Zillow Mortgage MarketPlace Launches: LendingTree in Reverse, For Free

Zillow Mortgage

Well, after much anticipation, Zillow has launched their Mortgage Marketplace.  In typical Zillow-style, they are doing things in the reverse of the lead generation industry which generally has benefitted the consumer, which is to be applauded.  In a nutshell, Zillow’s Mortgage Marketplace requires the consumer to go to Zillow, fill out a form that is similar to a mortgage long form found on LendingTree or LowerMyBills.   The consumer is REQUIRED to register with Zillow to receive bids.  The mortgage information is anonymousely sent to registered mortgage brokers and banks on the site.  These mortgage brokers and banks then respond to the consumer with offers.  It is the then up to the consumer to follow-up with the mortgage broker to get more information.  Consumers rate the mortgage brokers based on their responses and service. 

The Positives:  In general, like most things that Zillow launches, I think it is a pretty bold service that will result  in great value for some consumers.  For consumers who want to fill out a mortgage request and receive bids and spend the time to follow-up on those bids, those consumers will likely save some time and get a good deal.   Assuming Zillow is able to build a significant market of mortgage brokers who are willing to respond to lots of different types of loans (which is the challenge in mortgage – all brokers and banks want the same loans), consumers should win through a competitive bidding process.  If the mortgage brokers were able to see how their competition was bidding and then drop their fees even further, that would be really interesting.

The Challenges: 

  • For the Mortgage Broker: The Zillow Mortgage Marketplace reminds me a lot of the HomeGain Agent Evaluator product that HomeGain launched with in 1999 or 2000.  It was a pretty innovative product that went against the grain of the industry.  Of course, HomeGain was charging a referral fee and Zillow is not, it was a challenging product in that it required the real estate agent or sales person to do a lot of work upfront before receiving contact information or having a strong sense if the lead was qualified or valid.  Lead generation as a marketing medium is challenging in that the sales person must follow-up with the leads to really understand how qualified they and on what time frame the person is going to be buying – really buying, not just what they put info into the form.  With the Zillow Marketplace, the mortgage broker must do a decent amount of work upfront before knowing whether they can even compete for the deal.  I can see a % of very motivated and hard working mortgage brokers using the Zillow Marketplace, but I think the fall off in participation will be significant if brokers feel it is not a good use of their time to respond to inquiries versus their own web sites, direct mail, or purchasing leads.
  • For the Bank: Those who have managed a mortgage lead gen business know that the business revolves around the large mortgage brokers and banks that have massive call centers that need to be productive.     The keys to these call centers are highly qualified leads and VOLUME, VOLUME, VOLUME in a very narrow set of loan parameters or filters.  Zillow Mortgage Marketplace is doing something very different than the way the mortgage industry currently operates.  LendingTree launched in 1998 and the mortgage industry has been adapting to working LendingTree leads over the past 10 years.  Now most banks have large call centers dedicated to working mortgage leads.  It has taken 10 years.  Assuming that Zillow can drive significant volume of mortgage inquiries, Zillow will need to invest in coaching the large brokers and banks on how to operationalize this kind of marketing to get them to be interested and successful.  If Zillow can not drive significant volume, I doubt the big banks and brokers will participate at all.
  • For the Consumer:  BankRate and many of the reputable lead generation firms like LendingTree and LowerMyBills spend a significant amount of time and resources on assuring ethical lending practices, fraud prevention, and preventing predatory lending.  Zillow should easily be able to address this, but consumers should be wary of the different participants in the Zillow Mortgage Marketplace, especially initially until the mortgage rating system is viable.

Zillow continues to be an amazing company.  In real estate, Zillow gives the home valuation information away for free making up the the gap between the $1-3 banner ad CPM in real estate and the  $250 lead gen CPM with volume of consumer impressions.  Now in mortgage, they are giving away free leads to mortgage brokers and banks.  Those leads when monetized by 3 lenders are worth close to $200 a lead.  I assume Zillow is planning on long-term relationship with the consumer and targeted banner advertising opportunity at a CPM ranging from $30-90 on sites like BankRate.

Regardless, Zillow is fun to watch.  My five year ARM is coming to a close and I submitted a lead on Zillow.  Can’t wait to see what happens.

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YouWalkAway.com Encouraging HomeOwner Foreclosure?

Was listening to NPR this eveing on the way home from work and they covered an interesting new business that is taking advantage of the rising tide of foreclosures on the market.  Two San Diego lawyers have created a new web site called YOUWALKAWAY.com that provides consumers with a foreclosure kit so that they can literally simply leave their houses in eight months after foreclosure.  Interesting business, but may not be a great thing for the real estate or mortgage industries to promote to consumers.

