According to court documents filed in the State of Washington, a lawsuit has been filed by the National Association of Realtors (NAR) and Move, Inc. (operator of realtor.com, Top Producer, SocialBios, ListHub, and several other companies) against Zillow, Inc. and Errol Samuelson.
The suit alleges breach of contract, breach of fiduciary duty, and misappropriation of trade secrets. In a statement, Steve Berkowitz, CEO of Move said, “we take our trade secrets and intellectual property extremely seriously as a valuable asset in our competitive position in the marketplace. We take action in cases in which we believe our trade secrets have been compromised. We have raised this matter for the courts and believe that the matter will be resolved judiciously.”
When Errol Samuelson, former president of realtor.com and Chief Strategy Officer at Move, Inc. left to become Zillow’s Chief Industry Development Officer, reactions ranged from criticism of Move, calling it a poaching of talent, to a criticism of Samuelson, calling it a betrayal to the industry as NAR members own and have an operating agreement with Move (which competes with Zillow).
Lawsuit alleges that Samuelson destroyed evidence
Court documents state that “Each quarter that he was employed by, and an officer of, Move, Mr. Samuelson certified in writing that he had read, understood, and would abide by Move’s Code of Conduct and Business Ethics,” which includes a “Conflict of Interest” clause and forbids employees from releasing proprietary and confidential information during and after his employment.
Further, the suit states that Samuelson arranged to defect to Zillow, destroyed evidence by erasing all memory from the iPhone, iPad, and laptop issued to him for business purposes by Move, and then resigning from Move without notice.
Last week, we also questioned the timing, wondering if it was designed to hurt Move, Inc. company stocks, or benefit Zillow in some capacity, which Move and NAR clearly agree with via their lawsuit.
The truth is that during his tenure at Move, Samuelson was promoted to a position that was so encompassing, that his job entailed knowing the inner workings of Move companies as well as the National Association of Realtors. The role will not be filled as it once was, rather remain broken into parts and functions will be filled by various people.
Samuelson isn’t the only one
Don’t consider this the last lawsuit to be filed, as Zillow announced today that Samuelson’s replacement, Curt Beardsley jumped ship today as well to become Zillow’s Vice President of Industry Development.
Also, this probably shouldn’t be considered the last high ranking official that will leave for Zillow in this apparent coup – their pockets are deep and they’re clearly willing to use their assets. Next quarter’s SEC filings will shed more light on just that.
This story was originally published on AGBeat on March 17, 2014.
Redfin launches their Job Opportunity tool – gimmicky yet brilliant move
(REAL ESTATE) Redfin has launched a new tool that at first glance is a PR stunt, but at second glance is useful and pretty damn smart.
According to the National Association of Realtors, 90% of people searching for new homes will turn to the internet in their hunt. It’s why real estate sites like Zillow, Trulia and Redfin exist. With competition growing tighter every year, Redfin has created a new feature to stand out from the rest of the pack: a job opportunity tool.
No, this isn’t specifically for job hunting. You’re going to have to look for specific employment opportunities elsewhere.
Instead, Redfin has collected information from sources like the Bureau of Labor Statistics, the US Census Bureau, and even the IRS in order to provide an informed look into the job climate for those looking to relocate.
Not only can users get an idea of how many jobs are available in an area, they can take a look at median salaries, and how these salaries add up against the cost of living.
Redfin’s tool calculates average housing, transportation, and tax prices, among other things, which can give people an idea of how far their salary will really go in a new home.
Plus, they’ve also created a tab for employers to research data regarding hiring prospects, expanding usage of the tool to those considering starting, expanding or moving a business.
On its own, the job opportunity tool is pretty neat. There are plenty of colorful visuals to make the information engaging and easy to digest. The tool also boasts a decent amount of variety, providing insight about jobs from bakers, floor sanders, midwives, and anything in between. It’s sure to provide interesting insights to anyone looking to relocate.
Primarily, it’s a smart business move on Redfin’s part.
The tool sets them apart from other real estate sites, giving them a traffic and brand boost with the markets they were already targeting. Many people looking to buy homes are, after all, making significant relocations. It also diversifies what Redfin offers, though, which might help them garner attention from other industries and break out of real estate in a creative way.
Above all, it’s a smart PR move for Redfin, to creatively present their data to news outlets and have their name in as many media mouths as possible.
Online real estate is still a budding industry despite being two decades old, and this is just one of many ways the industry is evolving. Still, kudos to Redfin for making something that is both an interesting gimmick and a useful tool for job and home hunters alike.
Zillow hopes gov’t is dumb enough to grant them a patent on 30+ year old tech
(CORPORATE NEWS) Zillow continues to expand their offering, but can they succeed with all the patent lawsuits they’re in?
