serving a really under the most underserved segment of the market and saying yeah yeah maybe not going to maximize the price you get but if you think about the time value of money you think of
00:25:59flexibility like to to get a guarantee price the moment that you wished it like that's something that could be very attractive and then theoretically they will flip it and then and then and then sell it for higher price and they charge fees on the way the reason why is it such a problem for Zillow is to the extent they get traction the they're not just threatening is how can a competitor coming along its they're threatening the entire model of real estate and again the model real estate is where Zillow wrestle so there's a real threat to Zillow here but then to your point the point you just made there's also a real opportunity cuz what's open doors problem they still have to sell the house right and what company in the entire industry is best place to sell a house quickly and efficiently Soulard Zillow the one where everyone's already going so it's both ate open doors both a threat and an opportunity yet it's it's fascinating the way that Wendy's Industries start to change
00:26:59how often times these companies that come along and Aggregate and disrupt they they require working with the elements of the industry that they end up disrupting and the ones that are successful other ones that get the companies that they dangle want to disrupt in the aggregate consumers on top of that they get them so dependent on working with them. They have no choice and all that they did that it's so attractive and that they are Focus just on that quarterly earnings that it's like all just keep working with you and the Frog full a boss and the example that I that came to mind for me is I was reading your article from last week was actually Netflix and it started off in much the same way just taking a will just take the content from you guys and will mail out DVDs and then we'll just will just drain the content your content it's all good this is all this is all marginal revenue for you guys with making you missed a content provider more money and then they get better they generate more data than
00:27:59custom is trying to go there they build relationships with customers they have this fantastic UI the data give some insights into content that no one else has and then all of a sudden I turn around in that I guess what guys we going to start creating our own content and will sell it to everyone in the world and it puts them in this incredible position and what's going to be interesting to say is whether Zillow have got themselves in such a secure position did the estate agents are willing to risk bypassing using them in the future and whether they lack collectively to do so this is so interesting to watch it and it has in it matters not just for Real Estate but for how you think about companies like Spotify for example there's reason to think that Zillow can pull this off and the multiple listing services of a downside of the early days is they didn't do to get access to Multiple Listing Service which is where all the houses go on immediately if you want to know what house is on the market right away you need access to the
00:28:59is you have to be a registered broker cuz they're run by local real estate associations I mean you can see all the like she could see what all the problems his access to all that you actually have to be you have to be in there and do that cuz they're at their are media companies are high margins are the media companies you know Redfin went the opposite way there actually are and have been trying to build out the real estate agency would like a different different approach on to Zillow and so they were always a little behind there a little late but the start of the brilliant piece that still have you mentioned it I think it would be the podcast zestimate we could go on and see what house was what they said it was worth and you'll be beside how accurate is it doesn't matter cuz people loved it right in the state of love going and snooping around as soon as the neighbors houses where the my house is worth and that that was the source of the word alligator the key users
00:29:59on the platform and the people on the platform the real estate agents were motivated to put listings onto the platform as well and that's what got it started and then what happened was this is really interesting is Zillow made a deal with like a small a aggregator of an MLS listings and they insulate actually got MLS listings on 201 fulling out there and in this is the key point due to like to have a dispute with the alligator they're going to pull off the MLS Zillow off and to the point where they predicting Doom for Zillow happened was is Zillow started cutting individual deals with all those 900 MOS areas and they all hustled and work hard and I went back and read like real estate journals when that time. And they're talking about how hard you're working to get back their MLS back onto Zillow and what happened why because they know you can see me and that's where the consumers were in the local real estate agents knew that if they were
00:30:59where to sell houses effectively they needed to be on Zillow and they're on their service on zillow's terms so they've already demonstrated at least one point in their history that date that the market knows they need Zillow the real estate market in those that need them and they have power over them so my suspicion is again those couches determine in the context of over civil records real estate agents you just there certain opportunities where makes sense is there's not going to be a real retaliation retaliation Mercedes have to pull their houses off right they pull their houses off though they've already shown that they know they're going to be hurt and so I think they're not going to be punished like that they have achieved enough consumer mindshare and control that they actually have gained power over there in Trent suppliers and can move into this new area without retaliation I love
00:31:59comparison between Zillow and Spotify but there is one big difference between the two of them which is Spotify is dependent effectively on an olive olive ballistic I can pick up that I would go out which is a group of supplies IE the record label so the likelihood of collective action there is much higher than 900 mls's and it's not even the mls's it's the individual agents in the individual agent will have a collective action problems today if it was one person and I saw this happening one entity they saw this happening it's like okay guys I see what you're trying to do you're trying to say you're trying to come for me I'm going to cut off all your supply in the consumers can go to your site but it won't matter cuz they won't have any houses and people aren't going to be there but you don't want to be the only real estate agent not listing that cuz there is still going to be a bunch of consumers going
