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Zillow plans to acquire Trulia: will the FTC approve, will the world end?

Zillow has announced that they will be acquiring Trulia, pending regulatory approval. Does this mean only one place to mail your ad dollar check? Nope, but it’s still a tricky acquisition the SEC will have to analyze before giving the red light.

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After much speculation and leaked details, Zillow and Trulia have announced their commitment to one another, as Zillow has entered into a “definitive agreement to acquire Trulia” for $3.5B in stock. Both companies will remain in tact as brands with Trulia CEO Pete Flint reporting to Zillow CEO Spencer Rascoff, and the deal is on target to close next year.

With this acquisition, two real estate search giants will remain (Zillow, realtor.com), and real estate professionals and industry insiders have mixed feelings on the topic (some believe the world is going to end, others are enthusiastic), but as the two names remain in tact, Zillow would simply own Trulia, not necessarily swallow it. Read: your advertising dollars will still go to two separate locations rather than just Zillow since the world will not be absent a Trulia.

What remains to be seen, however, is whether or not the FTC will approve the acquisition, as both are publicly traded companies and require approval from the regulatory body. This merger is akin to all telecom companies merging except for Sprint, leaving a world of only two large, nationally recognizable options – even if all stores still say “AT&T” or “Verizon” on the signs, in this theoretical example, they’re all still owned by AT&T, so there are only two competitors. The FTC doesn’t always like when there are only two competitors controlling a market.

Zillow will argue before the Commission that there are literally thousands of competitors, and they’re right, but when it comes to the main competitors, as an industry, we’ve long called Zillow, Trulia, and realtor.com the “big three,” and changing that landscape changes control over the market. While most believe the FTC will approve, it is not a guarantee, so we will be watching closely.

Rascoff’s letter to brokerages

The following is a copy of an email sent by Zillow, Inc. to real estate brokerages.

*****
It’s my pleasure to let you know we have just announced that Zillow has entered into a definitive agreement to acquire Trulia. You can read the full press release here .

I’m really excited about this opportunity, but I am sure the news will lead to a number of questions. The most important thing I can stress is that this combination of companies sets the stage for us to offer even more real estate tools and services to empower consumers and thus has the ability to drive even more business to local brokerages and their agents.

We expect to maintain both the Zillow and Trulia consumer brands, as both will continue to offer buyers and sellers access to vital information about homes and real estate, providing an important bridge to local agents across the country. We’ll work hard to make sure the great partnerships we have with brokers nationwide continue to prosper.

This acquisition requires shareholder and regulatory approval, which might take several months. We will provide additional details as they become available. For now, it’s business as usual for both companies. Our daily focus and strong commitment to local agents and professionals in the real estate industry remain unchanged and of the utmost importance to our entire team.
Please contact our team at partners@zillow.com with any questions.

Regards,
Spencer Rascoff
Zillow CEO

Zillow’s press release about the acquisition

Zillow Announces Acquisition of Trulia for $3.5 Billion in Stock

Combination of companies sets stage to offer more real estate tools and services that empower consumers and drive more business for real estate professionals

SEATTLE and SAN FRANCISCO (July 28, 2014) – Zillow, Inc. (NASDAQ:Z) today announced that it has entered into a definitive agreement to acquire Trulia, Inc. (NYSE:TRLA) for $3.5 billion in a stock-for-stock transaction. The Boards of Directors of both companies have approved the transaction, which is expected to close in 2015.

The combined company will maintain both the Zillow and Trulia consumer brands, offering buyers, sellers, homeowners and renters access to vital information about homes and real estate for free, and providing advertising and software solutions that help real estate professionals grow their business. At closing, Trulia CEO Pete Flint will remain as CEO of Trulia reporting to Zillow CEO, Spencer Rascoff, and will join the Board of Directors of the combined company. In addition, at closing, a second member of Trulia’s Board of Directors will join the board of the combined company. Further operational and organizational details will be announced at closing.

“Consumers love using Zillow and Trulia to find vital information about homes and connect with the best local real estate professionals,” Rascoff said. “Both companies have been enormously successful in creating compelling consumer brands and deep industry partnerships, but it’s still early days in the world of real estate advertising on mobile and Web. This is a tremendous opportunity to combine our resources and achieve even more impressive innovation that will benefit consumers and the real estate industry.”

