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It has been a little over two weeks since Zillow introduced it Mortgage Marketplace and this is my first comment on the new development. The reason why hadn’t commented sooner is because frankly I didn’t think much of it. It was a few years back that I first entered into discussion with others about giving the consumer control of the bidding and the mortgage shopping process. The discussions I was having on this subject included something similar to the Zillow marketplace, but went into further detail and was open to a number of different financial transactions not just mortgage. The end result of those discussions are still only discussions so I must applaud Zillow for taking these steps towards giving the consumer more control.
Seth Goldstein was the first to attempt this concept with Root Vualt back in 2005, or around that time. His idea was to give the consumer control of their personal financial data and allow different levels of access to whomever they chose to give it too. I think Root Vaults was slightly ahead of its time and because if this people had a hard time grasping the concept. Zillow comes to market with a scaled down version of these ideas. In fact it is probably not fair to Seth to compare the two. Why this works now for Zillow is because they are one of the few companies that could easily implement this idea with the a current user base already in place. We will have to see if Zillow really builds this out to be more than what it currently is, though.
Should Lead-gen companies be concerned?
The people that may be slightly concerned about this development are of course the lead providers. These companies have been chugging along with the same old strategies and very, very little developments or innovations. Who can blame them really? It is very difficult to innovate when the market is retracting and number of companies are struggling to stay profitable or be profitable at all. Even though there may or may not be a lack of innovation in the mortgage lead gen space, depends on your opinion, Zillow’s current offering is not going to take away any market share from the mortgage lead generators. The lead generation space is quite large and there is a big difference between what Zillow is offering and what lead generation companies like LowerMyBills is offering.
Why Zillow’s is not a threat to the lead generators.
As much as consumer want to complain about the bombardment of calls they receive from filling out a mortgage inquiry, they are contacted within minutes and receive real discussions about receiving a mortgage loan. Instantly these consumer are talking with people who are motivated to help them receive a mortgage quote. The Zillow marketplace is not much different from this process and Zillow users at times will receive quotes within minutes of filling out their request. But what does that all mean? Internet marketers and lead generation companies study lead forms as if it was there religion. They know how many questions they can ask before the abandonment rate begins to increase. They also know what is the least amount of questions they can ask without deteriorating lead quality and when I say lead quality I am referring to consumer intent. The current forms that lead providers use generate leads that have a high level of intent. Zillow’s quote request forms garner very little intent from the consumer. This is comparable to ZipRealty which has a huge user base but a very small conversion ratio. These consumers are window shoppers and nothing more.
Lead Providers VS. Zillow
Current mortgage shops and banks that focus on Internet leads look for instant communication with the consumers. They want efficiency and the ability to scale their production at a predictable rate. Zillow currently is far from efficient for any business that doesn’t want to sit around pricing out loans all day only to receive call backs from less the 5% of the quotes they submitted.
Lets run through a few comparisons in performance between the current Zillow marketplace and the average mortgage lead provider. I am going to use Some_Insiders ROI graph for this example. (If you need a refresher course on ROI I strongly recommend reading his series here.)
A couple of assumptions from gathered from a few different source experimenting with ZMP: A 5% contact rate and a 3% contact to conversion rate. I am not taking into count the extra time pricing out the different scenarios and submitting the quotes, however I did need to associate a cost per lead of $1 so we will call it a wash.
The Zillow scenario simply does not make sense for many companies. What is very positive about the Zillow scenario is that every extra closed loan dramatically increases the ROI.
Determining the intent of the customer is going to be very important for Zillow’s success.
My Two Cents
I am impressed that Zillow stepped out of the box and has implemented this idea, but I don’t think they are going to fully and completely build this out properly. Zillow is laying the road work and prepping the consumer for the next generation of lead-gen. I have said it before and I will say it again, consumers will take more and more control of the process in the future. Will it be through Zillow or another company I of course don’t know. I foresee Zillow becoming a BankRate simply with a different look. If quotes become automated, the number of them become limited and forms become longer what is going to make them any different? Of course the leads will be free, but who knows for how long, though. The lack of price or buyer risk increases the probability of fraud on the network, in my opinion. The lack of conversions for companies will sooner or later drive them away from the marketplace and therefore leave consumers with one or two quotes from less qualified loan officers and more fraud. Zillow will need to act very fast to keep their momentum. Can they do this? Will they do this?
