Zillow Inc. (Z)

[Art2Gecko]

Expedia Ex-CEO Sets Web Real-Estate Venture
By JAMES R. HAGERTY
Staff Reporter of THE WALL STREET JOURNAL
January 13, 2006

The former head of the Expedia Inc. travel Web site said his new company, Zillow.com, within the next six months will begin offering a "beta" test version of a set of Internet tools designed to help people buy and sell homes more efficiently.

The much-anticipated service will involve "information tools" that will help people "take control of the process" of buying and selling real estate, Richard N. Barton, chairman and chief executive of Zillow.com, Seattle, said in an interview.

Mr. Barton is due to discuss his new company in New York today at a conference sponsored by Inman News. Until now, Zillow has said almost nothing publicly about its plans. Zillow's moves have become the subject of intense speculation in the real-estate industry because of Expedia's role in slashing the costs to consumers of booking online reservations for hotels, cars and airplanes.

So far, real-estate brokers have avoided the kind of price war many people predicted in the early days of the Internet. Commission rates have come down only slightly in recent years and still average more than 5%, according to surveys by Real Trends, an industry publication, even though the soaring price of homes has made those fees far higher in dollar terms.

But real-estate brokers are edgy about the possibility of tougher online competition ahead as companies like Google Inc. and Craigslist Inc. add more information about homes for sale, giving consumers more ways to bypass agents.

Mr. Barton didn't provide a full description of his business plan. But he said the company won't operate as a brokerage firm and won't be based on listings of homes for sale. He also declined to give details on the tools to be provided but said they will draw traffic to the Web site, which will sell advertising to companies providing services to home buyers and sellers.

Zillow faces the risk of unrealistically high expectations, as change will come much more slowly in real estate than it did in travel and other businesses such as stock trading, Mr. Barton said. That is largely because home sales typically involve lots of personalized service from agents who know their local markets and how to solve the many problems that can crop up before a transaction is completed. It isn't simply an order-taking business, he noted.

But Mr. Barton said major change in home selling is inevitable over the next five years or so because "there's an unsustainable disconnect" between the commissions charged by most agents and the value of their services. He expects that agents will become more productive and less numerous.

"How it's all going to shake out, I have no idea," Mr. Barton said. "But I'm 100% sure that things are going to change."

Zillow was formed about a year ago and has 75 employees, mostly engineers, said Mr. Barton, who is 38 years old and served as Expedia's chief executive officer until 2003. Expedia, originally created within Microsoft Corp. when Mr. Barton worked there in the mid-1990s, later became a unit of IAC/InterActiveCorp, New York, which recently completed a spinoff of Expedia to shareholders.

Zillow has raised about $32 million from two venture-capital firms, Benchmark Capital and Technology Crossover Ventures, Mr. Barton said.
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