How Zillow grows by democratizing data with Zestimate

• Growth breakdown: How Zillow uses Zestimate to create a viral (and binge-worthy) loop by giving home buyers objective data.

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🏆 The one thing:

If you’re short on time, here’s the one thing to take away:

Zillow didn’t start off by creating new data points. They used data that was already available, but hard to get to, and invisible to most people.

But this leads to a key lesson that often data availability isn’t the issue. It’s the accessibility of it that is.

In these marketplaces, the way to win is to package that data for users in an easily digestible, enjoyable, and shareable way.

So instead of looking to generate new data points, think about how you can improve an already available set of data by focusing on the user experience.

📚 The tactic:

A brief explanation of the tactic.

Back in the early 2000s purchasing a home seemed like a solved problem.

Using an agent was the first, second, and third option.

And it worked.

But there was an underlying issue.

Information was not equally available. It was heavily skewed towards the agents.

And thus, relied on high levels of trust between the end-user (you) and the middleman (agents). But this isn’t necessarily a bad thing and in the case of purchasing real estate, agents are really valuable.

So rather than replace agents, Zillow ventured to democratize the data available to agents, empowering home buyers and sellers.

They centered their product positioning around access to information.

To do this, the team took months to build a database of millions of properties to develop what was new ground for the real estate industry:

An algorithm to estimate the value of a home.

Their core differentiator, the Zestimate.

Essentially what Zillow had done was create a way for a home buyer or seller to get an objective view on the value of a home.

Today, the average margin of error for Zestimate is just over 2%.

Practically wiping away the need for subjective price valuations (in most cases).

🎯 The execution:

3 actionable insights from the tactic.

👷 1. Doing the dirty work

All the information Zillow used for their Zestimate algorithm was publicly available.

So anyone could have used it.

But the problem was that the information was hard to access, fragmented, and often localized. Meaning you as an end-user would’ve needed to put a ton of effort in to estimate the value of a home.

Well to democratize this data, Zillow set out to do this for you: accessing multiple sources, cleaning it, understanding what matters, updating it constantly (home prices are not static), and creating a single source of truth estimate.

Zillow had made their user lives easier and better (all of agents, buyers, and sellers).

While at the same time, not being at odds with the industry incumbents - agents.

Which can often be a problem when entering into traditional industries. And something you should look to avoid, unless you have substantial financial backing or a completely revolutionary product.

While Zestimates might ruin the day of agents trying to drive a higher price. Ultimately, they help everyone get to a fair price quicker and easier - and have probably helped to weed out lemon agents.

📣 2. Viral moments

The founders of Zillow, Rich Barton, Lloyd Frink, and Spencer Rascoff, knew the viral potential of Zestimate.

It’s provocative.

It could tell you that your house is worth much less than you think

Or much more if you’re lucky.

Even better, you could compare the value of your house to your neighbors, your friends, or even your favorite celebrities.

They were betting on Zestimate taking Zillow viral. So they doubled down on its provocativeness.

One way they did this practically was to make the Zestimate one number and not a range. With Barton saying, “points are more provocative”.

Another thing they did was keep Zestimate under wraps when building, but letting the media see it (under NDAs) and getting them ready to write about it once it was released.

Boy were they right on their bet on Zestimate.

By the second day, more than 1 million people had visited Zillow.

And by the fifth day, over 2 million.

Zestimate instantly started debates with homeowners and the nosy rest of us.

Home values were now publicly visible. And everyone wanted to see them.

📲 3. Time to binge

But Zillow didn’t just stop at a moment of virality.

They used it to create a behavior of bingeing.

You see, before Zillow there was no culture of pointing out the flaws in the kitchen lighting of a $20M LA mansion with less than $1k in our bank accounts.

Now this isn’t to say that Zillow was the first home listing aggregator.

But, because of their emphasis on opening up the data - they were the first to create this binge-worthy experience:

You were no longer limited by listed homes. You could get a price estimate for any home.

You could now get a true price estimate (critical to if that $20M lighting is a dealbreaker).

You could now go and find out the true price of every home you’d driven past.

All your favorite celebs.

All your friends.

Zillow had created a user experience that emphasized staying on the platform. While also creating share-worthy moments.

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