“Trulia and Zillow have a shared mission and vision of empowering consumers while helping real estate agents, brokerages and franchisors benefit from technological innovation,” said Flint. “By working together, we will be able to create even more value for home buyers, sellers, and renters, as well as create a robust marketing platform that will help our industry partners connect with potential clients and grow their businesses even more efficiently. Our two companies share complementary employee cultures with innovative, consumer-first philosophies and a deep commitment to create the best products and services for our industry partners.”

Both Zillow and Trulia are primarily media companies, generating the majority of revenue through advertising sales to real estate professionals. Despite continued growth as public companies, significant opportunities of scale remain as the majority of advertising dollars in the real estate sector have yet to migrate online or to mobile. For example, the two companies’ combined revenue currently represents less than 4 percent of the estimated $12 billion i real estate professionals spend on marketing their services to consumers each year.

Zillow and Trulia are two rapidly growing real estate sites on mobile and the Web, enabling advertisers to reach a large and expanding consumer base. In June, Zillow reported a record 83 million unique users across mobile and Web ii . For the same month, Trulia reported a record 54 million monthly unique users across its sites and mobile apps iii . The two brands have limited consumer overlap – approximately half of Trulia.com’s monthly visitors do not visit Zillow.com, and approximately two-thirds of Zillow.com’s monthly visitors across all devices do not use Trulia.com iv . Maintaining the two distinct consumer brands

will allow the combined company to continue to offer differentiated products and user experiences, attract more users and maximize the distribution of free content across multiple platforms, apps and channels.

A summary of expected benefits of the deal, include:

• Faster Innovation. By combining resources, the companies expect to accelerate innovation on mobile and Web to provide more valuable tools and services to consumers and professionals.

• Greater Access to Free Real Estate Market Data. The companies expect to share real estate market data, housing trend analysis, and forecasts to make more free data available to consumers and real estate professionals to empower people to make more informed decisions.

• Broader Distribution. Home sellers and their agents, brokerages, and participating MLSs will benefit from seamless free distribution of listings across even more platforms to reach an even larger audience of consumers.

• Enhanced Value and ROI for Advertisers. The companies expect to offer shared services and marketing platforms for advertisers that enhance agent productivity and marketing and deliver greater return on their investment.

• Corporate Cost Savings. By operating independent consumer brands through one corporation, the companies expect to realize synergies to improve overall operational efficiency over the long-term. By 2016, management expects to achieve at least $100 million in annualized cost avoidances.

Transaction Details
As part of the agreement, Trulia shareholders will receive 0.444 shares of Class A Common Stock of Zillow, Inc. v for each share of Trulia, and will own approximately 33% of the combined company at closing. Current Zillow holders of Class A Common Stock and Class B Common Stock will receive one comparable share of the combined company at closing, and will represent approximately 67% of the combined company. The transaction assumes Trulia’s convertible notes will be assumed by the combined company at closing. The value of the deal represents a premium of 25% to Trulia’s closing price on July 25, 2014.

The agreement is subject to the satisfaction of customary closing conditions, including the expiration of U.S. antitrust waiting periods and shareholder approval of both companies. Zillow co-founders Rich Barton and Lloyd Frink, who control a majority of the shareholder voting power of Zillow, have agreed to vote in favor of the transaction. In addition, Trulia directors holding 7.4% of Trulia stock have entered into voting agreements with Zillow to vote in favor of the transaction.

Letter to Trulia employees from CEO, Pete Flint

The following is an e-mail sent from Trulia, Inc.’s Chief Executive Officer to Trulia’s employees:

Dear Trulians,

Today, we are embarking on a new and exciting chapter. We’ve signed an agreement to be acquired by Zillow. This was a decision the Board of Directors and I did not take lightly, and I am convinced it is the right one for our company, our employees, our customers and our shareholders. Together, we have successfully built Trulia from the ground up by staying focused on our clear vision. Our mission remains the same – to use technology to drive innovation in the real estate industry. By joining forces, Trulia and Zillow can accelerate our efforts to revolutionize the home search process for consumers, help professionals build their businesses and create additional value in adjacent markets.

This combination is expected to create an even stronger organization by bringing together the shared talent, technology and industry relationships of Trulia and Zillow. Together we can unlock more innovation and align our time, energy and resources into building the best consumer and agent experiences. The combined company will be home to two fast-growing and beloved brands in the online real estate industry.

We expect that Trulia and Zillow will continue to operate as separate and distinct brands once the transaction closes. The multi-brand strategy is common in a variety of industries from travel to household goods and more. For example, Priceline owns Kayak and Booking.com, ensuring they have products that meet a variety of tastes and preferences, while delivering more quickly on their shared mission.

