I want to start today by calibrating our watches.
Let's take a trip back in time, 20 years, almost
exactly. 20 years. I want you to close your eyes,
unless you're driving, please don't close your
eyes if you're driving, and just picture the
world as it was on the morning of February 8th,
2006. 2006, okay. Yeah. Yeah, let's really set
the scene here, because 20 years, it feels like
a geological epoch in tech time. It really does.
I mean, you have to understand, this is a pre
-iPhone world. We're still a year away from Steve
Jobs pulling that device out of his pocket on
stage. Right. So if you wanted to check your
email, you were sitting down at a desktop computer,
probably a big beige box. Almost certainly a
beige box. And Facebook. It was still mostly
just for college students. It hadn't opened up
to the general public yet. Twitter didn't even
exist. If you wanted to watch a video online,
you definitely weren't on YouTube. I mean, it
was barely a year old, and it was mostly, you
know, that one video of the guy at the zoo. Yeah,
me at the zoo. You were probably downloading
some super grainy clip off of LimeWire or Kazaa.
And just praying it didn't brick your entire
computer with a virus. Exactly. It was a completely
different digital landscape. And on that specific
morning, February 8th, in a pretty nondescript
office building in Seattle, a small group of
people were huddled around a monitor. And these
weren't kids in a garage? No. Not at all. These
were former Microsoft executives, you know, seasoned
pros who had seen big launches before. But the
energy in that room, by all accounts, was different.
They were nervous. They were hovering over the
enter key, waiting to go live. That's it. They
had been working in stealth mode for over a year
on this new website. They'd run all the projections.
They'd done the math on server capacity. They
thought they knew what to expect. But they were
ready. So around 8 .00 a .m. Pacific time, they
flip the switch. They launch. Zillow .com. And
then? Chaos. Absolute digital meltdown. The servers
crashed. Oh, they didn't just crash. They effectively
incinerated. I mean, the site was completely
unusable within hours. They had anticipated a
certain level of curiosity, you know, for sure.
Sure, you expect some traffic. They figured,
okay, the early adopters, the tech blogs, maybe
they'll check it out. But the traffic they got
on that very first morning was, it was exponential.
It just blew. every single projection out of
the water see this is what fascinates me about
this moment usually when a site crashes it's
because people are trying to buy something you
know concert tickets the new playstation before
the bots get them all right exactly but here
nobody was buying anything you couldn't buy a
house on the site you couldn't even really talk
to an agent that's the key they weren't shopping
They were snooping. This was the birth of what
we now call real estate porn. It really, really
was. You have to put yourself back in that pre
-2006 mindset. Before that morning, real estate
was a black box. It was a secret society. Fully
opaque. If you wanted to know what your neighbor's
house was worth or what your boss paid for his
mansion or the value of your ex -girlfriend's
parents' place, you just couldn't know. It was
impossible. You had to be a real creep about
it. You'd have to go down to the county clerk's
office and, what, dig through physical microfiche
or these dusty paper logs? Getting dust all over
your hands, yeah. Or you had to call a real estate
agent. And the moment you asked an agent, hey,
what is that house worth? You weren't just a
curious person anymore. You were a lead. You
were a lead. You were in the sales funnel. There
was no such thing as casual browsing. The agent
held all the keys to the data kingdom. They were
the gatekeepers. But Zillow in an instant just
changed the rules of engagement. They put a price
tag on every single rooftop in America, whether
it was for sale or not. And that server crash
was the signal. It was the market screaming at
the top of its lungs. We have been starved for
this information. It was definitive proof that
there's this massive, unfulfilled hunger for
transparency in what had historically been the
most opaque major industry in the economy. So
here we are. It's February 6th, 2026. We are
almost exactly 20 years on from that server crash.
And the company that started that revolution,
it has had a wild, wild two decades. To put it
mildly, I mean, it has been a true roller coaster.