What do you think?  Interesting and innovative business model, but may be a tough one for the real estate industry to swallow.

Launching a Product on FaceBook: The Bacon Salt Story

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This is the story of Bacon Salt or J&D’s Down Home Enterprises – the most successful Seattle start-up that you have never heard of.  Or maybe you have.  In 2007, Justin Esch and Dave Lefkow developed a zero calorie, vegetarian, kosher certified bacon flavor seasoning and decided to start selling it on the Internet.   Within months, they had a significant business making hundreds of thousands of dollars in 2007 revenue.  Today they are at a run rate of millions of dollars in revenue.  How did they do it?  Social media, particularly Facebook.

I met with Bacontrepreneur Justin Esch several weeks back where we talked about their strategy and how they developed a grassroots following for Bacon Salt through online guerrilla, Seth Godin-style Purple Cow marketing.  Here is Justin’s recipe in launching a physical product on Facebook:

  1. Create a Group on FaceBook:  Check out the Bacon Salt group on FaceBook.   Before broadly opening up the group to the public, Justin and Dave went and made sure that there was plenty of content, pictures and videos to keep people busy and make it a fun experience.
  2. Invite 100 or so Friends and Let the Newsfeed Do It’s Magic:They then invited 100 or so friends to start populating the room leaving comments on the wall, etc.    Make sure you invite the popular people who have lots of friends on FaceBook.  As everyone knows,  FaceBook users can watch what their friends are doing on the newsfeed.  When friends see other friends join the Bacon Salt group, they get curious, check out the Bacon Salt group, and join the group.
  3. Make Sure There Is Lots of Fresh Content:  Just like good blogs or communities, groups on Facebook need lots of care and tending.  Justin and Dave made sure that there was a constant stream of interesting Bacon Salt related content and encouraged the community to place or promote Bacon Salt in interesting places.  The result was hundreds of pictures and videos of Bacon Salt all around the world.  There are some amazing pictures and videos in the group.   They also filled the group with Bacon Salt recipes and random bacon musings.
  4. Target the Rabid Fans: Justin and Dave then used the interest tagging on FaceBook to target every Bacon Fan and every group that was about Bacon.  They reached out to all these individuals to make sure they are aware of Bacon Salt.  They sent them free samples to get the early adopters to talk about Bacon Salt, tell their friends, or wrote a blog post on Bacon Salt.  The ground swell started.  Here is hilarious video that someone put together.
  5. Do Some Good & Sell Some Bacon Salt – OPERATION BACON SALT:  Justin and Dave encouraged rabid fans of Bacon Salt to take pictures and post them on FaceBook and around the Internet.  J&D came up with the brilliant idea of sending free samples of Bacon Salt to soldiers in Iraq.  Iraq, being a Muslim country, does not have any pork products, let alone bacon.  The soldiers in Iraq were incredibly appreciative of the generosity of J&D and loved the taste of Bacon Salt.  They took TONS of pictures of Bacon Salt in military vehicles across Iraq and the world.  Word got back to the States of their good deeds resulting in more and more press coverage of the Bacontrepreneurs.Operation Bacon Salt

They have basically replicated this strategy on MySpace as well.  Their business is doing extremely well.  Bacon Salt is knocking on the door of distribution through major grocery retailers and they are slated to appear on QVC at some point in the near future.

Bacon Salt QVCbacon-salt-qvc.jpg

What’s even more amazing to me is that they have bootstrapped it 100% to date.  Now that’s what I call a story of two Seattle boys done good.

Would you like some Bacon Salt with that?

Recruiting the New Marketing Team

As described in this article, HouseValues went through multiple evolutions of its media mix to get to where it is today resulting in a 10x reduction in cost per acquisition over the past five years.  Over the past five years, it was critical to evolve the marketing team to react the new skills required.  Five years ago, the HouseValues consumer marketing team was largely a buying organization where the core skill set was identifying media opportunities, negotiating with television stations, and monitoring execution.  The Internet, the nationwide expansion of the HouseValues business, and introduction of multiple products (seller leads, buyer leads, mortgage leads, portal impressions) required an evolution and expansion of the skill sets on the team.  See the below table for the evolution of the HouseValues Media Team:

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Below are six characteristics that you should look to develop or recruit on your marketing team;

1)     Strong Quant Skills: As your team is balancing multiple media – offline and online –  strong quantitative skills are critical in terms of balancing the media mix and determining the effectiveness of your media buys.  Historically, an individual attracted to media buying was not a naturally mathematically inclined.  Today’s media buyers and media managers must be able to make the trade-offs between different media based on quantitative metrics and results.  Trade-offs need to made on cost per acquisition versus volume of acquisition, local versus national media spend, brand exposure between pure direct response.  Balancing all these demands can be challenging.  Managers must be able to give media buyers clear direction and goals.  Media buyers need to be able to analyze results and communicate to managers why they are choosing the media mix they have.

