When Zillow launched what is perhaps its most controversial feature, the “Zestimate,” company executives knew it would be provocative — and they wanted it to be. Part of their plan was to use that controversy to fuel the popularity of the Zestimate.
The plan succeeded.
Zillow is now the largest real estate media website, boasting around 140 million visitors per month, many of whom use the company’s website and mobile apps to check the value of homes, according to Zillow Group CEO Spencer Rascoff.
The Zestimate is Zillow’s estimate of the value of every house in a neighborhood, displayed as points on a map with attached dollar amounts. It provides users with a visual guide to the value of homes so that they can better understand the housing market — though it also enables users to assess how wealthy their friends (or enemies) might be based on how much their houses cost.
“The Zestimate is very provocative and personal and a little voyeuristic,” said Zillow co-founder and executive chairman Rich Barton, speaking on the GeekWire podcast last week to mark the 10th anniversary of Zillow’s launch.
Barton, Rascoff and Zillow co-founder Lloyd Frink talked to GeekWire about how the company evolved from idea to reality, survived the Great Recession, and managed to come out on top of the online real estate media industry. Barton and Frink reflected on how much the company has grown, but also said their ambitions have not lessened despite the company’s success.
The idea for the Zestimate began when Barton and Frink were both looking to purchase new homes. They found themselves doing a lot of basic math, using publicly available data on the sales of comparable properties to determine what they thought the available houses in a neighborhood should cost.
“It was just mind-boggling that there was no website that did this,” Frink said.
So they decided to create their own algorithm to estimate home values.
As they developed the idea, the Zestimate was kept under close wraps. Intrigue built around what Zillow might be up to, Rascoff said. Just prior to release, Zillow allowed dozens of journalists to see test versions of their site, but only after they’d promised not to write about the Zestimate until Zillow was ready to announce. This primed the media to pounce.
After all the secrecy, the Zestimate debuted to a big hubbub. More than 1 million people visited Zillow by the second day and by the fifth day, there were over 2 million visitors, Rascoff said.
Quickly, and perhaps unsurprisingly, the Zestimate sparked debates with homeowners, now that their home values were publicly visible. In response, Zillow was quick to remind that the Zestimate is just that — an estimate based on publicly available data. It’s not an exact figure, since an actual valuation can only be determined through an appraisal from a real estate agent or other expert in the market, Barton said.
“[It’s] just a starting point to figure out what a valuation is,” he added.
Nationally, the Zestimate has a median error rate of 7.9 percent according to Zillow’s website. That might sound small, but on a $500,000 house, that amounts to a $37,500 variation in price. Furthermore, that 7.5 percent error is just the national average. In some neighborhoods, the Zestimate can be even further off, as in the Dallas/Fort Worth metro area, where the median error is 10 percent, according to Zillow.
Zillow could have made the Zestimate a range, but the founders decided that they should instead do a single price point, since “points are more provocative than ranges,” Barton said.
Furthering its strategy to stir interest (and perhaps tempers) around the Zestimate, Zillow also decided to make an estimate for every house in a neighborhood. This put them at odds with existing Automation Valuation Models that would only estimate home values in the middle of the market, avoiding the controversial high and low ends,
Years later, the Zestimate continued to generate controversy. Trulia, previously Zillow’s biggest competitor, launched a similar service it called Trulia Estimates. Zillow sued Trulia for copyright infringement and the two had a nasty battle. However, the case has since disappeared, due to Zillow’s acquisition of Trulia last year.
Ultimately, the controversy that Zillow was able to build around its Zestimate was a major boon. Zillow capitalized on the intrigue and disagreements about the Zestimate to bring in more attention for their product, turning the Zestimate into one of Zillow’s most engaging features.
Editor’s Note: Post updated to include additional information on Zestimate median error.