Real estate listings are Zillow’s “lifeline” to generating revenue, and the company faces the prospect that rule changes and broker changes could reduce listings on the war-ready portal.
What ammo did you collect for the battle earlier this year? Carrots and sticks. At issue in this case was Zillow’s decision to ban individual listings if they are not shared somewhere the portal can retrieve and display them within a business day. It was a plan that company leaders discussed internally in the spring.
Jeremy Waxman Zillow CEO
“In my head, I was going to line up a series of deals (e.g. eXp, KW, Anywhere) and then jointly announce them and publicly announce the stick plan,” Zillow CEO Jeremy Waxman wrote in an internal group message in April. “But given how fast things are moving, should we consider announcing each deal as it happens? So as soon as we sign eXp, do we announce that and our plans?”
The message is part of a trove of documents filed last month as part of Compass’ ongoing lawsuit against Zillow. The documents, which Mr. Inman has been reviewing since they became available in the court filing system, include depositions, internal messages and strategy documents, and other materials that shed light on the companies’ tactics. Among other things, it provides insight into Zillow’s efforts to ensure it maintains a source of revenue-generating listings.
The documents also suggest how seriously Zillow is taking the situation, with one executive — TG Gallaudet, senior director of broker development, for example — noting in March that the company was facing “a war in which it doesn’t have many friends.”
This conversation came as Zillow was grappling with the proliferation of private listing networks. Although this is the effort most associated with Compass and the brokerage’s three-phase marketing strategy, many other brokerages have developed similar networks of their own.
“We need people to pause,” Chief Industrial Development Officer Errol Samuelson said in a message to other Zillow executives in April.
The subsequent move started the public’s fight in a war that Zillow knew was coming. It’s a war Zillow doesn’t want to fight alone, and one that could still determine how real estate listings are sold in the future.
In December, Inman sent Zillow a series of questions about the documents. “The exhibits used in this article do not accurately represent Zillow’s business or strategy and were selected and provided by Plaintiffs in order to construct a narrative in support of their litigation,” the company said in an email this week.
“The submission contains carefully selected words from one-off scratchpads and brainstorming conversations that were never seriously considered and were abandoned,” Zillow’s statement continued. “Our announced and widely publicized listing access standards are Zillow’s strategy, as multiple Zillow executives have testified in court. Their attempt to mischaracterize Zillow’s documents to promote the story is just one example of a growing list of lies and misrepresentations.”
Zillow’s “Stick” Plan
“Going public is the lifeblood of our company,” Samuelson said in March, commenting on another discussion at the company, about Zillow’s bet on a private listing. “If we don’t go public, we don’t have any eyeballs, we don’t have any revenue,” according to the documents.
“Even if the content of your listing deteriorates, the number of potential customers will decrease. [Premier Agent] “And we can’t sell showcases for listings we don’t have,” Samuelson added. We have lived this reality from 2008 to 2021. ”
After months of risk assessment and preparing for various possibilities, Zillow zeroed in on one strategy. It aims to change the course of private listing networks by signing and announcing direct listing agreements with brokerages and franchises.
By early April, eXp had agreed to a partnership with Zillow that included publicly supporting the portal’s stance on private listings, according to documents and subsequent public statements. EXp CEO Leo Pareja, who has positioned himself as a proponent of shared listings, was keen on the partnership for multiple reasons, documents suggest.
“eXp is very excited to be working with us on this press release,” Samuelson wrote in an April 3 message. “Leo believes he can use press releases to recruit a top team and position eXp as ‘partnering with Zillow.’ He believes PAs at companies that operate PLN are concerned about how their brokerage strategies will affect their relationship with Zillow. ”
Leo Pareja | EXp Realty CEO
“As soon as the release is announced, he and his recruiters are going to be making calls and offering these agents a move to a Zillow-friendly brokerage,” Samuelson continued. “It should be interesting to see this play out.”
The documents further show that the days leading up to April 10, when Zillow announced it would ban certain listings, were filled with internal efforts to bring more brokerages and franchises on board.
“Should I be more specific with Anywhere about ‘not Zillow, never Zillow’ for the next combo, or should I wait for eXp?” Jun Choo, Zillow’s chief operating officer, asked while preparing for an April 8 meeting with Eric Chesin, Anywhere’s chief strategy officer.
