Zillow announced that it is to acquire the New York City property portal of StreetEasy for $50m in cash. StreetEasy is judged to be an incredibly strong and well recognised brand in New York, a city that is recognised as being fairly unique in the US with a very much a distinctly different real estate industry structure.
On the face of it buying up a direct competitor to either acquire customers or deny your biggest rival (Trulia) the opportunity to acquire this portal would be seen to be the logical; or as Spencer Rascoff states StreetEasy “complements Zillow’s dominant and growing national brand”.
However thinking it through, I am not as certain of the logic of this acquisition.
Zillow state that StreetEasy “will be run as a separate unit within Zillow and will maintain its brand. Zillow plans to help its new acquisition expand its mobile operations, including by introducing apps”.
These statements made in the DealBook of the NY Times are for me the most interesting. Zillow has been very clear in its strategy recently of building consumer brand awareness as a strategic platform to gain ascendancy in the online real estate space. Adding and maintaining another consumer brand flies in the face of this strategy, why when you want to make Zillow the watchword for property shopping across the US do you start to operate a separate brand in a key market place like NYC?
Zillow is already established in the NY market – check out its 8,000 listings, not quite the 15,000 on StreetEasy but comparable to Trulia’s 9,500 listings. Content does not come with this acquisition as the MLS structure is the key to access listings. Certainly the core database of StreetEasy will enable enhanced Zestimates for the city, but the content could have been secured without this acquisition.
Zillow’s core business model is agent advertising, something that they already have established in NYC on the Zillow site, will they expect agents to advertise on both Zillow and StreetEasy to secure leads so as to better monetize StreetEasy?
Comment is made to the potential for Zillow through this acquisition to expand the mobile operations, including introducing apps. StreetEasy already has an iPhone app. Functionality on the app as with the website is not the sharpest of property portals and clearly Zillow has the technical team to deliver enhanced user experiences, but again why apply these resources to a second brand in such an important market as clearly they want ultimately to have Zillow as the only brand in this vertical – at some stage closing down StreetEasy.
So to me I can’t see the logic. To use $50m in cash to buy this business when half that money invested in the two core drivers of Zillow’s business – sales teams and consumer marketing might just have delivered a powerful blow to StreetEasy’s aspirations and made NYC a Zillow city!
As a point of note I have not spoken to anyone at Zillow regarding this acquisition, I have simply read the media reports and examined the relevant sites and applied my skills and experience to assessing this move.