Trulia shareholders will receive shares in the combined company equivalent to 0.444 shares of Zillow, for each share of Trulia. This represents a 25% premium to Trulia’s closing price on July 25, 2014. Trulia shareholders will own about 33% of the combined company. Once the transaction closes, Zillow CEO Spencer Rascoff will be CEO of the combined company. I will continue to run Trulia under the new structure, reporting to Spencer, and will join the Board of the combined company.

This news means new possibilities for our employees and greater value for our shareholders. This also means significant benefits for buyers, sellers, homeowners and real estate and rental agents, such as:

1) Faster Innovation. By combining resources, the companies expect to accelerate innovation on mobile and Web to provide more valuable tools and services to consumers and professionals.

2) Greater Access to Free Real Estate Market Data. The companies expect to share real estate market data, housing trend analysis, and forecasts to make more free data available to consumers and real estate professionals to empower people to make more informed decisions.
3) Broader Distribution. Home sellers and their agents, brokerages and participating MLSs will benefit from seamless free distribution of listings across even more platforms to reach an even larger audience of consumers.

4) Enhanced Value and ROI for Advertisers. The companies expect to offer shared services and marketing platforms for advertisers that enhance productivity and marketing and deliver greater return on their investment.
I know this announcement may come as a surprise for many of you. Trulia was doing great as a standalone company. However, we believe that combining with Zillow will allow us to do much more together than apart. And I can tell you that after working closely with Zillow’s team the past few weeks, it has become apparent to me that Zillow‘s business is highly complementary to Trulia’s, and Zillow’s vision, strategic goals and objectives are closely aligned with ours.

Many of you may have questions about what this will mean for you. Here’s what I can tell you today: First of all, Trulia’s brand and culture are not going away. Zillow admires and respects our culture. It is one of the key reasons they want to combine with us. Additionally, this deal will mark the beginning of a new chapter of growth and opportunity to innovate for our customers and our employees.

Second, we are just beginning what will be a lengthy process, as the proposed transaction will require both customary regulatory and shareholder approvals. We believe these processes could take several months, and we expect the transaction will close in 2015. During this time, despite the many possible distractions, it is absolutely critical that we maintain our focus on delivering the best products and experiences for our customers and partners.

In the months to come, we will share additional operational details, with the bulk of the details announced around the closing of the transaction. As part of this process, we will work with Zillow to form a transition team comprised of employees from both companies, who will focus on integration planning for Trulia and Zillow. I want to assure you that — as always — we intend to be as transparent as possible and will keep you informed as decisions are made and information becomes available.

Business leaders throughout Trulia are setting up meetings with their teams to talk through the transaction, so each of you will have more opportunities to discuss any questions about how this might affect you. For now, it is business as usual, and for the time being, our normal operations are not affected whatsoever by this announcement. Trulia and Zillow are and will remain completely separate companies until the transaction closes. I’ll reiterate the importance of staying focused, even in the face of the many distractions from this announcement.

I am grateful to be part of the talented team we have here, and I thank you for all of your hard work, passion and dedication. We will be holding an employee all hands at 10:00 a.m. PT (details to follow) where we will discuss this further. I look forward to working with you as we prepare for this next step in our journey.

Thanks,
Pete Flint

Full statement from Trulia

On July 28, 2014, the following entry was posted on Trulia, Inc.’s corporate blog:

TODAY MARKS A NEW AND EXCITING CHAPTER FOR TRULIA AS WE AGREE TO BE ACQUIRED BY ZILLOW

Today, we have some exciting news to share https://www.businesswire.com/news/home/20140728005503/en/Zillow-Announces-Acquisition-Trulia-3.5-Billion-Stock, as Trulia is embarking on a new and exciting chapter. We’ve signed an agreement to be acquired by Zillow, which will enable us to accelerate our efforts to revolutionize the home search process for consumers, help professionals build their businesses and create additional value in adjacent markets. I’m excited about the benefits this combination will bring to the consumers, agents, brokers, franchises and data providers we work with every day.

Over the last 10 years, we have successfully built Trulia from the ground up by staying focused on our vision – to fundamentally improve the way that home buyers, sellers, renters and home seekers find a place to live and the way that agents and brokers connect with them to power their businesses. It’s clearly been working and today’s news further validates and invigorates our mission. It is also a reminder that our journey has really just begun.