We're calling this deep dive the glass house
because Zillow promised to build this beautiful
glass house where we could all see inside the
market. But as we're going to find out, living
in a glass house is incredibly dangerous. Especially
when you start throwing stones yourself. And
they have thrown plenty. We're going to track
how they went from that simple look up your neighbor's
value website to this massive all encompassing
housing super app. We're going to look at the
billion dollar failure of their house flipping
business. These scandalous culture accusations
that rocked them in the mid 2010s and the absolute
legal war zone they find themselves in right
now in 2025. It's a story of. I think, hubris
of technology and ultimately the realization
that you can have all the data in the world,
but you can't algorithm away the messiness of
the real world. So let's start at the beginning.
Segment one, the origin story. Because this wasn't
some scrappy startup in a garage, right? This
was a different kind of launch. No, and that's
a really common misconception. Zillow wasn't
two college dropouts eating ramen and coding
in a basement. It was founded by Rich Barton
and Lloyd Frank. And these were heavy hitters.
Oh, yeah. These were top executives at Microsoft
during its golden era, the 90s. They were part
of the machine that built the modern digital
world. But more importantly, before Zillow, they
built something else that basically changed how
we all live our lives. Expedia. Okay, so connect
the dots for me. How do you go from booking flights
to pricing houses? Is there a through line there?
It's the exact same philosophy. It's the same
core idea about information asymmetry. Okay.
Think about what it was like to book a trip in,
say, 1995. If you wanted to fly to London, what
did you do? You called a travel agent. Right.
You picked up the phone. And they had a computer
terminal, usually the old Sabre system. And that
screen faced them. You couldn't see it. They
would type for a minute, frown a little bit,
type some more, and then say. Okay, I can get
you to London for $800. And you just had to say
yes. You had no idea if there was a flight for
$400 on a different airline. You didn't know
if flying on a Tuesday instead of a Friday was
half the price. You were completely helpless.
You were helpless. The agent was the gatekeeper.
They held the book of secrets. Rich Barton looked
at that dynamic and said, This is fundamentally
inefficient. The power should belong to the consumer,
not the intermediary. So Expedia was just...
turning the screen around. That's the perfect
analogy for it. It was democratizing the data.
It was giving you the same information the agent
had so you could make your own decision. So after
they spin Expedia out of Microsoft and eventually
sell it for a huge profit, Barton is looking
for his next project, his next gatekeeper to
slay. Right. It's 2005. He's wealthy. He's successful.
And he's trying to buy a new house for his family
in Seattle. And he runs headfirst into that same
book of secrets wall. The real estate version.
The real estate version. He later told this story
about how he just couldn't find basic information.
He couldn't find past sale prices for a home
he was interested in. He couldn't even find the
correct addresses half the time online. It was
all locked up. It was all locked up in the MLS,
the multiple listing service, which only agents
could access. He asked his agent for the raw
data, and the agent basically patted him on the
head and said, don't you worry about the numbers.
Just trust me. I'll find you a great place. Which
is pretty much the worst possible thing you can
say to a data -obsessed tech guy who just disrupted
the entire travel industry. It's like waving
a red flag at a bull. He got frustrated. He started
asking that fundamental question, what is this
house actually worth? And he realized that unless
the consumer could answer that question for themselves
independently, they were always going to be at
a disadvantage in the biggest financial transaction
of their lives. So that's the Spark. They incorporate
in December 2004. They set up shop in downtown
Seattle with about 20 people. Barton and Frank
self -funded initially because, well, they can.
They had the capital from Expedia. And they spent
a full year, more than a year, just scraping
data, just building the foundation. They had
to digitize the paper world. Completely. They
were pulling tax assessments from thousands of
different county websites, many of which were
barely functional. They were licensing public
records, satellite imagery. They were building
a database of the entire country's housing stock
before they even had a product to show for it.
And then came the launch we talked about, but
the killer app. The thing that really made the
servers melt was the Zestimate. The Zestimate.
