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 firstname.lastname@example.org with any questions.
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.
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:
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.
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!
REX anti-trust lawsuit accuses Zillow, NAR of being in a ‘cartel’
(REAL ESTATE) Real Estate Exchange, Inc. (REX) is suing Zillow and NAR, alleging a cartel wherein non-MLS members like themselves are edged out of the marketplace.
Real Estate Exchange, Inc. (REX) has today filed an federal anti-trust lawsuit against Zillow and the National Association of Realtors (NAR).
REX accuses NAR of “non-negotiable” compensation structures baked into the MLS, an assertion that has been proven otherwise in the past.
They go on to accuse Zillow of making changes recently to their site that makes “non-MLS listings accessible only via a recessed, obscured, and deceptive tab,” leading to REX’s listings (on Zillow) losing traffic, “severely impacting REX’s reputation, its ability to execute its innovative and disruptive business model, and driving consumers away from REX and back into the MLS regime, ensuring higher commissions that benefit NAR’s members” which they say ultimately disadvantages consumers.
REX claims that Zillow (and other real estate aggregators) have helped them “to maneuver around the NAR/MLS cartel’s high commission structures” by aiding them “to reach a large audience of potentially interested buyers.”
But then Zillow went and became an ibuyer, shifting their focus from search to owning inventory, eventually joining NAR in 2020.
REX accuses Zillow of hiding non-MLS listings like theirs through their redesign. All of their homes are listed by a licensed real estate agent, but they are not NAR members and proclaim they never will be.
The crux of REX’s argument is that as a newly minted member of NAR, Zillow must follow rules set by NAR (which is done by members in committees, not the executives), and so they have joined forces to conceal non-MLS listings on Zillow’s site, thus entering into an anticompetitive posture together.
“Zillow began like so many other platforms: it served a great value to American consumers. Unfortunately, we see Zillow as backtracking on their original mission to serve consumers, instead focusing on their own profits,” said REX CEO Jack Ryan in a press release today.
In the last week of February, REX presented this case to 35 states attorneys general, leading up to their federal filing (their presentation can be found here).
In a statement to The American Genius, Mantill Williams, NAR VP of Communications states, “This lawsuit has no legal basis, and we intend to vigorously contest it. This is an example of a brokerage trying to take benefits of the MLS system without contributing to it. It has been long recognized that the MLS system provides considerable pro-consumer, pro-competition value. REX’s lawsuit seeks to undermine that consumer value—simply for REX’s own benefit.”
Williams continues, “The MLS system levels the playing field for small businesses and allows innovation to flourish, all to the benefit of buyers and sellers. The advanced MLS technology gives publishers access to all the same information, allowing buyers to see as many properties for sale in one place as possible, while simultaneously ensuring sellers have access to the largest pool of buyers. Because of MLSs, we’re at a point in the market where we’re seeing unprecedented benefits to consumers and competition among brokers, especially when it comes to service and commission options.”
A Zillow spokesperson tells us, “We are aware of the lawsuit and believe the claims are without merit and intend to vigorously defend ourselves against it. Zillow is committed to giving consumers the most up-to-date housing information on the most amount of listings possible on a single platform. As part of our switch to MLS Internet Data Exchange (IDX) feeds and becoming formal MLS participants earlier this year, we were required to make changes to the way some listings appear on the site in order to be compliant with MLS rules. As a result, when using one of our platforms to search for homes, buyers may see two options to view their search results – “Agent listings”, and “Other listings” – which include For Sale by Owner listings or Coming Soon listings not on the MLS or, for that matter, on most other real estate sites.”
They conclude, “As part of our efforts to empower consumers, we have been actively working to update the industry rules, including those around ‘co-mingling,’ to allow a seamless search experience so we can continue to display all types of listings on our platform.”
The tables have turned: Zillow being sued for violating antitrust law
(REAL ESTATE CORPORATE) A Vermont real estate company is bringing a lawsuit against Zillow for violating antitrust laws. Will it be enough to slow the real estate giant?
In a shocking upset, a Vermont real estate website is suing Zillow for violating antitrust law. The website, called Picket Fence, alleges that Zillow’s operation in Vermont led to millions in lost revenue, both past and projected.