00:32:59so I think the likelihood that Zillow experience is a problem vs. Spotify and I remember thinking at the end of that episode asking you if you are a wreck with agent what would you record label what would you do and I was thinking actually you know what I wish I had mentioned if I was a label and I saw Spotify moving to label territory and there are only a handful of labels I just pulled the content right then and there and keep them in that you keep them in that line but the likelihood of that happening with real estate agents is so small because there is so many of them and you don't want to be the agent that gets the shity price because you're not listing on Zillow and the seller is going to be like why isn't the house on Zillow like I want my house on Zillow I know that's where all the consumers car that's exactly right in this is another sort of this is my other sort of real aha moment when I was writing this article was the appreciation for if you want to predict the success of an aggregator a key component is understanding the degree of fragmentation in the morning
00:33:59certainly causes fragmentation but they also benefit from it in music Magoo all right what it was the web that are we completely destroyed the newspaper bismol that fragmented is that put that put billions and trillions of pages on the internet that were just waiting for someone to to to the field was fresh it was like plowed in end and all the further that has Facebook further that absolutely but they did the conditions were right for them to come in and I think this gets to your point where Zillow again it's a very very hard Market to break into but it's still pretty fragmented and that fragmentation Works to their advantage of your exactly right to compare to Spotify the fundamental problem with Spotify will there's two problems no one but the problem is there's only 3 which means that their power is out size
00:34:59obviously the other problem with Spotify is they have a competitor in apple music is there and yes I prefer I think spotify's better for lots of reasons but at the end of day if Spotify has no record Has No Label music and apple music does that matters the supplier supplier content matters more than that then this or user features that makes total sense and it was for that reason that the there too so I want it. The conversation and talk about the market reaction to it and on one hand I found it immensely frustrating that the market would punish a company for doing something bold like this in taking taking that position and effectively leveraging it to go off to to go off to what could be one of the biggest markets in the United States like you think about home sales it is a huge market and if they can tie that up it is huge on the other hand I kind of understand that there is pretty substantial operational risk
00:35:59associated with figuring out financing and all the capital of sociated with buying houses and the on the boots on the ground boots on the ground type of protist that you going to need in order to buy all these houses and show the houses and do whatever they say they're going to do I think there's another really interesting element which is that you train your investors to expect certain things and this is an instance where Zillow like they said it in that IPR the s-1 like you said they were real estate media company and invest is come along and they think okay this is a very predictable, it's going to the revenues are going to be predictable we can we can measure it out in perpetuity and if I want this type of company with this type of exposure I'll buy this type of company if you come along and you catch the market on a wear with a big shift like this you will get that 9% hit or whatever it was independent of the operational risk involved in switching your business models
00:36:59no doubt it everyday and still trending down there they were at a high of $58 in in middle of March and they're $47 is $47 right now so I guess that's a 20% drop and and yeah I think I think it's some investors buy into a copy with an expectation there Billy portfolio right if they wanted to be invested in a in a real estate company that you to your point if it's not just that they're taking on you know that they have to put boots on the ground something like the entire capital structure of the company is going to have to change if they're going to do this in a meaningful way they're going to take out tons of debt they're going to take all these properties the rest is going to be way higher but that's what happens if the payout to your point is huge I risk and high reward you don't get one without the other so I am I can understand the investor reaction what so interesting is I think we said on that pocket door I said I can bring your position by wound up to I said there was not going to do this the rule for it yeah I know I think you wanted to do it
00:37:59no way that we do it in the reason they would never do it is because their investors went allow them to I think they had the end and also you're competing with the spiders that they could be as far as point I think you could see that coming again once you understood how that MLS example that before but from investment perspective and being a public company. I didn't think that I don't think that I don't think they could do it but the day that we started on that road yeah it is taking some Coronas and there is it's not without risk but you know what like this is the kind of thing that makes me excited about tech and makes me excited about Silicon Valley it's it's one thing and I don't want to chill out I got to defend Seattle Seattle and Seattle or Silicon Valley it it's like it's one of these things where it's nice and fantastic for you to build a business on top of an existing Market that's broken and make things a little bit of
00:38:59yeah and take a nice cut of whatever Market that is but come along and to risk your position in order to fundamentally reset a broken locket I think this is awesome and I am cheering for them all the way and I really hope they pull it off the rug with open door like I've always been very interested intrigued by that because there's an aspect of if you're going to change a market if you're going to fundamentally change the market you're not going to do it by you're not going to do it by doing what is already done better right there was a red fins that's why I've always been very skeptical in and kind of bored by Redfin they're like basically we're going to make real estate agent fees and stuff cheaper doesn't transform the market you have to come in with something that fundamentally changes the the value chain and that's an Open Door is doing by being by by being a buying agent actually buying a house and then train them but the questions I was in power they going to sell the houses how are they going to get rid of