Even the branding was genius, wasn't it? It sounds
so scientific and official. It sounds authoritative.
The Zestimate. It sounds like something NASA
came up with to value moon rocks. Yeah, it was
such a radical concept. I really can't overstate
this. Before Zillow, if you wanted a home valuation,
you had two options. You could pay an appraiser
$400 or $500. Or you could call a realtor who
would run comps for you. But again, then you're
a lead. You're a lead. There's an obligation
attached. Zillow came along and said, nah, we'll
just run a complex math equation and we will
slap a price tag on every single home in America
for free. And again, the absolute genius of it
was pricing the homes that weren't for sale.
That was the viral loop. That was the secret
sauce. Yeah. If they had only listed homes that
were for sale, they would have just been a digital
version of the newspaper classified section.
Which is, you know, boring. Utilitarian, but
boring. But by putting a value on your home and
your parents' home and your high school rival's
home, they made everyone an active participant
in the real estate market, whether they intended
to be or not. It tapped into vanity. Yeah. It
tapped into jealousy. It tapped into pure, unadulterated
curiosity. And man, did it work. By July 2006,
just a few months after that chaotic launch,
they secured $25 million in venture capital.
They were just growing like a weed. And get this,
they were profitable by 2010. That's astounding.
In the modern tech era, that's... practically
unheard of. I mean, you're expected to burn cash
for a decade before you even think about making
a dime. It just shows how incredibly efficient
and powerful their advertising model was. Real
estate agents were desperate to be on the platform
because that's where all the eyeballs were. They
had no choice. So they go public in July 2011,
trading under the ticker symbol Z. Just Z. Talk
about a flex. One letter. That's some old school
18 key level confidence. But the engine of all
this success, the thing that kept people coming
back day after day, year after year, was the
Zestimate. And that brings us to the second part
of our story because this algorithm, it's a very
powerful but very dangerous double -edged sword.
Very sharp one. Let's dive into that engine of
engagement. How does the sausage actually get
made? Because for a lot of people, the Zestimate
feels like magic or, you know, black magic, depending
on whether the number is lower than you want
it to be. Right. It's either gospel or it's garbage,
depending on what it says about your house. It's
an automated valuation model or AVM for short.
AVM. OK. Essentially, it's a giant regression
analysis. It takes all the hard public facts
it can find, square footage, lot size, the number
of bedrooms and bathrooms, the most recent tax
assessment. mashes that up with user -submitted
data. So if I go on and claim my home and I say
I put in a new roof or finish the basement, the
algorithm digests that. It digests that, yes.
And then it layers on the most important ingredient,
comparable sales or comps. What the neighbor
sold for. Exactly. If the house next door, which
is very similar to yours, just sold for $500
,000, then yours is probably worth something
close to that. It's constantly adjusting based
on real -time market activity. But here is the
rub. And it's a big one. The fine print. The
fine print. Zillow has always, from day one,
legally covered themselves. They say very clearly,
if you bother to look, this is a starting point
for a conversation. This is not an appraisal.
But human psychology doesn't read fine print.
We see a number, a specific number down to the
dollar, and we treat it like gospel. We anchor
to it. We anchor to it immediately. And that
creates what I call the Goldilocks problem. Break
that down for me. The Goldilocks problem. Okay.
Imagine you're selling your house. You've lived
there for 10 years. You love it. You put in new
floors. You paint it. You think it's worth $600
,000. But you pull up Zillow and the Zestimate
says $550 ,000. Oh, I'm furious. I'm absolutely
livid. I think Zillow is actively sabotaging
my sale because every potential buyer is going
to look at that Zestimate and think I'm overpriced.
Exactly. You hate Zillow. It's a terrible, inaccurate
tool. But now flip it. Imagine you're the buyer
for that same house. It's listed for $600 ,000,
but the Zestimate says it's only worth $550 ,000.