Zillow will acquire Trulia in a stock-for-stock transaction in which Trulia stockholders will receive shares in the combined company equivalent to 0.444 shares of Zillow for each share of Trulia, and will own approximately 33% of the combined company at closing, on a fully diluted basis. At closing, I will remain as CEO of Trulia reporting to Zillow CEO, Spencer Rascoff, and will join the Board of Directors of the combined company. In addition, a second member of the Trulia board of directors will join the board of the combined company.

Trulia and Zillow will maintain our individual consumer brands and operate as separate companies. The combined company will offer buyers, sellers, homeowners and renters access to vital information about homes and real estate and provide advertising and software solutions that help real estate professionals grow their businesses.

Together, we will create an even stronger organization by bringing together the shared talent, technology and deep industry relationships of Zillow and Trulia. We can align our time, energy and resources into building the best online real estate experience by accelerating innovation on mobile and desktop platforms and providing more valuable tools and services to consumers and professionals. We can also work together and in partnership with the real estate industry to ensure more free data is made available to consumers, which can empower people to make better decisions. With broader and seamless distribution, home sellers, agents, participating brokerages, franchises and MLSs will be able to reach an even larger audience of consumers. Finally, together we can offer shared services and marketing platforms for advertisers to enhance productivity and deliver great return on our customers’ investment with us.

I know this announcement may come as a surprise for some of you. Over the years, in this first chapter, as we have participated in the growth of the industry with Zillow, mutual respect grew. We believe that combining with Zillow will allow us to do much more together than apart.

It has never been a more exciting time to be in the real estate industry. Here’s to the next exciting chapter!

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Lani is the Chief Operating Officer at The Real Daily and sister news outlet, The American Genius, and has been named in the Inman 100 Most Influential Real Estate Leaders several times, co-authored a book, co-founded BASHH and Austin Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

Real Estate Corporate

Zillow Group sued for being inaccessible to the visually impaired

(REAL ESTATE) Zillow has been sued for their numerous sites being inaccessible by popular screen readers – what do the Plaintiffs want the company to do next?

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Two visually impaired Massachusetts women have banded together to sue Zillow for their sites allegedly being inaccessible to the blind and visually impaired.

Filed in the U.S. District Court in Massachusetts, the lawsuit claims that Zillow Group is in violation of Title III of the Americans with Disabilities Act (ADA), asserting that their sites are not compatible with the most common computer screen reader programs, which the visually impaired rely upon in order to access information online.

Court documents sate that this failing “deprives blind and visually-impaired individuals the benefits of its online goods, content, and services — all benefits it affords nondisabled individuals — thereby increasing the sense of isolation and stigma among these Americans that Title III was meant to redress.”

The Plaintiffs cite tools utilized to attempt to use the sites – Apple’s VoiceOver technology, JAWS and NVDA software. Accessibility experts tell us that JAWS and NVDA are the two most common tools in America used for this purpose.

The core of the problem is readability – for example, if a button is an image (of say a search icon) but has no text or alt text, the screen readers cannot read them, therefore the visually impaired cannot use that feature.

Image source: court documents.

Further, the Plaintiffs assert that Zillow Group “has long known” that these screen reader technologies are necessary and that they are legally responsible for providing them, but offers no evidence that the company “has long known,” aside from the fact that Title III isn’t a new law.

The lawsuit did not acknowledge possible attempts to use any other real estate search site, nor their existence.

What do the Plaintiffs want?

Their list is long and fascinating. Aside from the standard request for payment of “actual, statutory, and punitive damages as the court deems proper,” along with attorneys fees and court costs, they demand that Zillow Group do the following:

  • Hire a Web Accessibility Consultant (WAC) and incorporate all of the recommendations within 60 days of receiving them.
  • Train certain staff on accessibility.
  • Submit to a quarterly usability test and a period audit.
  • Create a web accessibility policy, provide that policy to certain staff.
  • Make a public statement on the policy, with an accessible contact form and feedback option.
  • Immediately escalate all usability calls to properly trained staff.
  • Submit to a two year monitoring period.
  • It remains unknown if the Plaintiffs intend on pursuing action against any other websites (real estate search portals, brokers, and the like), and as of publication, Plaintiff’s representatives have not responded to our request for comment.

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Real Estate Corporate

$60M lawsuit alleges Zillow listings can be hijacked

(REAL ESTATE) Zillow has long been a data powerhouse, but a lawsuit about a $150M listing offers a look into listings claims.

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Once called “the most expensive house in the US,” 924 Bel Air Road is a California jewel, crafted by famed homebuilder, Bruce Makowsky. And it’s currently on the market for a cool $150 million.