2)     Balance:  Advanced media teams have always had to purchase multiple media – maybe print, TV, radio and maybe outdoor display/billboards.  The Internet has multiplied the number of places that a marketing team can advertise – search, banners, pop-unders, roll-overs, sponsorships, and more.  Every media team needs to be cross-trained in negotiating, purchasing, and managing traditional media types as well as the new media, particularly search.  I find most online advertising to be far simpler to implement and manage than the traditional media due to transparent pricing and limited creative options.  A the same time, marketing teams that are able to efficiently use print, TV, and radio will do well since the actual implementation of the campaigns is a barrier to entry for competition.

3)     Clear Communicators: With more media alternatives, it is critical for media managers and media buyers are able to clearly communicate WHY they have chosen to execute and test various campaigns and HOW those campaigns performed.  Media managers and media buyers also must communicate potential threats and opportunities to senior management – threats include increased competition or increased pricing from publishers; opportunities include new media or reduced pricing opportunities as well as buyer power in publisher relationships.

4)     Embracing Experimentation: The Internet has increased competition at every turn.  Media need to consistently experiment with new media and new creative to keep pushing the boundaries of what is known.  With every media business, costs increase to reach the marginal eyeball or consumer.  Thus, it is important to consistently increase the reach of your message.  Buyers must also embrace the “scientific method,” which we all learned in high school.  Media buyers must test new media (channels, times, days, segments, behaviors) and new creative implementations while holding as many constants as possible.  Then, test, measure, refine, and repeat. 

5)     Growth through Creative:  The creative implementation matters a lot.  Smart quantitative media buyers are very good at optimizing the buys.  Buying smartly with the same creative implementations will get you only so far.   Regularly testing and pushing your creative implementations is necessary for every media business.  You can be surprised at the results.     

6)     Familiarity with Product Management:  Search is becoming an important part of your media mix.  A strong marketer will understand the implementation of good natural search / search engine optimization strategies as well as the dynamics of social networking.  Though there are good consultants to help with search engine optimization and social media strategies, having a strong familiarity with search engine optimization and social media will help in identifying the right tactics to drive additional consumer awareness of your products.

Online Real Estate Traffic Off to the Races

Those of us who have worked in the online real estate industry are pretty familiar with the seasonality of the traffic patterns.  Generally, consumer traffic starts tapering off after school starts in September and then drops dramatically in November and December.  But for some reason, right after Christmas and New Year’s Day, traffic starts accelerating. 

Consumers start searching for homes online about three to six months before they get serious about buying or selling and contacting an agent. Consumers get back to work on January 2nd and are still shaking off the holiday blues by casually surfing and visiting real estate sites.   The first quarter of the year really determines what web site is going to be the most useful to both consumers and real estate professionals.

Though we are in the worst real estate downturn since the 80’s, consumers came back to real estate in a big way.  Take a look at the below graphs from Alexa (we need to make the assumption that trends in Alexa are accurate).  Nearly every real estate web site experienced a ncie uptick in traffic in the last week.  Realtor.com (owned by Move, Inc. and partnered with the National Association of Realtors – NAR) saw the most dramatic gains.  VERY SURPRISING.  I am not sure why Realtor.com moved so much more than anyone else.  I will need to do some research.  Anyone have an idea?

The below graph is the tier 1 of online real estate: Realtor.com, Zillow, Remax, Trulia, Homes.com

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The below graph is my Tier 2 of online real estate – generally made of companies focused on marketing services, web sites or lead generation for agents.  Though it doesn’t show up on the above graph, Homes.com seems to be doing a very nice job in growing their online traffic.  Dominion, formerly known as Trader Publications, bought Homes.com in 2002.  Homes.com was a survivor of the dotcom boom and bust and was in difficult shape when they were acquired.  Since then, traffic has grown nicely.  I give Jamie Clymer a lot of credit for his work with Homes.com and Dominion’s real estate businesses.

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We’ll keep watching the trends over the first quarter of 2008 to see how the online real estate industry plays out in 2008.