You know, I love Zillow. It's my negotiating
partner. It's giving me leverage to make a lowball
offer. Right. So in every single transaction,
Zillow is almost guaranteed to be the villain.
to at least one party. This estimate is either
too hot or too cold. It's almost never just right
for everyone involved. And sometimes the machine
just breaks. It goes haywire. We have to talk
about June 14th, 2011, the day of the algorithm
shift. Oh, June 14th, 2011, a date that will
live in infamy for longtime Zillow users. It
was a crisis of faith. What happened? What did
they do? They tweaked the algorithm. They updated
the formula. They added new data sources. They
changed the weighting of certain factors, all
in an effort to be more accurate. A noble goal.
Sounds reasonable. But the result was that millions
of home values changed, sometimes dramatically,
overnight. And it wasn't just the value for today.
They retroactively changed the historical data
graph. That was the part that felt like gaslighting.
That was the crazy -making part. You might have
checked your home's value history on June 13th,
and the little graph said your house was worth,
say, $300 ,000 back in 2008. Okay. You log in
on June 15th after the shift and suddenly that
same graph says your house was only worth $280
,000 in 2008. They re -row history. They re -row
history. People were howling. It felt like their
personal wealth, their financial history was
being deleted or altered by some computer glitch
in Seattle. It really, really highlighted how
fragile and arbitrary this truth was. We attach
so much of our net worth and our identity. But
the number is just a best guess by a machine
that has never actually been inside your house.
So that's the big question. How accurate is it,
really? Because like we said, sometimes it feels
spot on and other times it seems like it's in
a different galaxy. The Wall Street Journal did
a great analysis way back in 2007, not long after
the launch. And their conclusion still largely
holds up today. They said that when the Zestimate
is good, it's frequently within a few percentage
points of the actual sale price. Which is pretty
impressive for a machine. Very impressive on
a macro scale. Yeah. But, the report continued,
when it's bad, it is terrible. Terrible! I love
that very technical journalistic term. It's the
perfect word for it. And it's because of the
blind spot issue. The algorithm loves data. It
can count. It loves square footage. It loves
the number of bathrooms. It's great with quantifiable
data. But it has no nose. It has no nose. It
can't smell the cat pee that is soaked into the
subfloor. It has no ears. It can't hear the constant
highway noise. It's much louder in the backyard
than from the street. It can't see that the kitchen
renovation the owner claimed was done with cheap
particle board cabinets from a big box store
instead of high -end custom marble. Precisely.
I can't judge quality, condition, or nuance.
In 2016, Zillow themselves claimed their median
error rate was about $14 ,000. Now, across the
entire U .S. economy, that's an incredibly impressive
level of accuracy. But for an individual family.
For an individual family trying to sell their
home, being off by $14 ,000 is... It's a new
car. It's a year of college tuition. It's real,
tangible money. There was actually a legal challenge
about this pretty early on, wasn't there? Yes.
The National Community Reinvestment Coalition
filed a complaint with the Federal Trade Commission,
the FTC, back in 2006, right after the launch.
They called the tool misleading and argued it
could be particularly damaging to low -income
and minority neighborhoods where the public data
was often sparse or inaccurate. What happened
with that? The FTC declined to investigate. But
the criticism has always lingered. Zillow presents
these numbers with an air of scientific certainty
when they are really just sophisticated and sometimes
very flawed guesses. But despite the flawed guesses,
they absolutely won the traffic war. They became
the destination. And once they had the audience
locked down, they started the next phase of the
plan. Segment three. Consolidation and monopoly
building. This is the if you can't beat them,
buy them phase of the company's life. Maybe more
accurately, if you are already beating them,
buy them anyway, just so they can never, ever
come back. A Pac -Man strategy. Just gobble up
everything in sight. It started relatively small.
They bought a company called Postlets in 2011,
which was their first real acquisition. But then
they realized they had a massive hole in their
armor, a geographic blind spot. New York City.
New York City. It's always different, isn't it?