Jeremy Hoffman, Zillow’s chief financial officer, responded: “When we have our next meeting, I’m going to show my teeth and let him know we’re serious about this.” “The risk of being specific is that it comes back to Levkin. I don’t think that’s going to happen with his competitors.”
In addition to the so-called “sticks,” the document also includes a document that explains the “carrot” aspects of the strategy. In that case, the carrot included “tiered product features for agents and brokerages.”
look for someone else
The document also sheds light on how Zillow leadership approached figures in various industries.
“I don’t know what to say, but it would be best for Anywhere not to share this with Pam at Corcoran,” Samuelson said in a message included in the document. “She doesn’t like us. I’m not going to ignore her and let this slip.”
At another point, Mr. Samuelson and Mr. Waxman exchanged text messages about Howard Hanna CEO Hobey Hanna.
“He has finally accepted the difficult news of requiring us to comply with listing standards,” Samuelson wrote. “At the same time, we’re going to offer him some real commercial benefits.”
And in early March, Zillow’s broader team debated how to respond to Mauricio Umansky, CEO of The Agency and co-founder of NAR rival American Association of Realtors. Umansky has long been an enemy of NAR’s explicit cooperation policy and even launched a private listing network called Pocket Listing Service. But The Agency was also a customer of Zillow’s Showcase product.
The Zillow team considered Umansky a friend. Still, the team wondered what to do about the contracts the agency had in place for future events, documents show.
“If distributors want to buy our products, that’s fine (at least for now),” Samuelson wrote in an email in March. “But there is no scenario in which you could in good conscience send them marketing funds or ‘advocate’ with them.”
Errol Samuelson | Zillow Chief Industrial Development Officer
The documents also show executives agreed that announcing the new policy and the eXp deal will help secure other deals with major brokerages and franchises, with Samuelson noting in the message that there is a “long-standing bad relationship” between Keller Williams and eXp.
“They will want to ‘nullify’ any benefits that eXp has,” Samuelson wrote. “In our conference call with KW, it was clear that they recognize the value of growing their FLEX team.”
Keller Williams, eXp and The Agency did not respond to requests for comment.
Zillow executives were hopeful that Anywhere would also sign a deal, and its announcement could “snowball” into public attention and industry-wide momentum. A message Waxman sent to other executives on the eve of the announcement said Anywhere CEO Ryan Schneider had been briefed and was “excited” about the plan.
Elsewhere in the document, other companies are mentioned, including Windermere, John L. Scott, Howard Hanna, West USA and Keyes, and James Dwiggins’ NextHome.
“It’s a shame he wasn’t a launch partner, but he understands that. And he’s not too fussed about it being just eXp and NextHome,” Waxman said, referring to Dwiggins’ company in one message.
what happened?
It’s unclear how many companies ended up doing business with Zillow, but this document provides some insight into what the deal means.
The document mentions, for example, that brokerage firms provide brokerage-level “feeds” to Zillow.
They also say that partnering with Zillow will provide them with a “fast path to Zillow Flex eligibility,” an “alternative to compete with Compass,” and support for “their brand, recruiting, revenue, and ability to compete against noisy competitors.”
In his sworn testimony, eXp CEO Leo Pareja explained that as part of the agreement, Zillow will provide a “discount” on follow-up bosses for up to three years.
The document appears to focus on where consumer leads from the platform are sent. In documents that appear to have been prepared in advance of the Chesin conference in April, Zillow indicated that “for Anywhere listings, we will direct interested consumers to highly qualified agents within our own brokerage firms.”
One slide shows what appears to be a Zillow Showcase listing agents’ cards on the platform. When a consumer contacts an agent, Zillow may send the lead directly to the listing agent, according to the slide. When a consumer requests a tour, the slide shows that the request is sent to an agent within the brokerage that participates in Zillow Flex.
Anywhere, the second-largest brokerage firm by trading volume, did not respond to a request for comment.
Waxman said in a deposition that the company ultimately did not sign a contract with Zillow.
Ultimately, documents filed early in the case say Zillow reached agreements with three brokerage firms.
The legal dispute between Compass and Zillow is ongoing and could last for months or even longer, and its outcome is still up in the air at this point. But the trove of documents nonetheless provides insight into how one of the defining real estate stories of the 2020s, the battle over unlisted properties, played out behind the scenes.
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