The real estate industry has gone through a massive transformation as new real estate websites such as Zillow (and Trulia now owned by Zillow, and Redfin) have brought together Big Data sets on available properties, home buyers, and home sellers. These firms have, in the process, showed us important lessons and best practices in monetizing Big Data, and revealed requirement for Digital Dominance.
While Zillow set out to disrupt the real estate market, its existence coincided with a growth in both fees paid to agents and an increase in the use of agents. In effect, Zillow transformed into a different kind of middleman – a data broker. Zillow and its competitors, Trulia and Redfin, through their data exchanges, have brought transparency to the real estate market. Because of these firms, due diligence, thorough searching, and even neighborhood comparisons are now easily available online. Zillow and its competitors brought convenience through its data products and have monetized them. Some may argue that their success, Zillow’s especially, may be more a function of the timing during which they launched: the housing market had just crashed and banks were selling homes. Suddenly, information on the direction of the housing market, neighborhoods, and foreclosures was worth a premium. Zillow fused various forms of data and embraced the realtor as a major part of its revenue source and developed data products to serve the realtor as part of their data monetization strategy.
The success of Zillow offers some important lessons in becoming a digital distruptor and dominating the digital environment for its sector. Their success in creating data, analyzing data, and leveraging that data in novel ways offers lessons for all firms:
1) Develop a Data Exchange with Customers on the Platform of your Customer’s Preference
Data exchanges have become increasingly important in many markets. Many exchanges like eBay and Amazon are now accessible on mobile platforms. Customers have shown a strong preference for data exchange use on mobile platforms. Leverage the movement to mobile apps to provide vicinity information. Increase customer participation on mobile apps by refreshing data at a high rate, making frequent consumer visits worthwhile and valuable.
2) Fuse Data from Many Sources and Formats
Relevant data comes from many sources and formats. Fusing data from public sources with proprietary data improves convenience for consumers and creates a economic benefit in that multiple sites do not need to be accessed. It promotes scale in the number of consumers and achieves increased precision in data too. Data is also not just numeric. Develop platforms that take in text, photos, video, and even audio. Develop rankings and indices that can help organize non-numeric data. Tagging and descriptions of non-numerical data are necessary to finding and accessing such data.
3) Bring Scale to Data with Indices
Having lots of data requires understanding the rank, severity, or importance of any specific entity. Indices help bring scale and communicate these natural inquiries. Just as a temperature scale allows us to understand severity and make relative comparisons, develop indices that allow users of your data to do the same. The above graphic in this post is a map of the prices of real estate in the NYC neighborhoods. The ability to compare on a scale is important in judging relative value and appropriateness for prices. Zillow created new scales, like the walkabilty index, which helps buyers identify neighbors that allow for lots of walking and offers consumers a great comparison of neighborhoods on a dimension other than price.
4) Solve Customer Needs with Data Products
In general, customers do not want data. Customers have market questions. They seek answers to those questions. It is absolutely important that data products be created to solve the problems facing customers and answer the questions that they have. The data products permit monetization and marketplaces.
5) Achieve Market Scale Quickly
Although the real estate market has given rise to multiple sophisticated data exchanges (Zillow, Trulia, and Redfin), Zillow emerged as a leader quite quickly. This was possible because it achieved scale quickly. It included more properties before the other sites. The marketplace rewards firms that achieve scale first. With more data, more innovation and more data products are possible. With that comes more users, and with more users comes more opportunities for monetization.
6) Treat and View Your Data as an Asset
Zillow has a great reverence for its data. In its annual report to investors, it even describes the types of data it collects and its plans to collect more. Few firms are predicated on data as an asset, but that is changing. If you want your firm to view your data as an asset, you must begin to treat it that way. If data is the future of your firm, map your data strategy to your business strategy. It brings focus to the importance of data by your employees and by investors who see a future in your data monetization plans.
7) Focus Data Products on Sellers: Reminder that Sellers (and Their Agents) are More Willing to Pay Than Buyers
Zillow shows us that in its quest to unleash information about homes to buyers, it remains that the sellers and the listing agents (real estate agents of sellers) are most economically incentivized to pay for data products. A large portion of Zillow’s revenue comes from listing agents, just like eBay earns from sellers, Google earns from advertisers (and not buyer) and the list goes on and on. Examine your business model for the role of buyers and their agents. Focus data products on sellers. Develop premium data products for sellers versus buyers.
Strategies for Digital Dominance are developed in greater detail in our upcoming executive program at Northwestern University: Big Data to Big Profits: Strategies for Monetizing Social, Mobile, and Digital Data with Data Science in Evanston, IL on Jun 15-16, 2017. A limited number of slots are still available.
About Russell Walker, Ph.D.
Professor Russell Walker helps companies develop strategies to manage risk and harness value through analytics and Big Data. He is Clinical Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management of Northwestern University. He has worked with many digital enterprises, banks, insurers, professional sports teams and leading marketing organizations through the Analytical Consulting Lab, an experiential class that he founded and leads at Kellogg.
His most recent book, From Big Data to Big Profits: Success with Data and Analytics is published by Oxford University Press (2015), which explores how firms can best monetize Big Data through digital strategies. He is the author of the text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management through business case studies.
Algorithm, Analytics, Big Data, Big Data Analytics, Data Analytics, Data Capture, Data Exchange, Data Monetization, Data Product, Data Products, Digital Platform, economics, featured, Mobile, New York Real Estate, Real Estate, Zillow