No journalist can resist a good horse race. That’s why most stories about Trulia, the San Francisco-based real estate search company with 17 million users per month, also mention Seattle competitor Zillow (NASDAQ: [[ticker:Z]]).
After all, both companies were founded in 2005, and both offer fancy map-driven interfaces for canvassing rental listings and houses for sale. Trulia is a bit larger than Zillow (300 employees versus Zillow’s roughly 275). But Zillow beat Trulia to the public markets. It raised $69 million in its IPO last July, while Trulia continues, for the moment, to make do on the $33 million it has raised from venture investors like Accel Partners and Sequoia Capital.
But from my perspective, there isn’t much point in trying to pick a winner in the real-estate search business. The truth is that it’s big enough for both companies. The real prize in this market is an ongoing share of the dollars real estate agents spend on advertising. There are more than a million licensed real estate professionals in the U.S., who earn about $50 billion in commissions annually. Traditionally they’ve plowed about 10 to 20 percent of that income back into marketing and advertising. Do the math, and that’s a $5 to $10 billion industry.
Before companies like Zillow and Trulia came along, the vast majority of this spending went to offline channels: newspapers, classifieds, billboards, direct mail, grocery cart advertising, and the like. But both companies have built thriving businesses selling online ads and related services, with real estate agents now waiting in line to get their glamor shots and phone numbers on the sites’ listing pages.
What really interests me, then, is how quickly the real-estate startups have changed the way people buy homes—and the way agents sell them—even in the midst of the worst downturn in the housing market in generations.
I’ve had a couple of conversations on this theme recently with Pete Flint, Trulia’s co-founder and CEO, and it sounds to me as if both companies are using roughly the same playbook. It involves identifying the most common frustrations plaguing house buyers and real estate agents, and easing the pain by changing the way information gets delivered—whether that’s information about available homes, which was traditionally hard for consumers to find, or qualified leads on home buyers, which is what agents always want more of. “What we are trying to solve for is not only a consumer problem but an industry problem,” says Flint (he’s the one on the left in the photo above). “We not only needed to get smart on consumer needs, but also on how the real estate industry operates-the economics, the personnel, the legal aspects, all of those things.”
British-born Flint got a master’s degree in physics at Oxford and spent five years as a business development executive at UK-based travel site Lastminute.com before arriving at Stanford Business School in 2003. There he met a Finn named Sami Inkinen, who had also studied physics and had done his own spin in the startup and consulting worlds before deciding to pursue an MBA. “We became pretty fast friends,” says Flint. “We had a similar passion for high-tech, and we spent the first year at Stanford bouncing around entrepreneurial ideas.”
As second-year students in 2004-2005, Flint and Inkinen had spend time searching for off-campus housing in Silicon Valley, which is when “the light bulb went on,” Flint says. “At the time there were a handful of regional brokerage sites, but they were not really consumer destinations, and there were some very disappointing national sites, like Craigslist. It hit us that this was a big opportunity that seemed completely obvious, and it was remarkable that no one had done anything that was particularly strong.”
Before they even got their Stanford diplomas, Flint and Inkinen had founded Trulia and built a five-person office in San Mateo, CA. Flint took the CEO role and supervised product development, while Inkinen became president and hit the sales trail, selling realtors on the system. (Six years and about 200 employees later, the company moved to its current quarters in the historic Rialto Building in San Francisco; as one of the only big downtown office buildings that survived the 1906 earthquake and fire, it’s a real estate landmark in its own right.)
Inkinen and Flint figured that if they could bring lots of consumers to their site, they would be able to start siphoning real estate advertising dollars away from newspapers. But it was a chicken-and-egg problem. To attract consumers, Trulia needed actual real estate listings, but the