Always. It's a rental -heavy, broker -dominated,
incredibly complex jungle. And Zillow's national
model just couldn't crack it. The data was different.
The rules were different. So in 2013, they did
a smart thing. They bought StreetEasy for $50
million. And StreetEasy was the undisputed king
of New York real estate websites. It was a bible.
If you were looking for an apartment in New York,
you were on StreetEasy. By buying them, Zillow
intently locked down the single most important
and valuable real estate market in the world.
But the big one, the one that caused a seismic
shift in the industry, was Trulia. 2015. This
was the monster deal. Trulia was their main rival,
their only real rival at scale. It was Coke versus
Pepsi. It was Ford versus Chevy. And Zillow just...
bought Pepsi. They paid $2 .5 billion in an all
-stock deal. That is a staggering amount of money.
It was huge. And at the time that deal closed,
the combined Zillow and Trulia entity controlled
about 70 % of all online real estate search traffic
in the United States. 70%. That is, for all intents
and purposes, a monopoly on consumer attention.
It meant that if you were a real estate agent,
you had to pay Zillow. You couldn't afford to
ignore 70 % of the potential buyers in your market.
It gave them immense pricing power over the very
agents they claimed to serve. And they didn't
stop with search portals? No, the shopping spree
continued. They bought Dotloop, a company that
handles digital signatures and paperwork, to
get into the transaction itself. They bought
Showing Time. which is the software that most
agents use to schedule home tours. So now they
control how you find the house and how you book
an appointment to see it. And then they bought
companies like VRX Media for the photography
and virtual tours. They were building a walled
garden, an end -to -end ecosystem. They want
the search, the tour, the documents, the mortgage,
everything to happen inside the Zillow universe.
By 2023, they had a database of over 160 million
properties. They had effectively built a digital
twin of the entire U .S. housing market. They
looked completely unstoppable. They were on top
of the world. Which brings us to the most dramatic,
the most telling part of this entire 20 -year
story, the moment where they got too arrogant.
Segment four. The great stumble, the rise and
fall of Zillow offers. This is a business school
case study that will be taught for decades. It
is the perfect example of big tech hubris crashing
into the hard reality of the physical world.
So set the stage for us. It's 2018. Zillow is
printing money from its advertising business.
They're dominant. Why on earth would you change
a winning formula? Because Wall Street is never
satisfied. Wall Street loves growth, and there
is a natural ceiling to how many ads you can
sell to real estate agents. The real money in
real estate, the truly massive prize, isn't in
the advertising. It's in the transaction itself.
The commission. The asset. The asset. The total
value of homes sold in the U .S. is in the trillions.
The ad market is in the billions. They wanted
to move from selling ads to owning the house.
So they decided to become the buyer. They pivoted
to what the industry calls iBuying. Instant buying.
And the pitch to the consumer was incredibly
seductive. Selling your house is a nightmare.
You have to clean it, stage it, leave for open
houses on the weekend, negotiate with picky buyers
over repairs. What if Zillow just wrote you a
check? We'll buy it from you directly. You walk
away with cash in hand and we'll handle the hassle
of fixing it up and reselling it. And Rich Barton,
the founder who had stepped back from the CEO
role, actually returned to CEO in February 2019
specifically to lead this charge. He called it
Zillow 2 .0. He called it their moonshot. In
the underlying logic, the core belief was we
have the data. We have the Zestimate. We know
the price of every home in America better than
anyone else. Therefore, we can flip houses with
virtually zero risk. That was the theory. They
believed their algorithm gave them a crystal
ball. They thought they could predict home price
appreciation with surgical accuracy. They expanded
aggressively into hot markets like Phoenix, Los
Angeles, Austin, Miami. They were buying thousands
and thousands of homes every single month. They
wanted to be the market maker for American housing.
But then came 2021 and the crystal ball just
shattered into a million pieces. It was a spectacular
public humiliating disaster. In November 2021,
the news broke. Zillow was shutting down the
entire Zillow offers division, effective immediately.