The only problem is, that according to Zillow, on February 04, it sold for $110M, there was an open house on February 08 that never existed, and although the errors were corrected by Zillow, the listing again was marked as sold on February 09 for $90.5M, corrected, and sold again the very next day for $94.3M.

The property owner is currently suing Zillow for $60M, alleging that the company “admittedly published false information, through its own website,” and “is disseminating misleading, false, and inaccurate information that has a large prominence because of Zillow’s market power.”

Further, the Plaintiff offers email evidence wherein Zillow acknowledged that they were “aware of the issue,” complaining that the false data was not immediately removed, rather took a week.

How did all of this happen?

A false claim of ownership.

Initially, a Chinese IP address with the email 910028863@qq.com (and a phone number whose area code does not exist) claimed the listing, and although Zillow requires a verification process, the lawsuit alleges that anyone that attempts to claim the property enough times can anticipate the questions “and be able to figure out what information they need to verify their identity.”

Later, on February 14th, “andersgraff@icloud.com” attempted to alter sales information. It is not immediately clear to us if this email address is associated with the previous claim, faked, or if multiple individuals have attempted to claim the address. Zillow’s policy is to notify the original party claiming a listing if there is a dispute, so “andersgraff” could be the original user’s second attempt. Or not.

They allege that Zillow does not have any safeguards in place, and that they “knew or should have known that trolls, criminals, and persons illegally claiming ownership of property and falsely contending it was sold that could easily bypass their standard questions to ‘claim a home’ and post false information.”

“It was reasonably foreseeable that this would happen,” the lawsuit alleges. “Yet, the Defendants have done nothing about it and simply do not care about the homeowners they hurt in the process.”

That last bit is a little floral, but their point is taken.

So what is the solution here?

Zillow has always allowed homeowners to claim their address, update information to improve accuracy of the data, and correct any information; it has been part of the differentiator between them and their competitors.

Zillow Corporate Counsel, Kim Nielsen emailed the Plaintiff’s attorney, Ronald Richards on February 14th, “Unfortunately, if someone is able to provide responses to the verification questions, they are able to claim the home. As I mentioned, we do not manually check each time someone attempts to claim a home. One suggestion would be for the listing agent or company selling the home to go in and claim the home until it is sold. This will at least prevent someone else from being able to fraudulently claim ownership of the home.”

Couldn’t that in itself be seen as a fraudulent claim of ownership if the agent claims the property as their own?

This lawsuit highlights a massive challenge to Zillow’s data, revealing that it can, in fact, be manipulated. With a fake email address and Chinese IP address. Can any user game the system to impact local markets?

For the lawsuit, read here; for the exhibits, read here.

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Zillow patent grab advances, now seeking patent on automated rental rates

(REAL ESTATE) Zillow has been applying for utility patents left and right, now adding rental Zestimates to the list.

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We recently reported that Zillow is scooping up patents faster than developers are bulldozing Central Austin single family homes to build two modern half-million dollar homes in their place.  And since then, Zillow’s showing no signs of slowing down.

The online real estate search giant applied for another utility patent for automatically determining market rental rate index for properties .

And what is that you ask?

This application patents Zillow’s ability to determine and index the market rental rate for homes in a geographic area. By accessing the current market rental rate of every home in each area, they can automatically compare them to similar homes to obtain aggregate results.

This functionality isn’t new. Other sites use similar functions to help renters find homes in the areas of their choosing at prices they are willing to pay. However, as we stated, utility patent applications are time intensive and the cost alone raises eyebrows.

Why?

Because if granted these patents, Zillow will be putting themselves at odds with their direct competition and other heavy hitters in the real estate search engine space. No biggie, it’s a free market, but brokers (who butter their bread) also feature automated rental rate tools, many not from Z.

As we mentioned before, this calls into question the unsavory practice of patent trolling. Patent trolls weaponize patents by scooping up patents from other companies instead of coming up with new ideas or technologies. In this case, it means grabbing patents for common technology, such as functionality that allows a user to compile a list of homes with desirable attributes in their prices range.

This kind of technology is already commonly used by several companies and some tell us they believe it shouldn’t need a patent in the first place. However, if Zillow’s applications for the patents go through, they can use them to threaten competing companies with legal action for infringement or failure to pay licensing fees for use of said tech.

Alternatively, this could be a brilliant move by Zillow to protect their intellectual property, their very own special way of automating this data, and that too is a smart business move.

We don’t know how this shakes out, but we’ll definitely be keeping a close eye out for updates.

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