00:39:59because you don't want it comes to this sort of business you're the number one all that matters is how on this house on your couch eat you have to get them off your balance sheet as soon as possible and and the company was by far the biggest advantage of doing that is Zillow because they already own where customers go it matters more like I don't care how good open doors data science is if they don't get customers buying their houses they're going to struggle and and I agreed I think it's a huge opportunity I think Zillow is right to go for it and yeah I hope the $20 decliner stock price is not dissuade them from going all-in there's a obvious complement between those two companies to write one really has got nailed the consumer experience and bring lots of brings lots of eyeballs and does another company that's figured it out from the seller's perspective in Tums off creating and experience in terms of I need
00:40:59sell my house right now because I'm moving and I need to get out and they have figured out evaluation process they figured out how to show houses fix them up take them out like you people valuation super quick weight etcetera etcetera I can see a world in which these two companies have given the directions to Lowe's just described become very very complimentary not to start to go into Dreamland and how it and everybody loves to do this imagining mergers and Acquisitions I'm actually very skeptical of doing it but in terms of skill sets and creating an end-to-end integrated organization I could goes to organisations very complimentary other people in this space I mean obviously we are we are very biased towards the towards the ones in the valley I'm choosing test that I mean open door has expanded pretty well there I think there are there raising a tattoo billion dollar valuation or something like that which you know what I think is suggest that their numbers are are looking pretty decent but yeah
00:41:59that it'll be interesting what does presume that their technology is better on the on the buying house side I would bet on Zillow because the the the selling side the DMV customer acquisition and the other thing is you know it when it comes to finding the buyers the open door have to advertise they have to like did they do a lot of advertising in the mark sat there and say no you make raise awareness Zillow if you're selling a house what also the first place that you go you go get that new movie that estimate right you see how much is my house worth and and they're just like it's so valuable to own in that relationship that customer relationship but it's it's you need more right you need that integration in the story because one the market itself is super interesting with her trying to do is interesting how they sort of are seeking to Pivot in dealing with the market is interesting but also this idea of really flashing out sore
00:42:59you know I already sincere I think in a really meaningful sort of step forward I mean obviously let me know that that's right up my alley I love this to I sort and I was like yes this looks fantastic this is this is an example of the premise attack like fundamentally rethinking it business or an industry given UTech that's come to Market given the changing Dynamics I think it's awesome but I wrote that to finding a traitor's piece I I Rhoda the company piece of the time called blogs. Books or something along those lines and what am I start a big things was the ability sort of iterate and change things over time and this is a great example because I thought I really nailed this down right like 6 months later like baking a pretty substantial change or adjustment and like I said almost going back to where I started because like the big article that I wrote the week before I sincerely was Netflix in the conservation of attractive profits which is about Professor Christians Theory and it why why that shift that
00:43:58Grayson was critical and it's kind of weird are you kind of forget stuff like it's a book would be good cuz that's the written down but it's also really good that once it's written down if you like it's stuck right now and it's it's pretty great for my perspective so crazy I mean once upon a time I think you made this point once upon a time a book would have been appropriate given the pace of change but the extent to which industries of changing and we're learning new things and we seen multiple examples of this been dominant but in different Industries and they're different things like the extent to which this fragmentation in supplies in different Industries just allows you to refine the Siri as you go along and you want to be able to do this because all this is happening so quickly because all the delay hope don't people always say that and you guys at that at that conference this weekend and you know is always a kind of report on people always say it's different this time but it is the internet like all this is because of the
00:44:58the reason why the internet matters is the internet is the driver of that fragmentation they did the Internet is the driver of that commodification of stuff that used to be integrated into by creating the conditions for integration to come along and without without the internet like that's why it is different and why there are these opportunities to build activators cuz you first did everything broken up into pieces and then again that's the others or take away I have your is just drive change date will lie on the on the change having already happened in many respects and that and that's the real change driver the real unifier of all this is the internet yep I totally agree
00:45:42cool well we will I'm sure the the what I actually run out this weekend in the privacy in the South we will definitely talk about again I think it ties into thinking what regulation in different ways I can use at the end of it. That's going to be another piece and I think another podcast but I'm glad we are actually brought my microphone thing cuz I want a podcast about about this article so it's so much. I obviously I'm a big proponent of all the talk about the Privacy stuff but when this came out particularly given the nature of our conversation last time and just the best company to go off to this Market I was like why I was glad that this was your prefer topic to it cuz I love this stuff as well I don't know where are definitely I think more big wide world with our listeners know we are in a relevant with the stuff for sure the word press.com for sponsoring exponent go to wordpress.com
00:46:42how to get 50% off your website today and I will talk to you next week it's good to have you back I look forward to speaking to you next week bye bye

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