Why? What went so catastrophically wrong? The
algorithm failed. It turns out that predicting
the housing market three to six months into the
future is incredibly difficult. Maybe even impossible.
Their model was broken. They were consistently
overpaying for houses just to win the deal against
competitors like Opendoor. And then underestimating
the cost of repairs. And underestimating the
repairs. They couldn't know from a desk in Seattle
that a house in Phoenix needed a new $15 ,000
air conditioning unit or that the foundation
had a crack. And the market itself shifted on
them. Right. The crazy red -hot market of early
2021 started to cool just slightly. They had
bought high. At the peak, and by the time they
fixed the houses up and put them back on the
market, buyer demand had softened. They were
left holding the bag. What were the numbers?
How bad was the damage? In the third quarter
of 2021 alone, the Zillow Offers Division lost
$420 million. $420 million in just three months.
It's an almost incomprehensible number. That's
roughly $4 .6 million a day that they were losing.
They had about 7 ,000 houses on their books that
were underwater. They were literally selling
beautiful homes for less than they had paid for
them just to stop the bleeding and get the cash
back. And Barton had to get on the earnings call
and announce that he was laying off 25 percent
of the company's entire workforce. It was a bloodbath.
It was a complete and utter humiliation. It shattered
the myth of the data god. It was this humbling
moment for big tech that proved that real estate
is still fundamentally an analog, messy human
business. You need local knowledge. You need
to know if the foundation is cracked. A computer
in Seattle can't know that. So Zillow offers
dies in a blaze of glory. But Zillow, the company,
survives. They lick their wounds and they pivot
again. Segment five, the housing super app. If
you can't be the house flipper, then you want
to be the operating system for everyone else
involved in the transaction. This is the new
strategy announced in 2022. They call it the
super app. It's a very trendy term in tech. It
sounds fancy, but it basically means they want
to find a way to take. A small tax from every
single part of the real estate process. They
identify what they call their five pillars of
growth. Which are? Touring, financing, seller
solutions, their partner network, and integrated
services. In English, that means they want to
be your mortgage broker. They want to be your
closing agent. They want to sell you title insurance.
Exactly. They are trying to deepen the revenue
they get from each customer. Instead of just
getting, say, $20 for sending an agent a lead,
they want to get... $2 ,000 or $3 ,000 for originating
the mortgage for that same customer. And how
is that big pivot working out for them? Well,
if we look at the most recent numbers from 2024,
it's a grind. There's no other way to put it.
They brought in $2 .24 billion in revenue, so
it's still a massive company. But they posted
a net loss for the year of $112 million. So 20
years in, after all this market dominance, after
becoming a household name, they are still losing
money. They are investing very heavily to try
and build out this super app ecosystem. But it
shows you that without the high revenue but terribly
low margin house flipping business, they are
still struggling to find the perfect consistent
profit machine. Now, while all this business
drama was happening on the balance sheets, there
was some pretty serious drama happening inside
the building to segment six. culture, controversy
and frat houses because the glass house had some
serious cracks on the inside. Yeah. Every big
tech company has its culture issues. But Zillow
faced some particularly specific and ugly allegations
around the 2014 to 2016 timeframe. And this seemed
to center on their high pressure sales office
in Irvine, California. Right. Sales floors in
any industry can be notoriously high pressure.
You know, that Wolf of Wall Street kind of vibe.
Yeah. There were a couple of lawsuits alleging
pretty standard labor disputes, unpaid overtime,
missed meal breaks. But then came the sexual
harassment suit. This was the one that really
made headlines. Yes. A former employee who was
represented by the very high profile lawyer,
Mark Garagos, filed a suit alleging that she
was subjected to sexual torture. Sexual torture.
I mean, that is a horrific phrase to see in any
legal filing, let alone one against a major public
company. The complaint was incredibly graphic.
