UPDATED, 3:22 p.m., April 9: Spencer Rascoff doesn’t often share his secret sauce. But in a new, wide-ranging interview, the CEO of Zillow provided the most detailed look yet at the strategy that’s made the company a $10 billion listings giant.
The big insight, Rascoff said to Forbes, was betting it all on mobile in 2007, after watching Apple CEO Steve Jobs’ announcement that the company would allow third-party apps on the iPhone.
“Literally within the week we had pivoted towards mobile,” Rascoff said. “[We] basically stopped all desktop development and redeployed all resources toward mobile web and mobile app development.”
Real estate, Rascoff added, “is the ultimate untethered activity. When you want access to real estate information is precisely when you’re driving around a neighborhood and looking at houses, not when you’re tethered to your computer.”
The strategy paid off — today, mobile makes up about 80 percent of Zillow’s usage, and the company, which has a market cap of $10 billion, took in around $1 billion in revenue last year. About 80 percent of that revenue comes through Premier Agent, the online agent-advertising program that has generated its share of controversy.
Rascoff expects Zillow Group, which has acquired the likes of Trulia, StreetEasy, and DotLoop over the years, to generate around $1.3 billion in revenue this year. He acknowledged the company “[doesn’t] entirely know how exposed we are to cyclicality,” but believes that in the event of a downturn, advertisers will pull away from “unmeasureable channels” like print and direct mailing, allowing online advertising to take a bigger bite of market share.
Speaking on Zillow’s other divisive feature — the Zestimate — Rascoff said the company has used machine learning and artificial intelligence to make the property estimate tool much more accurate than in the past. Zestimate uses public data and algorithms to estimate the price of homes, whether or not those properties are on the market. Critics say it distorts consumer expectations, and it has been the subject of lawsuits in the past.
“When we started 12 years ago, we had about a 14 percent error rate,” Rascoff said. “Today we have about a 4 percent error rate.”
Looking forward, Zillow has plans to expand its presence in the rental market, which “has for decades belonged to Craigslist,” Rascoff said, with tools including “automated showings, automated applications, digital leasing and digital payments.” It also wants to streamline the dealmaking process. The company is currently piloting its “Instant Offer” program, in which “you press a button and we get you offers from that home from investor buyers,” he said.
Rascoff said people have grown accustomed to their smartphone being “the remote control of your life,” and that the company wants to “tap into that consumer expectation of magic.”
“We haven’t really done that yet, to be honest,” he said. “The first 10 years have been great, and were successful, but shopping for a home today isn’t all that much different than it was five or 10 years ago.”
Correction: A previous version of this story incorrectly stated Rascoff’s revenue projections. Rascoff expects the company will earn $1.3 billion in 2018.