CoStar’s Andy Florance takes direct aim at Zillow
The CoStar CEO said that Homes.com’s ‘Your listing, your lead’ model is better for agents and consumers.
- CoStar’s Homes.com has seen significant growth in recent months but still lags far behind Zillow and Realtor.com in portal traffic.
- Florance said Zillow’s model is a bad deal for agents and an awkward experience for users.
- He believes that like Apartments.com, which is a leader in the rental space, Homes.com can dominate the residential for-sale market.
The portal race — a contest among listing sites to not only win the most user traffic, but also provide the most value to consumers and agents — is in full effect. At least, that was the clear message from CoStar Founder and CEO Andy Florance during his conversation with T3 Sixty CEO Jack Miller during the T3 Leadership Summit in Naples, Florida. (Note: Real Estate News and T3 Sixty share a founder, Stefan Swanepoel.)
CoStar's Homes.com platform has been witnessing significant growth in recent months, but Florance says that ultimately, the strategic differences in how his platform treats agents and consumers will be key to climbing the portal ranks — and taking on heavyweights Zillow and Realtor.com, or "Zilltor," as Florance referred to them.
Your listing, your lead
"Zilltor is selling buyers to buyer brokers. What we're trying to do is sell homes to buyers," he said to Miller about the core difference between Homes.com and the leading portals. "We're not trying to take Zilltor's clients and make them our clients, we're trying to produce a product for the 95% of agents who are not served in any way, shape or form by these portals."
Instead of selling buyer leads and cutting into agent commissions, Florance said his platform is a subscription model that is "a tenth of the cost" of what agents would pay to Zillow Premier Agent and similar competitors. Additionally, Florance highlighted that Homes.com is rooted in the "your listing, your lead" philosophy in the sense that agents won't be pitted against each other on the listing pages.
"We think we can create a lot of value, and we think we can do it harmoniously with the industry as opposed to in competition with the industry," he said. "Everything we've done before — LoopNet, BureauxLocaux, Realla, BizBuySell, CoStar, Apartments.com, Land.com — they're all 'your listing, your lead,' and have been 'your listing, your lead' for 40 years."
This is in contrast to Zillow, whose philosophy could be categorized as "your listing, our lead," Florance said, which has been controversial with agents and MLS organizations — and, he claimed, is a weaker business model: "We've been much more profitable doing 'your listing, your lead' in other spaces … so it's just a better business model."
Focusing on the consumer experience
Getting agents on board is only one key to success for Homes.com. Florance highlighted the importance of providing a valuable platform for users in order to increase adoption and ultimately, the site's standings in the portal wars.
"I don't know if you saw the skit on Saturday Night Live where some people are searching Zillow, scantily clad in their beds and then the whole fantasy comes to a screeching halt when they hit the button 'Contact Agent,'" he said to Miller.
"This whole 'Contact Agent' button sends you into a call center, gets you into the robo-calling list, connects you with an agent who has no idea what that property is about. They hate it," he said about feedback from focus groups on the current leading portals. "They hate the Zestimate, they hate the fallacy of the single value model, all that kind of stuff."
Florance had previously spoken of his own experience using competing sites as a consumer, calling it "remarkably awful." He said that in the same way that Apartments.com had the ability to fill a void among consumer rental sites, there remains the same opportunity but for residential for-sale real estate.
CoStar as the 'bogeyman'
More than 35 years after starting CoStar as a college student, Florance has big ambitions for Homes.com's growth with residential agents and homebuyers, but he was quick to note that CoStar's very early roots were planted in residential real estate.
It all started with scraping data from government mainframes and making that information available to users with a PC, which he described as being "revolutionary" at the time. However, as an upstart in the '80s, Florance said that he had to make a decision early on to focus on either residential or commercial real estate, and ended up going in the latter direction.
Fast forward to 2014: CoStar acquired Apartments.com, and the company broadened its scope back into residential. It was a strategic decision, Florance said, not just in terms of business revenue, but for CoStar's image.
"To be honest, one of the big thought processes in Apartments.com was that it was a stepping stone to creating legitimacy to go into residential with our investors," he said.
When acquired, Florance said Apartments.com was generating $75 million in revenue and was the sixth most popular rental site. The site is now "approaching a billion" in revenue, he said, and is "clearly number one" when ranked with competing rental websites.
While Florance promises big things for Homes.com, he also fended off naysayers and real estate professionals who view the push as a bait-and-switch.
"People from retail, industrial, office and residential apartments have always worried about when is CoStar going to be the bogeyman and jump out of the closet and say, 'Fooled ya! We've been waiting all this time to be a broker,'" Florance jokingly said to the audience. "They've been waiting a long time — like, if you're sitting there looking at the closet for 38 years waiting for the bogeyman to jump out, maybe you should come up with something else to do."