It described the Irvine office as an adult frat
house. It alleged that managers not only condoned
but actively participated in rampant sexual harassment.
It painted this picture of a toxic, misogynistic,
male -dominated environment that was completely
at odds with the friendly, helpful, family -oriented
brand that Zillow projects to the public. And
Zillow's response? They fought it, of course.
They put out statements saying these allegations
did not reflect their company culture or the
experience of the vast majority of their 1 ,200
employees. But... and this is almost always the
tell, they eventually settled the suit in 2016
for an undisclosed amount. They paid to make
it go away. It's a really dark chapter in their
history, but there was another culture clash
around that time that was less dark and maybe
more petty, but just as revealing. Do you remember
the saga of McMansion Hell? A slight chuckle
in the voice. Oh! Oh, Kate Wagner. Yes, this
was in 2017. Can you explain what McMansion Hell
is for anyone who hasn't had the pleasure? It's
a blog. It's a brilliant blog. Kate Wagner, the
author, takes photos of these hideous, oversized,
poorly designed luxury homes, which she usually
finds on Zillow. And she writes these incredibly
funny, biting architectural critiques of them.
She points out the mismatched windows, the useless
columns, the soaring lawyer foyer. It's architectural
satire at its finest. It is hilarious, but the
legal team at Zillow did not find it funny. Not
one bit. They sent her a cease and desist letter.
They threatened to sue her into oblivion for
copyright infringement for using their photos.
Which is just insane because she's basically
giving them free publicity. Even if it is mocking,
people are going to Zillow because of her blog.
It was a massive, self -inflicted PR disaster.
The Electronic Frontier Foundation, the EFF,
stepped in immediately to represent her pro bono.
They argued it was a textbook case of fair use.
You are allowed to use copyrighted images for
the purpose of parody, commentary, and criticism.
Zillow looked like a massive corporate bully
trying to crush a small -time blogger. They did.
And they backed down very quickly once the EFF
got involved. Yeah. They dropped the threat.
But the incident revealed how incredibly possessive
and sensitive they were about their platform.
They viewed the listing data and photos as theirs.
They didn't want anyone messing with their product.
even for a joke. And that possessiveness, that
desire to control the narrative, brings us right
up to the present day. Segment seven, the modern
legal wars. Because if you think the lawsuits
of 2016 were bad, 2025 has been an absolute nightmare
for their legal team. It's been a siege, a multi
-front war. Let's start with the climate risk
story because this is just fascinating. It pits
the transparency for the buyer directly against
the interests of the seller. Okay, so in September
of 2024, Zillow makes this big, splashy announcement.
They're partnering with a data company called
First Street Foundation to add climate risk scores
to every single listing on their site. And this
is really useful stuff for a buyer. It's flood
risk, wildfire risk, extreme heat risk over the
next 30 years. It's crucial information. If I'm
buying a house in Florida or California or Arizona,
I absolutely need to know if it's projected to
be underwater or on fire or uninhabitably hot
in 10 years. This is the original Zillow mission,
right? Transparency. Power to the people. It's
the mission statement in its purest form. But
then, by November of 2025, just over a year later,
the data was gone. Zillow quietly scrapped the
entire feature. Why? Why would they remove such
valuable information? Because the sellers and
the real estate agents revolted. Homeowners saw
their Zestimates drop overnight because their
house now had a big red high flood risk badge
slapped on it. Real estate agents complained
that they couldn't move inventory in high risk
areas. The industry pushed back hard. So Zillow
had a choice. Do we tell the unvarnished scary
truth to the buyer? Or do we protect the sale
and, by extension, the agent's commission? And
they chose the agent. They chose the industry.
They removed the data. That is, that's really
damning. It's incredibly damning. It strongly
suggests that when push comes to shove, Zillow's
loyalty lies with the industry that pays its
bills, not with the consumer who uses the app
for free. And it seems like the government has
started to notice this kind of behavior, too.
