Signs Of The End: Zillow Has Become Huge Loss-Making House-Flipper

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via forbes:

Every night for five months before the launch of Zillow’s website in February 2006, employees gathered their Dell desktops on Ping-Pong tables, connected them to harness their combined processing power, and strung together extension cords to get them all running. To avoid overloading the circuits, they unplugged the office refrigerator and banned Christmas lights. Then, while most of them slept, this jury-rigged supercomputer analyzed a decade of property records and American housing market data in order to spit out price estimates for 43 million homes.

Rich Barton had created Zillow in December 2004 because he believed technology would revolutionize real estate. Nearly a year into the venture, his efforts to sell homes via digital auction were going nowhere and the four cofounders he had drawn from his last company, Expedia, were nearing the point when they’d need to return to more stable employment.

As the founders tell it, Zillow’s future changed dramatically during a weekend email exchange among colleagues. One participant noted that Google Maps’ satellite view, launched just months earlier, gave a unique, bird’s-eye view of every neighborhood in America. Another wondered if they could put a price on every rooftop they saw. And so the Ping-Pong table project and the Zestimate were born.

The day it went live, Zillow crashed. The founders gathered in the technology chief’s office, where the six-foot-tall Barton recalls curling up in a ball on the couch and begging someone to “make the pain stop.” It did. According to Zillow, last year an average of 157 million people visited its sites (including Trulia, StreetEasy and HotPads) each month to view listings and Zestimates on more than 100 million properties. In May, the Web traffic tracker Comscore ranked Zillow Group 24th in total visitors, right below eBay and above LinkedIn. All those visitors allowed Zillow to book $1.3 billion in revenue in 2018, mostly from ads bought by real estate agents.

Today Zillow has a $9.5 billion market cap and Barton’s stake (the largest held by any individual) is worth $700 million. But not since 2006 has Zillow’s future been less certain. In February, Barton took back the CEO’s job—nine years after having ceded it to cofounder Spencer Rascoff, who continues to serve on the board.

Now back in command, Barton puts on shoes (he generally prefers to go barefoot) to greet a reporter. He walks carefully on the stepping stones that lead through the shallow pool of water that sits between the cavernous living room where he welcomes guests and his 40th-floor office overlooking Seattle’s Elliott Bay and Mount Rainier. He confides that he’s been strumming his guitar “to calm my monkey mind.’’ Yet he admits to no doubts about the new direction in which he’s taking his creation. “I sleep,” says the 52-year-old with a grin.

 

 

 

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