EXHIBIT 2002EXHIBIT 2002
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`Bloomberg Businessweek
`Technology
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`A New Home Site on the Block
`By Timothy J. Mullaney on February 07, 2006
`http://www.businessweek.com/stories/2006-02-07/a-new-home-site-on-the-block
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`Researching real estate on the Web? If so, you're probably looking for the answer to one of two questions: What
`is my home worth, and which houses are for sale in the neighborhood where I want to live? To get an online
`estimate of a home's value, you often have to hand over your name and phone number so a service like
`HouseValues.com (SOLD
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`) can send a local agent your way. That will begin to change with the unveiling of Zillow.com, the long-awaited
`online real estate startup led by Expedia (EXPE
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`) founder Richard N. Barton.
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`Zillow's main product will be an automated home-appraisal service, supported by advertising and based on a
`vast storehouse of data (2 terabytes, for anyone keeping score) that covers public records of home sales across
`the country. Even in its beta-testing phase, which opens to the public Feb. 8, the site has enough data to provide
`appraisals -- or "Zestimates" -- for 40 million U.S. homes. That's almost half the nation's single-family units.
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`The service blends the estimated home valuations with satellite mapping, so you can see, for example, what every
`home on a given block in Seattle is worth in a single screen shot. The strongest coverage is in Western states,
`with some of the weakest in and around New York, where the mix of homes, condos, and apartments makes it
`tougher to compare properties.
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`UNIQUE APPROACH. Zillow says its estimates are typically on target, falling within 10% of the actual home-
`sale prices 62% of the time. "It just means that what we're doing is hard, and it's going to be hard for others to
`do as well," Barton says. Zillow's initial model doesn't provide any way to help consumers ratchet down, through
`negotiations, the standard 5% to 6% commission for selling a home.
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`Barton's approach is unique. Direct rival HouseValues, which also lets consumers sign up for home appraisals,
`connects consumers to local real estate agents, who pay HouseValues for leads. The real estate sales reps offer
`an appraisal, based on their own experience, and usually ask for a meeting with the homeowner. Discount broker
`ZipRealty (ZIPR
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`) helps consumers buy and sell homes, but it offers rebates of part of the firm's commission: A buyer of a
`$400,000 home can save about $2,500 by taking the business to ZipRealty. And RealEstate.com, a unit of
`IAC/InterActiveCorp (IACI
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`), charges real estate agents a substantial chunk of their commission in exchange for referring clients. It then gives
`the consumer a slice, usually through a gift card that can be worth thousands of dollars.
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`Some of these outfits will compete with Zillow, but others likely will be Zillow advertisers. Zip is expected to
`announce on Feb. 8 that it will be a charter advertiser on Zillow, Barton says. Traditional real estate agencies are
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`showing interest, too: Charter advertisers include New Jersey giant Weichert Realtors and Prudential Realty's
`California franchise, as well as online lender Quicken Loans.
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`"SEVERAL STEPS AHEAD." Ryan Slack, chief executive of New York-based automated-appraisal site
`PropertyShark, says HouseValues has already begun changing its business model to lessen reliance on
`appraisals. Instead, HouseValues' new HomePages.com site gives information on houses for sale in each market.
`"[Zillow is] going to make HouseValues' model really obsolete," Slack says. HouseValues CEO Ian Morris and
`Chairman Mark Powell didn't return a call seeking comment.
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`Analysts and some rivals say Zillow's offering is more sophisticated than other real estate tools currently available
`online. Steve Murray, president of industry consulting firm Real Trends in Littleton, Colo., says Zillow allows
`more customization and more flexibility than rivals. For example, once Zillow gives a basic home-price estimate,
`users can refine it by adding details Zillow may not know -- such as whether the house has been newly painted
`or had a bathroom upgrade. The estimate is updated each day, based on changes in the local market.
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`But Murray says Zillow's beta version doesn't give consumers the information they want about which homes are
`for sale in their market, unlike such rivals as ZipRealty, RealEstate.com, and Homestore's (HOMS
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`) Realtor.com. "They'll find a market for this," Murray says. "It's not earth-shattering, but it's several steps ahead
`of the other tools out there now." Barton hopes to someday add icons or tags to images of properties that are for
`sale.
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`EXPEDIA CROSSOVER. The biggest question about Zillow is Barton's decision to build a business model
`around advertising. Zillow plans to use cost-per-click advertising similar to that of a search engine, with prices
`beginning at $1 a click until advertisers eventually set their own prices through auctions. Zillow also will show ads
`placed on the site by Google (GOOG
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`). But Homestore, which gets 90% of revenue from ads, has struggled to make money, though it eked out small
`profits in the second and third quarters of 2005.
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`That has led most other players to try to get a chunk of the $60 billion-plus that Americans spend on real estate
`commissions each year by charging realty agents referral fees, rather than fighting with newspapers and other
`media for the much smaller amount ($11 billion) they spend on advertising. "There really are not any successful
`[online real estate] companies that have worked on an advertising model," says Tom Reddin, CEO of IAC
`Financial Services and Real Estate, which runs RealEstate.com and sister site LendingTree.
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`Heading into the crucial spring home-selling season, Barton's new project is ready for its test drive. He has
`assembled a raft of ex-Expedia execs among Zillow's 75 employees and has raised $32 million from venture-
`capital firms Benchmark Capital and Technology Crossover Ventures, where partner Jay Hoag was on
`Expedia's board. "Each conversation I have [with potential advertisers] makes me that much calmer," the 38-
`year-old says. But if Barton manages to roil the waters in this huge industry, he may be the only calm guy in the
`business.
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