Which brings us to the antitrust suits. Let's
start with June 2025. The brokerage giant Compass
sues Zillow. Now, Compass has this strategy of
using private exclusives listings that are kept
off the open market for a few days to generate
buzz among their own agents. Zillow implemented
a policy that effectively punished agents who
use these private exclusives, basically saying
you couldn't list on Zillow. So if you don't
give the listing to us instantly and first, you
can't use our platform at all. Exactly. Compass
called it what it sounds like. Illegal monopoly
behavior. Using their market dominance to stifle
competition and control how agents do business.
Gatekeeping. And then came the commission lawsuit
in Seattle in September 2025. This one attacks
the very core of their revenue model. It's a
class action lawsuit that alleges Zillow actively
misleads buyers. When you're on a listing and
you click that big contact agent button, you
naturally assume you're emailing the agent who
is actually selling that specific house. Right,
the listing agent. The expert on that property.
But you aren't. In most cases, you are being
sent to a premier agent, a completely random
agent, who has paid Zillow a premium for leads
in that zip code. And Zillow takes a huge cut
of their future commission, sometimes up to 40%.
Wow. The lawsuit says this is deceptive steering.
You, the consumer, are being sold to the highest
bidder without your knowledge or consent. But
the biggest bombshell, the one that really sounds
like a movie plot, is the Redfin deal. The Redfin
cartel allegation. This is serious stuff. In
2025, the attorneys general from five different
states, Virginia, Connecticut, Arizona, New York,
and Washington, all joined together to sue Zillow.
And what is the central charge? They allege that
Zillow paid Redfin, their main remaining national
competitor in the search space, a sum of $100
million. $100 million for what? To buy them?
No. to stop competing. Specifically, the lawsuit
alleges the money was to get Redfin to shut down
its rental advertising business and transition
all of those customers and that traffic over
to Zillow. That sounds like pure market allocation.
That sounds like something from the robber baron
era. That's what the AGs are arguing. It's what
lawyers call a pay for delay scheme or a non
-compete payoff. If it's proven true, it's a
flagrant textbook violation of federal antitrust
law. It paints a picture of a company that is
no longer trying to innovate to win, but is simply
paying off its rivals to protect its monopoly.
It's the classic life cycle of a disruptor, isn't
it? You start as the rebel crashing servers in
2006 to free the data for the people. You end
up as the empire in 2026, allegedly paying off
other rebels to keep the data. locked down and
profitable. From the perspective of the Attorney
General's office, it certainly looks that way.
So let's bring it all home. We have covered 20
years of this company's life, from the server
crash to the iBuying crash, from the power to
the people mission to the hide the climate data
reality. It has been a remarkable and transformative
journey, and you can't take this away from them.
Zillow changed the world. There's no doubt about
that. We are on balance, better off as consumers
having access to this data than not having it.
I can't imagine trying to buy a house today without
using it. It would feel like flying blind. Neither
can I. But we also have to recognize what Zillow
is now. It is a media giant. It is an advertising
platform. It is a publicly traded business that
has an obligation to feed the beast and grow
revenue every single quarter. So here is the
thought I want to leave all of you with today.
Let's hear it. Zillow started with a simple,
and I think a noble, mission to answer the question,
what is that house worth? They wanted to give
you, the consumer, the truth. But today, after
removing climate risk data to appease the industry,
and allegedly paying rivals to stop competing
for your business, Have they become the very
same gatekeepers they originally set out to destroy?
It's the ultimate and perhaps tragic question
for them. When you pull up that Zestimate on
your phone tonight, and I know you will, we all
will, are you really seeing the objective data
-driven truth? Or are you just seeing exactly
what the multi -trillion dollar real estate industry
wants you to see? Just remember, looking through
the glass in a glass house goes both ways. Precisely.
Take that number with a grain of salt. Maybe
a hole shaker. Thanks for listening to this Deep
Tag. We'll catch you on the next one.