Forbes Magazine recently featured a profile piece on Rich Barton, one of four co-founders of the Zillow Group. Here are some highlights of that profile.
Rich Barton, one of Zillow’s four co-founders in 2004, dreamed of creating a way to sell homes via digital technology before there were even smartphones. Now, just 15 years later in May of this year, Comscore, a web traffic tracker, ranked the publicly traded Zillow Group 24th in total visitors, just above LinkedIn and just below eBay, with 157M/month visits (including Street Easy, Trulia and HotPads) to view listings and Zestimates on 100M properties.
Barton reassumed the driver’s seat at Zillow once the company moved into the iBuying business with ZillowOffers. In Q1 2019, modeled after Opendoor, which sold 11,000, homes in 2018, Offers bought 898 houses, sold 414 of those houses and had 993 houses in inventory. Barton’s goal is to buy 5,000 homes/month, 1% of real estate transactions, and to book home sale revenue of $20B/year in 3-5 years.
Profits, in Barton’s view, will not come in selling all those homes. NO. Profits will come from auxiliary services derived from home sales…services such as insurance, title, and, most importantly, mortgage services that would finance the loans on those 5,000 homes/month once those homes were sold.
From the get-go, Barton believed that technology and tech entrepreneurs would and could fundamentally change the nature of real estate transactions. “…five months before the launch of Zillow’s website, employees gathered their Dell desktops on a Ping Pong table, connected them to harness their combined processing power and strung together extension cords to get them all running. To avoid overloading the circuits, they unplugged the office refrigerator and banned Christmas lights. Then while most of them slept, this jury-rigged supercomputer analyzed a decade of property records and American housing market data in order to spit out price estimates for 43M homes…”
Then, with the help of months-old Google Maps and its bird’s eye, satellite view of every neighborhood in the US, Zestimates was born. When the site went live, Zillow crashed from “too many” visitors.
Today, Zillow has a market cap of $9.5B and Barton’s piece, the largest among the four co-founders, is worth approximately $700M.
Wall Street, thus far is not blown away with Barton’s pivot towards house flipping. Stock in the ZillowGroup is lagging. According to Steve Eisman, a portfolio manager with Neuberger Berman, said to Forbes, “Genius is no always transferable. The people who have created Zillow are very well known for creating internet platform companies but flipping homes is not an internet company…a house is not a book. It’s expensive to “hold” a house…” while waiting for it to sell.
For his part, Barton is unfazed by Wall Street’s or anyone else’s skepticism about Zillow’s current business plan. He told Forbes, “Much of our original dream is just now becoming possible. The world is finally ready (as might the technology) for the seamless real estate transaction.”