Zillow is a different kind of investment. I don’t think they quite know what they are doing. That happens when you are on the vanguard.
Zillow Offers on the surface is stupid. Volatile inventory within a cyclical industry isn’t ideal (especially considering the low margins). Sometimes you need to make sub-optimal short term decisions to maximize your long term. To put this into context, within Zillow’s annual report, Zillow Offers expanding is listed as a risk to their financials. However, Zillow Offers isn’t about buying and selling houses though, it is about being the first place anyone goes to buy or sell a home. It is about building a network. Zillow isn’t scared to temporarily hurt its financials for a long term gain. That is a sign of good management.
My investment in Zillow isn’t really about any way they are currently monetizing. I’m investing in the network. I’m investing in the future possibilities. Zillow is getting sticky and popular. Zillow is becoming THE real estate company. Build the network and monetization will come.
Its hard to invest in a companies whose true potential lies in a market that doesn’t exist yet. Zillow is marketing itself as “real estate 2.0”, but the reality is within 10 years, we will be at “real estate 10.0”. Change is coming and I want to be part of it. I think Zillow is positioned to lead the charge.