I initially wanted to write on the Q2 earnings reports from the public companies in real estate since tracking what Zillow, Redfin, Realogy and now eXp are doing gives us all a good idea of what’s happening in residential real estate. But a few things happened in the last couple of weeks that changed my mind.
First, all of the Q2 reports more or less confirmed and validated all of my thoughts from the June Report on Q1 earnings. I titled that report “The Shape of Things to Come” and I see very little in the Q2 earnings reports that changes my mind. I am likely to do a series of posts perhaps following up with updates for Q2, but I didn’t think it deserved a full Red Dot.
Second, Zillow’s moves are important, if not exactly a surprise. The acquisition of Mortgage Lenders of America (MLOA), as well as other things we’re seeing out of Zillow, tells me that Spencer & Co. have seen the same strategic shifts that I have been seeing.
Third, it seems obvious to me that the tech side of real estate has a new buzzword: platform. Sure, we still hear a lot about AI and AR (Augmented Reality) and Big Data and so on, but the new buzzword is “platform” as in every single tech company out there is trying to position itself as a “platform” of some sort. Major companies from Compass to Keller Williams are talking about either becoming or producing a “platform”—sometimes, they even add the helpful phrase “end-to-end” so we all know they’re talking about something really major.
Thing is, I think there is a serious misconception in the real estate industry about what a platform actually is. Sure, some of it is semantics—how do you define the word “platform”? But then, any debate can devolve into a semantic debate, which usually ends up being uninformative and advances nothing.
So, we’re going to devote this issue of The Red Dot to the question of “platform”. What is it? What are its essential characteristics? What challenges exist? Who are the players, and why?
We will reference the frontrunner in the race to become the real estate platform today: Zillow. In part because, well, Zillow is the frontrunner. And in part because Spencer Rascoff is remarkably open and transparent in discussing Zillow’s strategic views. However, we will also reference both Redfin and Realogy, as their CEOs have been pretty open as well in earnings calls.
The real estate industry is at an important turning point, and will be over the next couple of years. The Game of Platforms has been going on for a while, but it has become visible enough for the rest of us to see.