Recently, Zillow quietly filed a patent for “automatically determining market rental rates for properties.”
The patent abstract says that it’s protecting “A facility for determining a market rental rate for a distinguished home located in a distinguished geographic area…”
It goes on to say that they receive attributes for the home, and runs it through a valuation model trained by rental listing prices and home attributes from recently-listed rental homes in the area, then reports the market rate that it comes up with.
If you’re familiar with Zillow, that probably means that you’re either a real estate professional, you’ve used it to find a home, or that you’re one of the people who idly flips through it ogling other peoples’ houses the same way that most people scroll through Twitter. But you’ll probably also recognize the service being described. It sounds like it’s basically a Zestimate, for rental properties.
A Zestimate is a home-value estimate that Zillow offers on its listings. It pulls pricing data from similar houses in the area, runs it all through an algorithm, spits out a rough estimate of what an appropriate price for that home might be. Better known as an AVM, which was developed in the 1990s.
It’s an interesting service. Though if you’ve ever played around on the site, you’ve probably noticed that the Zestimate can be way off. It’s not unreliable by any means, but it’s far from gospel about what a home is actually worth. The average Zestimate error for a house not currently on the market has been calculated to be around $18,000 as of July 2019.
It’s interesting that Zillow is going further down the Zestimate path. Earlier this month, they were sued by IBM for alleged infringement of seven patents. They claim that key Zillow features are built on unlicensed IBM patents, including tech that sounds an awful lot like what Zestimates would need.
IBM says that they’ve been trying to reach a patent licensing deal with Zillow for three years, which means that when Zillow filed suit against Compass for stealing Zillow’s intellectual property in April, they in turn were driving IBM to the end of its patience for not licensing theirs. (Does that mean that IBM should be suing Compass, too? Who knows!)
At any rate, it’s no surprise that Zillow’s considering a move deeper into the rental market. That kind of expansion has been a key part of their business plan for a long time now. While they’re certainly a leader in the “daydreaming about buying a house” space, they’re aiming to be involved with the entire home-purchasing process, from start to finish. From websites for Realtors, to instant homebuying and mortgage lending, Zillow’s dreaming of being the ultimate real estate service provider (even if they swore all along they never would practice real estate).
They’re not new to the rental space, either. Their current rental management system includes applications and tenant screening, as well as online rent payment. It’ll be interesting to see which of these expansions pay off for them in the long run.
WeWork’s melodramatic IPO withdrawal could hurt Compass & Opendoor
(REAL ESTATE) You may ask what some tool who claims he invented coworking has to do with the real estate tech world, but it turns out the ties that bind them are closer than many thought. Buckle up, this is a wild ride.
If you haven’t been paying attention to the WeWork melodrama, we’ll give you the TL;DR version, but you should first know that I am absolutely certain that this will all be a Netflix documentary a la the Fyre Festival scam or the Theranos debacle.
Like many of you, I have been obsessed with this wacky story, and I’m convinced that it is a fleecing of historic proportions that is complex and is (finally) unraveling before our eyes.
WeWork’s parent, The We Company announced today that they will be withdrawing their filing for their initial public offering (IPO) which initially was based on a $47 billion valuation that by this month had slid to around $10 billion. The Board successfully voted to oust CEO, Adam Neumann last week, with Neumann himself allegedly casting a vote in agreement.
The IPO failed for a number of reasons, but the meat is that the company had to disclose information in their filing that showed more of their shady underbelly than they would have preferred.
The S1 revealed made up accounting methods, wild spending, questionable dealings between WeWork and companies that Neumann owned (that benefited Neumann’s personal finances), and when investors began digging into the filings, they uncovered billions of dollars of annual losses that weren’t exactly documented or explained in a way that Wall Street was ready to invest in.
An editorial was posted on Medium.com that went viral, simply entitled “Is WeWork a Fraud?” to which the entire internet read and responded with “yep.” It was republished by countless blogs as a dramatic summation of the facts.
It empowered the average American to read and balk at Neumann’s bizarre God complex. He believes he is literally destined to be The One save the planet. He constantly played a shell game with his companies and brushed off legitimate questions about finances with answers that sound like some spiritual guru on stage.
People shared the editorial endlessly, and it was the catalyst for people becoming interested in the eccentric CEO who smokes weed in his private jet and cusses on stage like a hecka cool guy.
To really understand how all of this ties into Compass and Opendoor, we urge you to go read the original editorial before continuing- it’s worth the time, we promise.
So you’re probably asking yourself right now what WeWork has to do with anything in residential real estate.
The first common thread is Japan-based Softbank, the big bucks behind WeWork, Compass, and Opendoor.
