In Zillow-Trulia Deal, Making Room for Brokers

[Article courtesy of Joe Light]

Zillow to Issue $3.5 Billion in Stock in Merger of Online Sites

Zillow Inc. Z -0.97% and Trulia Inc., TRLA +0.64% the two online real-estate giants that announced plans to merge Monday, have a message for real-estate agents that have grown increasingly concerned about their market clout: We’re partners, not competitors.

Zillow, the most-trafficked real-estate website, agreed to buy Trulia, the No. 2 company, hoping to create a market behemoth that will dominate listings of homes for sale and other information that buyers and sellers covet.

At Zillow’s closing share price of $160.32, the company would issue about $3.5 billion in stock in the deal, which is expected to close in 2015, and value Trulia at just over $71 per share.

The concern of real-estate agents is understandable. The founders of Zillow came from Expedia about one decade ago where they eliminated the need for travel agents in booking many trips.

Spencer Rascoff, chief executive officer of Zillow Inc. Bloomberg News


But Zillow executives took care Monday to ease concerns that they might plan a repeat performance in the real-estate business.

“We started Zillow as a media property, not a real-estate brokerage,” said Spencer Rascoff, chief executive of Seattle-based Zillow. “We sell ads, not houses.”

Zillow executives say the combined company—which will maintain both companies’ sites—will do even a better job of listing data on most houses in the country and connecting agents with buyers and sellers.

That also will benefit real-estate companies that advertise on the sites, executives say.

The acceptance of brokers will play a big part in determining whether the combined Zillow and Trulia succeeds. In the past 12 months through the first quarter they had combined annual revenues of about $400 million, but both lost money during the year.

Thousands of agents throughout the country rely on websites today for market data, listings and leads. But many have never been happy about ceding control of the market information that they once dominated.

The National Association of Realtors, a trade group, in 1996 started its own listings website,, which is now operated by Move Inc.

The association continues to tout it over competitors like Zillow and Trulia. “ is still the most accurate, up-to-date resource of real-estate information,” said a spokesman for the association in an email Monday.

The growth of companies like Zillow and Trulia underscores the more subtle disruption that the Internet has caused in the real-estate brokerage industry than it has elsewhere. In other businesses, like stock trading and travel, online companies have eliminated brokers and other middlemen.

For example, the Bureau of Labor Statistics estimated that there were around 64,000 travel agents in 2013, compared with about 124,000 in 2000.

But Zillow’s founders say they understood early on that there always would be a need for real-estate agents, partly because buying and selling homes often are highly emotional decisions, and can be the biggest financial deals most people ever conduct.

“In real estate, there will always be a practitioner in the middle of a transaction, helping consumers with an infrequent, complex, and emotional transaction,” said Mr. Rascoff.

Real-estate brokers have stayed busy as the Internet has grown. The BLS estimated that there were almost 198,000 real-estate brokers and agents in 2013, well more than the estimate of 140,000 in 2000.

Although Zillow users can list their homes for sale without charge, it hasn’t become more popular to sell a home without an agent.

In 2001, about 13% of sales were a for-sale-by-owner property, according to the National Association of Realtors. In 2013, only 9% of sales fell into that category.

But that’s not to say that Zillow, Trulia and others haven’t changed the home-sales process. Today, many buyers and sellers start their search by going online.

Sites also are often checked by homeowners to see what their houses are worth and, as such, are important advertising tools for agents hoping to land listings from those possible sellers one day.

Giving one company so much market clout is concerning to the brokerage industry and some real-estate agents are approaching news of the merger with trepidation. Although Zillow and Trulia might not try to replace agents, they say, a combined company could be able to charge agents more for advertising.

California Association of Realtors president Kevin Brown wrote in an email that his association had concerns that “this merger will lead to fewer choices and higher advertising costs for our members and their clients.”

He wrote that “even in the Internet age, Realtors will continue to play an integral role in the home-buying and selling process.”

Lisa Chapman Bushnell, a real-estate agent in Marco Island, Fla., said she advertises on both Zillow and Trulia and spends more than $600 per month on each in order for her contact information to appear alongside listings when consumers search the sites.

She said that both sites get her leads on buyers and that she won’t be worried about the combined company unless it leads to higher advertising prices.

The sites “have improved my production greatly,” she said.

Write to Joe Light at