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CoStar Chief Executive Andy Florance this week hit back at legal claims filed by one of his fiercest rivals, saying he has a superior business model that already outperforms rivals on meaningful metrics .
Florence said he was excited to be in the boxing match with Move, Inc. CEO Damian Eales, whom Florence calls “the boxer,” leading a team team, the team’s latest blow is a newly filed lawsuit. Move, which owns Realtor.com, filed a lawsuit in California last week accusing a former CoStar employee of Realtor.com of stealing trade secrets to give CoStar’s Homes.com an unfair advantage.
The lawsuit comes as the four major U.S. real estate portals Zillow, Homes.com, Realtor.com and Redfin are competing for the largest audience of consumers who browse listings and real estate agents who pay for various services on the sites. professional.
Realtor.com alleges that a former senior editorial director at Realtor.com improperly accessed a key document that helped guide and inform traffic to the site within months of being hired by Homes.com.
Florance minimized the employee’s role in the company, saying he “came to us as an editor writing apartment descriptions” after being fired from Realtor.com earlier this year.
“I called five different people and couldn’t find anyone who had heard of this guy,” Florence said. “I’ve never heard of this guy.”
Instead, Florence said Realtor.com is lashing out at its rivals because its business model is facing an “existential crisis.”
In response, a Realtor.com spokesperson said the company would handle the matter in court.
“We do not take action like this lightly and there has only been one similar case in the past ten years,” the spokesman said. “We are confident in the merits of our action and out of respect for the justice system we will take action before the courts instead of Litigation in the media.”
As a result of concerns raised by Move, Inc., a division of the Better Business Bureau recommended that Homes.com stop using two critical traffic claims in its advertising. 156 million claimed in the Homes.com ad. Meanwhile, Realtor.com had 66 million visitors, the group said.
Florence offered his thoughts on the web traffic wars, lawsuits and competition with Zillow ahead of his July 30-August appearance. 1 at Inman Connect Las Vegas.
The following is a transcript of the interview, edited for clarity and brevity.
Inman: Let’s focus on the new lawsuits. This seems sensitive because, according to them, this employee played a central role in driving traffic to Realtor.com and then, according to their lawsuit, had a competitive advantage in transferring it to CoStar because he had access to the file. . It seems to me that focusing on this data – web traffic for Homes.com, Realtor.com and other sites – everyone seems to be sensitive to this. This is the latest twist in the storyline.
Florance: Before I answer this question, I want to say that Zillow is not sensitive about this. They are very laid back. I would say real estate agents are sensitive to this. And by REALTORS, I don’t mean the National Association of REALTORS. I’m talking about News Corp.
I would say they have an existential crisis in this industry. They had hoped to sell the business last year for around $3 billion, but that didn’t happen. It would be an existential crisis if they were no longer one of the biggest sites people go to to buy a home.
It’s also an existential crisis if their business model becomes ineffective. So the two things that are at risk there are real. That’s why you end up with things like PR lawsuits.
So traffic is a big part of it and has been since October when CoStar first announced it had surpassed Realtor.com in traffic.
No one in the world could have expected this to happen so quickly. Like the White House at the launch of Sputnik.
That’s why you get a lot of criticism for these numbers. Because in any market, it’s important to have a large pool of potential home buyers. The second major issue is we’re taking your listing, your leads, to market. I know I keep talking about it, but it’s real, it’s important, and it’s going to be the future. I don’t believe the business model when we arrived, which was the Zillow and real estate agent-led shift model, is the future.
Overall, Zillow’s lead diversion business model is highly unpopular. Agents universally hated it. Real estate broker[.com]History has been given a bit of a pass. Their business model is exactly the same as Zillow, but they get a pass because agents don’t realize that the National Association of REALTORS sold Realtor.com a long time ago and it has no affiliation with NAR. News Corp. is taking the lead. That’s why this lawsuit exists. Try changing some things.
Is that why they filed the lawsuit?
It’s a junior staff and a team of a thousand people making content. Our content strategy is clear and well known. This is ridiculous. If the employee had any files or access to any files, he never gave them to anyone setting the policy. I have never met anyone who does strategy. This guy is a pawn in a PR stunt. A little cruel.
You fire the guy, and then if anything happens, you sue him for something that doesn’t matter. This guy is a writer, right? So what we’re doing is writing a narrative about apartment architecture. There is a small team of writers in New York.
