Zillow.com could shake up the market for online mortgage leads by capturing information from prospective borrowers who use its Web site while shopping for a home and then giving the data to lenders.
The Seattle company said it plans to begin generating and offering leads to lenders for free in a few weeks. Its site, best known for providing consumers with free rough estimates of property values according to tax assessments and other sources, attracts 5 million visitors a month.
Despite numerous entrants, the mortgage lead business is dominated by three players: IAC/InterActiveCorp’s LendingTree LLC, NexTag Inc., and Experian Group Ltd.’s LowerMyBills.
Most generators make their money by charging lenders and mortgage brokers $10 to $175 per lead. But Zillow says it plans to continue relying on advertising for revenue. (Some of its ads come from lenders.)
Though some analysts expressed skepticism about how long the company could use an ad-driven model in the lead business, observers said Zillow is well positioned to compete there.
Its founders have formidable experience. Rich Barton, its chairman and chief executive, founded Expedia.com, and Lloyd Frink, Zillow’s president, led major divisions of the travel site, which is credited with helping to pioneer online lead generation.
And in an industry that abounds with privacy concerns and complaints about lead generators that resell the same contact information to multiple lenders, Zillow appears to be pitching itself as a more scrupulous alternative.
“We’ve built
A spokeswoman for Zillow said that charging for leads was “not in the plans at all,” but that the company would not provide further details until next week.
Steve Kropper, who founded Domania.com, a site that lets consumers check home values, and sold it to LendingTree in 2004, said Zillow’s model looked superior to those of other lead generators, because it combined “early stage” and “late stage” information on borrowers.
Early in the process, homebuyers are interested in price information, but later they want to know about loan terms and rates, said Mr. Kropper, now the president of Bank on Real Estate Inc., a Lexington, Mass., company that helps lenders and real estate brokers acquire and retain customers. “What Zillow is doing makes sense. I would call it joint customer acquisition.”
Zillow is likely to get better leads than competitors, he said, because visitors to the site, who are already shopping for homes, are more likely to take out a loan in the near term.
Because the site offers information on home values, which visitors are more likely to look at repeatedly, Zillow may have a leg up in retaining the 80% of borrowers who are not prepared to get a loan when they start the shopping process online, Mr. Kropper said.
“They are like dough that hasn’t been cooked yet,” he said. “If Zillow can detect when they go from cold to the buy zone … they will do something” that providers like LowerMyBills and LendingTree have not done yet.
However, other observers called free leads problematic, because of mounting industry concerns about lead quality and conversion rates.
“A free lead raises the question of what is the value … whereas in paid leads there is some incentive on the part of the seller of leads to provide” greater value, said Craig Focardi, an analyst in San Francisco for TowerGroup, an independent research firm owned by MasterCard Inc.
Mr. Kropper said he assumed that providing free leads was a “transition strategy” that probably would make sense for a while.
But Mr. Focardi predicted that Zillow eventually would have to expand its business model “from free to fee in order for it to be a value for them and the lenders they hope to deliver the leads to” — even though Zillow’s “fortunes are still rising” and the company has succeeded in “aggregating consumer eyeballs.”
In his blog posting, Mr. Van der Meulen invited lenders and brokers to register for the service so they could begin using it as soon as it is launched. Lenders and brokers will be charged only a $25 application fee to allow a third-party service to verify that they are valid industry professionals, he wrote.
