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Your cheat sheet to the Zillow-Trulia deal

By February 18, 2015 No Comments

We awaken today to a world where Trulia is owned by the newly named Zillow Group. Brokers and agents need to make quick sense of what the closing Zillow’s acquisition of Trulia means for the immediate and ongoing future. To help you toward that end, here is a cheat sheet covering deal structure, what it means for the two brands, and sharing insights about how you should react to the news. Disclosure: I was a Trulia employee for more than eight years; these views are based on my own experience and assumptions. (I was never in any capacity involved in the deal talks, nor do I have any knowledge about Zillow’s or Trulia’s future plans.)

Deal structure

The Zillow-Trulia deal is an acquisition via a “stock-for-stock” deal. At deal, Trulia stock (TRLA) converted to Zillow (Z) stock, and the Zillow Group was created. Trulia stock is converted at a predetermined price of 44 percent of Z’s price on the day of close — yesterday.

In the scenario proposed by Z in the offer to acquire TRLA, the brands will maintain their individual brand identities. TRLA stock owners will own north of 30 percent of Z, and Trulia’s co-founder and former CEO, Pete Flint, will join the board of the holding company along with one other Trulia board member.

What this means for Trulia and Zillow

  • Trulia and Zillow are still in business 100 percent (besides any celebratory champagne-popping). This deal isn’t designed to make Trulia go away. With 54 million unique visitors and not much overlap in consumer audience, killing the brands makes no sense. Trulia and Zillow each have individual brands and stories that make their co-existence a no-brainer.
  • The new company will save a lot of money. Zillow’s chief executive officer, Spencer Rascoff, said that savings would amount to the tune of $100 million. The lion’s share of that will come from money not spent competing against each other and in cost savings from shared resources. We just witnessed yesterday where some of these savings will come from: via layoffs.
  • Things are just heating up. Check out this quote from one of Trulia and Zillow’s largest investors, the Australian hedge fund Caledonia (which has invested a total of $1.9 billion in Z and TRLA), speaking to the future of the new combined entity: “So, we have a company with 72 percent of the homebuyer audience but only 4 percent of the agent advertising spend … This is equivalent to a TV station with 72 percent ratings and only 4 percent ad share. Advertising dollars inevitably follow eyeballs across every medium, across every country.”
  • No need to compete means renewed focus. With no energy wasted fighting each other, Trulia and Zillow can concentrate on winning even more consumers over — which, in turn, gives them more leverage in the industry. They may have shiny bells and whistles for agents and brokers, but the only reason you will pay them a penny is for the consumer eyeballs and leads they drive. Expect the new entity to throw even more of their combined weight around to strengthen their position in the market, and drive further shareholder value.

Insights for the future

  • You will be sold something. Trulia and Zillow’s sales teams will be bigger and stronger than ever. The new organization will learn to sell more efficiently, and will have even more leads and products to sell to agents and brokers. Maybe we’ll see different product packages and pricing structures, and hopefully that’s a win for agents and brokers. Remember, despite seeming monolithic, they have only 4 percent of the online ad spend, so they have a lot of selling left to do.
  • You could get more control over listings. Zillow parting ways with ListHub (owned by News Corp.) creates an interesting situation for the industry. What happens when the largest sites for real estate consumers are not a part of ListHub? Will brokers keep using Listhub — and why? Trulia and Zillow’s feeds will only get better as they unify listing aggregation resources and work with MLSs around the country. Frankly, Trulia and Zillow building up their direct feeds is good for the industry! Here’s why: You get more control. With no middle man controlling your data, you can impact listing display and lead delivery. Just ask Keller Williams and its “my listings, my leads” strategy.
  • Zillow will own the destination. Remember when Trulia bought Market Leader? Market Leader also owns and, and Zillow already owns HotPads, RentJuice and StreetEasy, to name a few more brands. The new Zillow entity will own the leading top-of-the-funnel sites under one umbrella. The money is not in the syndication; it’s in owning the destination. Let’s put hearsay aside and recognize that it’s better to work with (rather than against) Trulia and Zillow when it comes to leads. The companies have earned that respect.

Where should you focus?

Focus on your role in the real estate ecosystem — helping consumers achieve their real estate dreams and goals. Train yourself to be responsive to consumer demands and be a real market expert who helps consumers make sense of the data coming at them from all directions.

Let the large portals continue their battle for metrics like page views, search engine optimization rankings and average revenue per user. You need to double your focus on what actually matters to your business: showings, offers and closed transactions. Your only concern is whether the portals are working for you as an input into your marketing machine. Your clients couldn’t care less about how the portals are affecting the real estate industry.

All your consumer cares about is achieving a homeownership goal. Consumers need to understand their local market conditions, mortgage rates and their home’s value. Focus on delivering and exceeding consumer expectations, and your business will continue to prosper.

And if a consumer asks you what the Zillow-Trulia deal means, you can tell them: “Business as usual, but people on Wall Street made a lot of money. Now let’s find you a house!”

Pierre Calzadilla is the director of strategic partnerships at RealScout.

Email Pierre Calzadilla.

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