Are Zillow’s Interests Now More Closely With Agents?
Zillow is undergoing some dramatic changes. We will briefly examine two such changes, seeking to determine whether they have brought Zillow’s interests and those of its Premier Agents into closer alignment.
First Change – Best of Zillow
The first change we will discuss is the roll out of the Best of Zillow badge, through which Zillow recognizes the top Premier Agents. To earn the Best of Zillow badge, Premier Agents must be highly graded on surveys the company sends out to leads and connections. There are also other requirements, such as minimum sales thresholds. Individuals – a minimum of 12 sales or $2.5 million in sales within the preceding 12 months. Teams – a minimum of 24 sales or $5 million in sales within the preceding 12 months.
Premier Agents who earn Best of Zillow badges are rewarded in a variety of ways, for example being showcased to buyers and sellers throughout the home shopping journey.
Second Change – The Flex Program
Zillow has been testing its “Flex Program”. Historically, Zillow has used a pre-pay model. Premier Agents pay for their “share of voice” in their chosen zip code(s). Premier Agents tender payment to Zillow in advance, with their financial obligation being absolute, and therefore not contingent on results achieved from the leads provided.
Under the pre-pay model, Premier Agents bear all risks; payment is tendered to Zillow regardless of whether or the extent to which leads result in sales and commissions.
Well, along comes OpCity, a start-up committed to a post-pay model. OpCity acquires leads derived from a variety of sources, including top of funnel leads from facebook and google. OpCity then curates the leads, cultivating them into connections. This development process transforms leads into referrals, with an inherent value exponentially higher than leads.
OpCity believes that their process develops quality referrals. OpCity is confident enough to capitalize transactions with agents, retaining risk, providing referrals to agents on a contingent basis. OpCity’s confidence is based on recognition of the degree to which referrals are worth more than leads, and the realization that agents are eager to shed the risk associated with substantial recurring obligations for share of voice leads. OpCity charges 35% of the commission in exchange for its referrals and risk shifting platform.
News Corporation also thought highly of OpCity’s platform. News Corporation’s Move operates a number of websites including realtor.com. Move acquired OpCity in late 2018. Initially realtor.com indicated it would retain its pre-pay model, providing agents with choices on how to pay to keep their pipelines full. However, it subsequently indicated that it would be shifting to the post-pay model used successfully by OpCity.
Zillow has now tested its contingent model, the Flex Program, and is pleased with the results.
At this point, it appears as though the Flex Program is gaining traction at Zillow. If the post-pay model is widely adopted, Zillow’s interests would become more closely aligned with those of its agents. Moreover, Zillow has already developed tools to boost results (e.g., Performance, Pacing Algorithm – PPA), and can be counted on to develop more.
Author: Randy Airst, CEO at Exceedant and Team.
Based in the Greater New York region and Tampa, Florida region of the USA, The Exceedant Group is an asset management and financial services firm. Exceedant specializes in private equity, credit and hedge fund investment strategies. Exceedant’s clients have included NYSE and NASDAQ traded companies, hedge funds, private equity firms, commercial real estate firms and other entities.
Randy has been involved in asset strategy and management with clients/investors for many years at Exceedant and its predecessors.
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