In the beginning there were Zestimates, Zillow’s best guess at what the house next door was worth. Then there were Zprices, as company insiders nicknamed its attempt to use home valuation software to get into the home-flipping game. Finally there was the gasoline Zillow Group Inc. poured on the fire as it burned cash paying too much for houses, leading to a $569 million dumpster fire. On Nov. 2 the online property giant shuttered its technology-powered home-flipping business, Zillow Offers; said it was firing 2,000 workers; and began grappling with the damage it had done to one of the most valuable brands in real estate.
The episode is a cautionary tale about what happens when an overconfident company uses algorithms to supersize an old-fashioned business. But although it’s easy to assume Zillow’s number-crunching software misjudged the housing market, it wasn’t bad data or faulty code that did the venture in, according to current and former employees, competitors, and counterparties. As in so many misadventures in modern technology, Zillow’s downfall wasn’t caused by the tools so much as how the company used them.
Automated home valuations have been a core part of Zillow’s business since Rich Barton and his partners founded the company in 2006. Unlike its peers in online real estate listings, the company published its computer-generated Zestimates, which let people track the value of their own homes—and everyone else’s. This predated the advent of cheap cloud computing, so the magic happened on a bunch of computers strung together on a pingpong table in Zillow’s break room.
This story is from the November 15, 2021 edition of Bloomberg Businessweek.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the November 15, 2021 edition of Bloomberg Businessweek.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
Instagram's Founders Say It's Time for a New Social App
The rise of AI and the fall of Twitter could create opportunities for upstarts
Running in Circles
A subscription running shoe program aims to fight footwear waste
What I Learned Working at a Hawaiien Mega-Resort
Nine wild secrets from the staff at Turtle Bay, who have to manage everyone from haughty honeymooners to go-go-dancing golfers.
How Noma Will Blossom In Kyoto
The best restaurant in the world just began its second pop-up in Japan. Here's what's cooking
The Last-Mover Problem
A startup called Sennder is trying to bring an extremely tech-resistant industry into the age of apps
Tick Tock, TikTok
The US thinks the Chinese-owned social media app is a major national security risk. TikTok is running out of ways to avoid a ban
Cleaner Clothing Dye, Made From Bacteria
A UK company produces colors with less water than conventional methods and no toxic chemicals
Pumping Heat in Hamburg
The German port city plans to store hot water underground and bring it up to heat homes in the winter
Sustainability: Calamari's Climate Edge
Squid's ability to flourish in warmer waters makes it fitting for a diet for the changing environment
New Money, New Problems
In Naples, an influx of wealthy is displacing out-of-towners lower-income workers