What do you think?
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http://zillow.mediaroom.com/index.php?s=press_releases&item=57
http://www.zillowblog.com/opening-bell-for-the-zillow-mortgage-marketplace/2008/04/
8 Comments
First off, I am very intrigued by the Zillow model. Here are my thoughts from a couple different perspectives.
From the Led Gen competition…I would be concerned. I agree that the space is big enough to support additional companies at the current time however as we have all seen on the mortgage side things can change quickly. The fact that they are coming at this from a completely different angle should at least cause the lead generators to pause and think about their model. In the end that should be good for the space.
From a consumer perspective it’s a no brainer. If I can get quotes up front and decide who I want to talk to without being bombarded with calls (of course until that lender pulls credit and all the trigger leads start calling…but that’s another topic for another day) it’s a much better experience.
As a lead buyer you hit it on the head. We are participating because it is free, a little more on the cutting edge, and because we are curious. It is not efficient in the least which will cause us to participate at a lot less than we would if there was an interface. In the end it’s a good thing for the lenders who are the lowest rate or lowest fee but for those who rely on a motivated loan officer to get the deal done it is not as good of a model. It encourages low quotes no matter if they are accurate or not. To LC point this could encourage fraud. Zillow will have to actively manage lenders who do this. It would be great if they would force closed loan feedback for their free leads and compare quote to what the individual actually received but that is not likely to happen for many reasons (customer inaccuracy in their request, no efficient way to do this today, etc). This will be on of the biggest issues Zillow will need to deal with. Lastly with all of the information that Zillow is collecting they have an opportunity to be a resource for the consumer in helping educate them on the mortgage process.
I think that Zillow is uniquely positioned as it is a brand that is well known. That is something few in the lead gen space have today (with a few notable exceptions). Should they figure out how to make this work as an efficient engine I see no reason why they wouldn’t be wildly successful.
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Good take Lead Buyer,
I think it will be successful, but to what point I am not sure.
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Hi LC, it’s David G from Zillow.com
Interesting analysis and time will tell how successful the marketplace is. It’s still early days but interest in the marketplace well exceeded expectations and we’re hearing good feedback from both borrowers and lenders using the service.
Your analysis seems to miss the extent to which hard-sell sales tactics have lost their charm on consumers. During our research, borrowers repeatedly told us that they wanted to change phone numbers and e-mail addresses after using online lead-gen services. Zillow Mortgage Marketplace uniquely appeals to those borrowers who are sick of having their contact details sold to the highest bidder. It’s simply a larger market than the lead gen sites are competing for.
If you think through how Zillow’s model empowers a consumer to contact a lender they choose to work with I don’t know how you can reach your assumption for “funding ratio” – surely it’s the wrong way round (with the caveat that I would need to understand the user experience on the site the leads came from to make that call.) Are you including submitting quotes in funding ratio? If so, you may need to break it out to its component conversion rates and include the time invested in each step to properly compare the efficiency of both models. On Zillow, lenders waste no time with consumers that aren’t interested in receiving a call from them and submitting a quote takes just a few minutes.
I can tell you that we will continue to invest in the Mortgage Marketplace so please keep the feedback coming!
David
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David,
I completely agree that consumers are frustrated with the process. I have lived through that process numerous times and from both points of view and have been a huge advocate for improving the process. As I mentioned in the post discussions about giving the consumer control have been going on for some time. The challenge you have is making both the consumer and lenders happy and yes you do need to make both happy. Without one party you will not have the other. With that in mind the biggest problem with ZMMP is the level of intent by consumer.
Pricing out scenarios all morning then waiting for the few call backs and then once they call trying to trace back the quote you gave them is not efficient. It is fine for the smaller guy’s but I am not sure if medium to larger brokers will want to do this. I could be wrong, though.
Regarding the analytics: the 1000 number references the number of quotes submitted. This takes time to do and they are what you considered “free leads”.