Andy, if you don’t mind my rebuttal. This guy’s resume is crazy. He has a very prestigious pedigree from other news outlets. When we look back at the traffic component of things, CoStar has a press team that drives traffic to CoStar and builds its brand reputation. I think he is strategically important to CoStar. I think considering that everyone else has the same type of components – Realtor.com, Zillow – they all have news teams. This guy is the head of content and IMHO you seem to be diminishing his role.
There is a person in Richmond who is responsible for the content blog for the site. This person is not that person. There was a man in Richmond who reported to him. Not that person. This guy was hired to edit Apartment Stories in New York. This makes no strategic sense.
Have the right to work in the United States. If you are a employed person and your company fires you and you are a writer or editor, then you have every right to go work as a writer or editor somewhere else. This person has the right to work.
The bigger problem is that this is clearly a frivolous lawsuit and an act of desperation as they face an existential crisis because their business model sucks. To its credit, Zillow has the leading transfer model, and when you listen to Rich Barton speak now, you’ll see that he’s downplaying the leading transfer model, and he’s exaggerating everything else. Real estate broker[.com] Haven’t figured out yet that they have to get out of this business. Instead, they threw relatively junior employees under the truck as they were laid off.
You mentioned Zillow. Presumably, they are in your sight. You want to outdo them. We’ve talked a lot about transportation. They are constantly updating their business models. But you’re probably here for them now.
Well, you may have heard a rumor that I’m very competitive.
Yes.
This is not true. What we want to do is create a first-class residential area where people can market their properties for sale and where they can find properties for sale. In order to do this, you have to have a lot of traffic. I’m very confident that we’ve reached a level of traffic where we can provide a lot of value.
Anecdotally, I’ve seen that for our affiliates, we’re driving a lot more traffic to their listings than those affiliates are getting on Zillow right now. All in all, our members get 10 times the traffic to their listings on our website than they get on Zillow.
So we’ve beaten Zillow to a certain extent because our business model is different. They are trying to sell the agency. We are trying to sell the property. And, when we help people sell their properties, we help them win the listing. By competing on a different playing field, like we do with Your List, Your Leads, as far as our clients are concerned, we’ve beaten them in traffic.
How to resolve this traffic dispute? You focus on who is making the noise here and how they are making the noise. You are a competitive person. Presumably, you don’t like a company that questions your company’s public reputation, and maybe even yours. They questioned your traffic data, and now, they claim your trade secrets were stolen. How does it all end?
This is an entity owned by News Corporation, the Murdoch family. If you look at News Corporation, about 85% of the company’s value comes from real estate websites. So if you take [New York] postal and wall street journal And everything else, all the other media businesses they own, it’s only about 15% of News Corp’s market capitalization. That’s much of the value of the business, and you’ll probably agree with me that the Murdochs are not timid people when it comes to the media.
When you go against News Corporation (which is Realtor.com, which is not part of NAR), they’re going to fight in the media. This is what they are doing.
When we really started to get traction, it attracted a guy from Australia, Damian [Eales]. I think they brought him in because he’s a boxer and they throw all kinds of punches. Frivolous lawsuits will achieve nothing. We have just made a choice that we are trying to build the best website possible. If people want to make personal insults, or if people want to create fake news or lawsuits, that doesn’t stop us from delivering the best product possible and winning over agents one at a time with a better product. So, yes, I can handle the heat.
Looking to the future
I know the ink isn’t dry yet. I know it’s under regulatory review. I don’t know what you can share, but can you shed some light on what the Matterport acquisition means for CoStar? What are you going to do with this thing? What can you share?
All I can say is that, fundamentally, I really believe in their product. I’m glad to see some good technology. We know that high-quality, easy-to-create 3D digital twins are the best way to experience real estate online. It is underutilized in commercial and residential real estate.
We just want to go all-in on this technology and want to make it ubiquitous on our platform. We believe it will attract more traffic. This is the best way to market real estate. It has excellent, real artificial intelligence augmentation. Therefore, it is already the best example of artificial intelligence in real estate because the way Matterport is built relies on huge learning models and is generated by artificial intelligence. Others use human labor to try and sew them together.
Is this a Homes Pro product? I know how their revenue model works. So presumably you can’t turn it off and move it all to CoStar, and you have to be a member to use Matterport, right?
We won’t do that. We will make it available to anyone. Everyone. What we’re doing is Homes Pro members, we just matterport their listings and generate floor plans. But anyone who wants to do Matterport, that’s great. We think we win by stimulating demand and installing Matterport on homes.
I believe home sellers will want the same advantage in their marketing, which will drive Matterport sales outside of Homes Pro.
Email Tyler Anderson
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