There is no doubt that BankRatehas the most powerful business model in the online finance world. They have established themselves as the “gold standard” web site for consumers when checking interest rates on home mortgages. BankRate provides objective information on interest rates and loans and then has rate tables where they list the rates from local banks and mortgage brokers. Just like movie trailers, the best part of their business model is that the advertisement is the entertainment or the content that consumers are looking for. Tom Evans and Steve Horowitz engineered an Internet Hail Mary for BankRate in 2005 when they shifted their business model from a paid listing business to a pay per click business that really scales with traffic. Since early 2005, the BankRate stock has soared from about $10 to $40-50 a share. It would probably be higher if not for the real estate and mortgage mess the country is facing. Interestingly, BankRate is one of the only companies in the space that is not seeing wide spread defection from customers.
Though it has been rumored for months, Zillow just announced that they are getting into the mortgage business. It is unclear what the business model will be. VP Jorrit Van der Meulen posted on the Zillow Blogthat mortgage brokers and banks can apply for FREE access to Zillow traffic. Mortgage brokers have to pay a $25 application fee. Limited additional details are available. This is certainly an interesting opportunity for Zillow. The Zestimates has been very powerful in the real estate industry enabling consumers to do some homework when considering refinancing their house. Now it seems like Zillow is looking to either commoditize the mortgage lead generation players like LendingTree and LowerMyBills or go straight after the BankRate rate tables.
Maybe they won’t charge the brokers for it and just make money from the advertising around it. Zillow is a bold company. They have taken the unusual approach of not charging the industry for advertising, but trying to surround the information with banners from Lexus and Pella windows. The online real estate industry has always believed that best monetization of those eyeballs are from the real estate industry players (real estate agent, brokers, mortgage brokers, banks) and not the associated services.
Zillow may just prove conventional wisdom wrong… Or not.