You said, “On Zillow, lenders waste no time with consumers that aren’t interested in receiving a call from them and submitting a quote takes just a few minutes.” Did you just contradict yourself? “waste no time”, “quotes takes just a few minutes”.I guess if you only submit a few quotes it wouldn’t take too much time, but how many quotes do you need to submit to receive a call back?
Every time a quote is submitted you are risking wasting time with consumer that is not interested, right? I guess it depends on what you consider a waste of time.
You said, “(with the caveat that I would need to understand the user experience on the site the leads came from to make that call.)”
Have you ever bought internet leads or work Internet leads? From a lead buyers perspective, lenders don’t really care about the users experience, unfortunately, they only care about conversion ratio, ROI and how much time did it take to make $$. Seems shallow, but it is the sad truth. Maybe I missing your point here. I comparing quotes with a typical Internet lead here.
Without being too long winded in the comment, I think you guys are on the right track. Keep up the good work and you will figure it out.
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David G seems like a very well meaning technology person out os his element discussing sales and sales metrics.
You can’t just use some anecdotal evidence such as “consumers are tired of….” to support a argument about efficiency. If Zillow has some real numbers on this I will shut up.
Yes some consumers are unhappy with constant calls, but they are also happy with the lower rates and costs this brings them.
Zillow has to be able to find a way for lenders to convert ( see my post on the ZMM discussion boards) or the people who add value to the zmm (ie the lenders) will stop adding the value of the quotes. It is absolutely a fantastic idea, but there needs to be some added screening measure that means the people requesting the information are serious about obtaining a loan. The window shoppers predominate and since they don’t have to talk to anyone I think many are using this to take to the lender they already have a relationship with. Zillow has to always keep in mind that a lead implies an opportunity to create relationship which superceedes the loyalty to their current lender. The anonymity is great, but also means no commitment.
Hopefully this will continue to evolve. I do understand that this entire experiment is outside the zillow information gathering and public distribution model. While this would seem to be the case with mortgages it is no. Compared to the vast resources to the gathering of public records, collating it, and redistiributing it dealing with mortgage people has to be like hearding cats.
I would love to know the mortgage background of the directors of this project so we could get a real idea of where the next steps will be.
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Alan,
Before we launched the marketplace we tested it with real borrowers and real lenders. When I say “consumers are tired of having their personal contact details sold” that’s not my opinion … it’s the feedback we received from real borrowers in focus groups. In every study we did there were borrowers that told us that they wanted to change their phone numbers after using a traditional lead-generation service. Focus groups are more qualitative than quantitative but I’m not exaggerating when I say that more than 75% of people hate the harassment that comes with having their contact details sold by lead-gen companies.
We’re certainly smart enough to know what we don’t know and so we sought the advice of dozens of advisers who do know mortgages inside and out when we were building the mortgage marketplace.
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Again I don’t argue with you, and I love that you have some numbers, but lets be clear those weren’t the sales and metrics I was talking about.
Yup you do completely refute my anecdotal eveidence claim, but while 75% hate the harrasment how many of them did business with one of those lenders?
At what point did they feel harrassed? Was it the first barrage of calls? Was it because they put there name in 4 different mortgage shopping sites? Was it that the first 4 lenders kept recyling their names? All of these can cause harrasement, all have different solutions. I guess I just want Zillow to sell me that complete annonymity is the way to go and that it isn’t like using a bucket of water to put out a candle.
Hey you guys are smart you have millions to invest in this project so I am sure you willg et something to work.
However what about the sales side and sales metrics? ie…time invested in quotes compared converison etc… those are the numbers we care about… Yup the client has to get a good deal, but at the same time there best deal will come when you have the most energized salesforce in the mortgage industry living and dying on your site because they know if they sit two hours a day quoting low margin deals they will get a return on their time investment.
So sorry if I seemed snide above, but if your aim is to revolutionize you need revolutionaries and that is moregage folk and dealing with us is like hearding cats
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Dave from Zillow, I contacted Lending Tree for a mortgage quote. They said up to four lenders would contact me. I had over 80 contact me and also do inquiries on my credit reducing it 160 points. Needless to say, I will NEVER use that service again. How many lenders will contact a customer from Zillow?
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