Many fingers are pointed at Softbank CEO and Chairman, Masayoshi Son for being overly optimistic and underly diligent about companies that he personally sees as innovative.
Softbank had reportedly pressured WeWork to hold off on their IPO (and keep the noise down), as they are in the middle of raising their second $100 billion Vision Fund, hoping to attract investors who won’t notice Son’s reputation for investing in companies that don’t yield any returns.
But WeWork filed, the noise has become overwhelming, and the Vision Fund is in trouble.
Softbank has been the only real investment in WeWork, and the only one who says the company was ever worth a $47 billion valuation, investing $12 billion in 9 rounds since 2012.
The second common thread between WeWork, Compass, and Opendoor is that they are all growing incredibly quickly and are unprofitable.
That sounds like good news, but it’s not. Everyone in the startup and/or investing knows that burn rate is a critical component of a company’s sustainability.
Having a high burn rate is like a 7 year old that got their allowance, immediately rushed to spend every dime on candy, and are now in debt to their siblings because they used their allowances on candy as well. It’s corporate gluttony.
The third common thread is that they all claim to be technology companies.
This is a deep point of contention for some, but let’s digest this together.
Ben Thompson offers analysis of industry topics at Stratechery, and recently dissected whether or not WeWork (and others) are tech companies or not (and included an in-depth historical perspective leading up to his criteria). Per his definition, to be a tech company, one must check all five boxes:
- Creates ecosystems.
- Has zero marginal costs.
- Improves over time.
- Offers infinite leverage.
- Enables zero transaction costs.
Thompson asserts that WeWork checkmarks exactly none of the boxes, and under this same criteria, it is hard to see how Compass or Opendoor can either.
We offered a simpler criteria earlier this year when insisting that the media stop calling it the FAANG (Facebook Apple Amazon Netflix Google), noting that most of the companies aren’t technologies.
We noted that any company whose primary function is serving up content is a media company, and any company whose primary function is hardware or software is a tech company.
Under this simplified criteria, it is clear that WeWork, Compass, and Opendoor are not technology companies, they’re real estate companies that are either knowingly masquerading as tech companies to attract investors, or unintentionally giving themselves a label because they use technology better than their competitors and/or consider their use of technology as their core identity.
The final common thread is that all three companies have major competitors that are similar (and they don’t call themselves tech companies, they operate at a profit, and all have much lower valuations), but you would think from their marketing that they’re the only one in their field.
WeWork’s Neumann claims he invented coworking after growing up in Israel in a kibbutz. The only problem is that ServCorp has been around since the 70s, IWG (fka Regus) has been around since the 80s, LEO since the 90s, The Office Group since the early 2000s, and so on.
Compass is doing really cool things with technology (again, they’re not a tech company), but they are a glossy competitor to any other major brokerage, namely Realogy which is publicly traded and according to Forbes, “had 42 times the number of transactions, 11 times the sales volume, seven times the revenue — and actually made a profit.”
Opendoor became a unicorn (valuation of over $1B) right out of the gates, and they’re definitely thinking creatively to speed up the residential real estate process, but they directly compete with Homie, Offerpad, and Movoto, none of whom have the same wild burn rate.
All that said, there’s nothing wrong with Opendoor or Compass, but WeWork has made their existence more difficult.
Because all three are in a similar camp as described above, not only will investment from anyone other than Softbank be difficult to obtain, but WeWork’s insane bookkeeping practices have had a chilling effect in that people are looking more closely at profitability and operating procedures.
That chilling effect means external pressure to improve revenues, which real estate tech journalist, Mike DelPrete asserts, “could lead Opendoor to raise its fees, or Compass to reduce its generous commission splits with agents; either move would severely limit growth. Reducing expenses would come in the form of office consolidation (Compass has over 250 offices across the U.S.), ratcheting down employee perks, or even staff layoffs.”
And it wouldn’t be unprecedented. Uber has had layoffs and struggled with an image problem as they are hand-fed money by Softbank’s CEO who is ultra aggressive with investing in potential rather than profitability.
DelPrete adds that for all three businesses to succeed, they “require an unprecedented amount of capital and a willingness to buy into a vision that is driven more by words than numbers and where the long-term validity of the business model is easier to assert than to prove. The current WeWork fiasco… shows that valuations can’t keep rising unchecked by the realities of basic economic principles—and that investor patience does have a limit.”
WeWork’s newly ousted CEO has already cashed out and is set for life, and his God complex has made for some meaty headlines, but Compass and Opendoor may also pay a price.
This all sounds like a far away Wall Street problem, but try telling that to Compass’ 7,000+ agents (and 1,000+ staff), and Opendoor’s agent partners in 21 cities (and nearly 1,200 staff).
Nice job, Adam Neumann. Thanks a bunch.
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