Zillow’s Expansion Into NYC Real Estate Market

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Aug. 19 (Bloomberg) –- Bloomberg’s Cory Johnson, Telsey Advisory Analyst James Cakmak and Redfin CEO Glenn Kelman discuss Zillow’s $50 million acquisition of Streeteasy, as well as how Redfin differs from Zillow and Trulia. They speak with Pimm Fox on Bloomberg Television’s "Taking Stock." (Source: Bloomberg)

Agreement, what was it about?

Earlier settlement announced in may was rejected by the sec as too lenient.

Both agreed to admit wrongdoing.

That is a departure from recent and highly criticized practices in the past.

It ends a 12-year career of managing money.

He tied up most of his client money in a wireless company that went bankrupt.

He has admitted wrongdoing to a series of facts such as improperly borrowing $113 million from the fund and allowing special redemption terms for some not allowed to others and in proper bond trading causing the bonds to more than doubled in price.

He released a statement where he said he believes putting the issues behind him is the best course of action.

He says it will allow him to maximize the value for all shareholders and focus on what he calls his permanent capital vehicles.

A significant change from the initial settlement announced in may.

Is this settlement in reflection that you have the new head of the securities and exchange commission has a tougher policy?

Many are saying she had inherited an agency that was much criticized for the goldman sachs settlement.

There was no ignition of wrongdoing -- admission of truck -- there was no admission of wrongdoing.

That put a lot of focus on the policy.

Her sec has agreed to look at this on a case by case basis.

Let's turn our attention to the world of real-estate and the internet.

Zillow has agreed to pay $50 million in cash for another website.

They will get their 1.2 million unique monthly user's and access to the new york city area market.

Is this a good deal?

Let's find out more.

We have cory johnson.

Also joining me is an analyst and the chief executive of redfin.

I want to start with you, james.

What is this deal about?

$50 million in today's marketplace does not seem like a lot of money.

Looking at what they bought, streeteasy is a well respected brand in the new york city market.

It is an order of magnitude larger than other players.

From that standpoint, it is a good deal.

It can be argued as perhaps slightly on the pricey side.

This is an under-monetized asset.

The success hinges on the ability to get the full benefit from it.

St.reeteasy does sometimes charge for subscriptions where zillow does not.

It is a good deal.

Time will tell depending on the ability to execute and monetize if it was the right price.

Your company is a competitor to zillow.

What do you think of the evaluation?

What does this tell you about the business you are in?

We compete with zillow traffic but we are different businesses.

I think the deal is brilliant.

Zillow's main issue has always been about inventory and not traffic.

Valuing the deal based on how many millions of people go to streeteasy is not as important as looking at the number of listings it will get from new york city.

It has tried to be a dominant player.

Has always been top dog.

Zillow is now getting the inventory it has always lacked in new york.

Is it possible this can be replicated?

Are these bits of information public record?

New york is a special case.

The agents get together and share listings through multiple listing service that zillow does not have access to.

In new york city, it is a bit of the wild west.

You have all sorts of listings in different places.

Streetea sy has been gathering them for a long time.

I do not know that the deal could be replicated outside of new york.

But it has been a lucrative market.

Zillow illustrated it is very good at monetizing web traffic.

There is an advertising network of traditional real-estate agents that zillow will be able to plug into those consumers.

I want to bring in cory johnson.

What does this tell you about where we are in the cycle for these kinds of companies where one website is trying to take over another rather than build their own business out?

Building through acquisition is a reasonable strategy.

It is more difficult but faster.

This is a land grab.

They're going after the company spending $50 million.

In the world of the opposition's, it is not a lot except it is $50 million for a company that has lost money.

Zillow has decided to get bigger and add users.

That is what they're trying to do with the acquisition.

The internal metrics of the company, there has been strong revenue and user growth.

User growth has slowed down with revenue growth.

This is a way to accelerate that by bolting on new users.

James, is it the notion they will grow by acquisition or are they trying to fend off competition from somewhere else question eventually, they have to make money.

This is where the on-line traffic market was a decade ago.

I do not see this as a zero sum game.

I think there is room for multiple players to prosper.

This fits with their strategy.

They want to be synonymous with real-estate.

Building their brand is the utmost priority for them.

This jives with that.

It is there the possibility that people that want to buy or sell its home online could do that without a big intermediary?

They could put it on the web site of various locations.

I think there will always be a need for platinum -- platform for consumers and agents to go to.

It is driving information and empowering consumers.

It is generating leads for agents.

You need a platform to do that.

Any interest in going public to raise money to do these kinds of deals?

Redfin has plenty of capital.

The business is growing.

At some point, i am sure we will be a public company.

It has always been our ambition to be an independent, profitable business serving millions of consumers.

I do not know when that will happen, but that is not how we measure our success.

This text has been automatically generated. It may not be 100% accurate.

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