According to court documents supplied by the state of Vermont, Picket Fence—a for-sale-by-owner business that originated and is located in Vermont—was one of the first significant FSBO businesses in the state. Picket Fence purportedly endeavored to use their services in order to connect private sellers with clients, thus negating the need for an agent or traditional real estate service.
Zillow, by contrast, is a “Foreign Profit Corporation” in Vermont. Since Zillow is located predominantly in Seattle, Washington, their presence in the state of Vermont falls under a different classification than that of Picket Fence.
The court document alleges that Zillow, by providing aggressive competition in a state other than that of its origin, deprived Picket Fence of due revenue. It also alleges that Zillow violated “state and federal consumer and antitrust laws” in addition to a handful of Vermont laws. The document refers to “unfair and deceptive acts” on behalf of Zillow, insinuating that Zillow’s operation in Vermont was damaging to FSBO services like Picket Fence.
While much of Zillow’s purported damage to Picket Fence is projected based on profit estimations from 2017, the fact remains that Zillow used the tactics they have used across the country to monopolize real estate business in Vermont. Picket Fence estimates that this will result in a net loss of over $142 million by 2030, so their case prioritizes monetary recompense.
On a separate note in the document, Picket Fence shows that Zillow’s operation and interference in Vermont prevented local FSBO and other real estate endeavors from taking hold despite the best efforts of Picket Fence. The complaint addresses this issue as another nail in the antitrust violation coffin.
Picket Fence continues to suggest that Zillow’s actions were and are illegal, damaging, and in violation of significant antitrust law. This isn’t surprising given Zillow’s long history of shady activity from patent-grabbing to lengthy court cases designed to crush competitors; it is these exact behaviors that Picket Fence is hoping to address in their complaint.
Zillow, for their part, will have to answer for a lot over the course of the last 12 months. This Vermont case is sure to be one of the first of many attempts to bring the real estate giant to its wobbly, monopoly-seeking knees—and, with any luck, it will be the first successful one.
Watch out: Zillow’s terms of service have some sinister notes
(REAL ESTATE CORPORATE) Zillow’s updated terms of service allow them to make a lot of decisions with your data—none of which need your approval.
Zillow has a bit of a shady record. Between their excessive patent-hoarding and the aggressive nature with which they tend to squash competing services, you wouldn’t be remiss in treating them with caution—especially now that the real estate service is revamping their terms of service with some seemingly sinister changes in mind.
The actual terms of service prove for a lengthy—but recommended—read. However, WAV Group, a real estate consulting service, highlighted a few specific stipulations in the terms of service. If you’re here for the short version, it’s this: Have a lawyer look over the updated terms before agreeing to them if you’re a Zillow user. Otherwise, keep reading for a deep-dive on some of the more concerning aspects of these changes.
In a nutshell, Zillow’s updates allow them to use and distribute your data—including information associated with your listings—at their discretion. That sounds pretty standard, but Zillow makes it clear that they aren’t just using your data: They own it. What that means is you can’t repurpose or reuse that data again without specific parameters in place if you want to avoid breaking Zillow’s terms of service.
Zillow is also kind enough to alert you that they will take no responsibility for anything negative that happens as a result of your data use on their behalf, a process which can include unauthorized credit checks, the appropriation and use of your data by third-party services, and all of the downsides that accompany these actions.
So, for example, if Zillow passes along your data to a third-party service that has shaky web security, you can’t hold Zillow accountable for the hand-off regardless of negative repercussions on your end.
Now, you wouldn’t be wrong to want to delete your listing and clear out of Zillow after all of this, but you would be wrong in thinking it’s that simple. According to the new terms of service, you may delete your account, listing, and preferences; you just can’t delete any listing data from Zillow since, upon accepting those terms, your data is their data.
Finally—and, as WAV Group mentions, extremely importantly—Zillow’s new terms of service allow them to claim referral fees on your behalf without accepting any responsibility for potential harm to you, your property, your company, or—you guessed it—your data. This basically means that Zillow can act as a referring agency on your behalf without asking for your consent, which runs the risk of everything from raising your bottom line to risking your privacy.
It’s undeniable that Zillow has a motive here: Recuse themselves of responsibility for reckless and irresponsible behavior. Don’t trust the terms of service like you most likely do with other products here—make sure you have a lawyer (or at least a particularly shrewd second pair of eyes) to look over these terms before you sign any kind of deal with this real estate devil.
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