Murdoch Bid to Dethrone Zillow Starts With Knocking Math

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News Corp. CEO Robert Thomson

Robert Thomson, Chief Executive Officer of News Corp., intends to use Dow Jones as a content source for Realtor.com’s website. Photographer: Drew Angerer/Bloomberg

Can Rupert Murdoch take an online fixer-upper and turn it into a digital real estate profit spinner? We’re about to find out.

Murdoch’s News Corp. plunked down $864 million in cash and assumed $88 million in costs in November to acquire Realtor.com’s parent company, Move Inc., setting up a testy head-to-head rivalry with the unmatched king of online home-sales information, Zillow Group Inc. Zillow has bounded to the top in part because of a feature that includes price estimates for almost every house in America.

Now, Realtor.com, enriched and emboldened after the News Corp. purchase, is fighting to claw away at Zillow’s mainstay “Zestimates,” contending they just aren’t that accurate. Realtor.com argues it offers home sellers and shoppers a better online experience by listing more properties with accurate information as opposed to the guessing involved in Zestimates.

“We want to emphasize what’s real,” News Corp. Chief Executive Officer Robert Thomson said in an interview. “And the Zestimate’s not real. We’re the real deal in real estate in real time.”

Zillow scoffs at that. The company says it’s constantly updating its estimating technology, which, according to company data, has a national median error rate of 8 percent. CEO Spencer Rascoff said last month that Realtor.com’s efforts to alter the playing field haven’t made much of a difference so far.

“We haven’t seen anything at Realtor.com or News Corp. that has directly impacted Zillow’s business or at least successfully impacted our business despite, perhaps, their efforts,” he said on an April 14 conference call.

Escalating Rivalry

The Realtor.com-Zillow rivalry is escalating as the housing market picks up steam on U.S. job growth, low mortgage rates and a wave of millennials entering their prime buying years. More than 90 percent of homebuyers use the Internet in their search process and 50 percent deploy mobile applications, according to the National Association of Realtors.

At stake for Zillow and Realtor.com is the share of marketing spending by real estate agents, estimated by Goldman Sachs Group Inc. at $9.7 billion this year.

“Both have access to sufficient resources and both have a strong enough resolve so as to make this a portal battle for the history books,” Stefan Swanepoel, a consultant and author on real estate trends, said in an e-mail.

The competition already features sharp elbows. News Corp. has used its ownership of ListHub, a service for posting homes on the Internet, to try to cut off the flow of listings to Zillow. Zillow is striking deals with local multiple listing services to keep the information coming.

Zillow Sued

Move Inc. sued Zillow last year for alleged theft of trade secrets after Move’s chief strategy officer, Errol Samuelson, defected to the rival company. Zillow has disputed the allegations. The case is pending in Washington state’s King County Superior Court.

Murdoch appointed Thomson, a fellow native Australian, to head News Corp. before it split from 21st Century Fox Inc. in 2013. Thomson had been editor of the Times of London, managing editor of the Wall Street Journal and editor-in-chief of Dow Jones & Co., all Murdoch properties and competitors to Bloomberg News. Thomson intends to use Dow Jones as a content source for Realtor.com’s website.

This month, News Corp. started Mansion Global, a website with articles from the Journal’s Friday Mansion section and Realtor.com content. Mansion Global is co-sponsored by Sotheby’s International Realty, Extell Development Co. and kitchen-appliance maker Sub-Zero Group Inc. News Corp. is counting on growth in these online real estate ventures to make up for the continued decline in print advertising revenue.

Campaign Start

Digital products “will underpin long-term expansion and complement our expertise in news and financial analysis, both of which have been important ingredients in Realtor.com’s accelerated growth,” Thomson said in a May 5 statement.

Move Inc. CEO Ryan O’Hara is unveiling a new marketing campaign on Tuesday at a Realtors conference in Washington.

“We have several product initiatives going on that are going to move the needle,” O’Hara said in an interview.

The campaign will include a focus on New York, where Realtor.com competes with Zillow’s StreetEasy website. Raising New Yorkers’ awareness of Realtor.com will help attract more large advertisers, such as Home Depot Inc. or Wells Fargo & Co., O’Hara said.

“Not only is it a good market for real estate transactions, but also a lot of the big brands are there, and we love showing them our product,” he said.

Website Traffic

Among the top three U.S. websites, Zillow generated almost 48 percent of desktop and mobile traffic in March, followed by about 26 percent for Realtor.com, which came in just ahead of Trulia Inc., according to researcher ComScore Inc.

Realtor.com’s visitors rose 38 percent in April from a year earlier to 44 million monthly unique users, a faster growth pace than its biggest competitors, Thomson said on a May 5 conference call. Zillow still gained more total visitors, according to Katie Curnutte, a spokeswoman for the Seattle-based firm.

“We’re starting off twice as big and we’re adding more people,” she said. “They added 8 million people. Zillow added 12 million in the same time frame.”

Zillow’s earnings, scheduled for release Tuesday, for the first time will include results from this year’s acquisition of Trulia. Digesting Trulia is taking longer and costing more than expected, Rascoff said last month.

Property Details

Zillow continues to refine the algorithms for its Zestimates while also encouraging homeowners to update details on their property, such as the number of bathrooms or bedrooms, to provide more current online information, Curnutte said.

“It makes our database a lot more accurate,” she said.

Realtor.com has been licensed since 1995 as the official site for the National Association of Realtors. It lost its early online market lead after the Internet bubble burst and former CEO Stuart Wolff was convicted of insider trading and falsifying the company books.

O’Hara touted Realtor.com’s alliance with the industry trade association as part of its superiority to Zillow, implying that Zillow may be a disruptor bent on eliminating real estate agents from transactions the way the Internet’s cut out travel agents.

“We think Realtors are incredibly important,” O’Hara said in an interview on the Fox studio lot in Los Angeles. “You want a professional Realtor helping you make a purchase because it’s just too risky not to.”

Lead Generation

Zillow has no plans to cut agents out of transactions, Curnutte said. Both Zillow and Realtor.com get the bulk of revenue from real estate agents, who use the websites for marketing, customer management and lead generation. Leslie Ebersole, a real estate agent in St. Charles, Illinois, moved all of her online spending to Zillow in 2013 because it offered better support than either Trulia or Realtor.com.

“I’m a card-carrying member of the NAR,” Ebersole, a Realtor since 2005 who leads a team of six agents that sold $30 million of homes last year, said in a telephone interview. “I’m fine with NAR promoting the Realtor brand with Realtor.com. But as an agent growing my business, that doesn’t help me against other agents.”

Swanepoel, the CEO of Swanepoel T3 Group in San Juan Capistrano, California, said the Zillow-Realtor.com competition will help buyers and sellers of homes by spurring innovation and improving the quality of market information.

“The one company is perceived as younger and dynamic, the other as established and conventional,” he said. “The beneficiaries will be the home buying and selling public that will have robust apps and tools and an ever-increasing database of property information.”

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