The Network Effects of Trulia: The $3.5 Billion Marketplace
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The Network Effects of Trulia: The $3.5 Billion Marketplace

So it was the summer of 2004. I was a grad student at Stanford and I’d just gone through a kind of painful home search It was also the summer when Google went public So the buzz in Silicon Valley was around Google. I got a ticket to a real estate conference. So I sat at the back of this real estate conference. You know I remember driving from San Francisco back to Palo Alto. There was this kinda eureka moment “Huh!” What if we applied this sort of Google search model to real estate that was it. I was committed to it. So the core problem in a two sided marketplace is solving the so-called chicken and egg problem. How do you get supply which drives demand which drives supply. How do you kick start this? The first way we solved that problem was to index websites. So we’d go to brokers and say “Hey can we index your website? and put your listings on Trulia for free to demonstrate the value proposition.” The other key network effect that we added was a Data Network Effect. And we used the scale and data that came from our users to improve the user experience. Everything from a recommendation system. So just like Amazon, you like this home you’ll like these other homes. So the Protocol Network Effect was key for us in the early days Standardizing real-time XML updates, bringing real-time data from the fragmented MLSes and broker websites to publish on Trulia. We realized early on we were not taking money on every house sold. But we got massive fragmentation which makes it incredibly hard to monetize we focused on working with the biggest corporate clients in the industry. In Q2, Q3 of 2008, everything changed. These large real estate companies were struggling. They were laying off people housing transactions collapsed. Our advertising agreements evaporated. Business was in decline as every other real estate company out there. So up until that point our revenue came from a small number of big franchisors, brokers and mortgage banks who were paying a lot to advertise with us. But when the crash hit their marketing budgets were just to far removed from the actual transaction for them to see a direct ROI so we were forced to pivot to targetting individual real estate agents who could see an immediate ROI. Looking back this was a bet-the-company decision because we had to change direction completely while the market was collapsing around us and we were running out of cash But in the end it paid off big time we went from zero revenue growth during the recession to doubling year over year allowing us to go public in 2012 and merge with Zillow in 2015 in a 3.5 billion dollar deal to create Zillow Group. M&A helped to quickly increase defensibility of the core marketplace business providing scale and moving to a more powerful kind of network effect defensibility. So I think of Zillow Group today as a company that has really evolved into something of a Market Network which combines the core marketplace businesses that you think of as Trulia and Zillow with a SaaS-based tool the Premier Agent App. The third component was the acquisition of DotLoop, a transaction management platform providing the network. So you’ve got today this incredibly defensible platform a Market Network for the real estate industry.


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