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Global Trends in
 Real Estate Tech

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My presentation from the Proptech CEO Conference.

Published in: Technology

Global Trends in
 Real Estate Tech

  1. 1. Global Trends in
 Real Estate Tech Prepared by Mike DelPrete, November 2018
  2. 2. 1. Evolving role of portals 2. Insight into iBuyers 3. Technology vs. psychology 4. The big risks
  3. 3. The railroads are in trouble because they assumed themselves to be in the railroad business rather than in the transportation business. — Theodore Levitt, 1960 “ ”
  4. 4. The strategy is multi-dimensional. Real estate portals are operating along two axes. Closer to the transaction Far from the transaction More of the transaction Less of the transaction
  5. 5. The global leaders have positioned themselves across the map with a variety of strategies. Closer to the transaction Far from the transaction More of the transaction Less of the transaction
  6. 6. Each portal’s product strategy and M&A activity show the direction it is moving. Closer to the transaction Far from the transaction More of the transaction Less of the transaction
  7. 7. There is a clear trend towards the upper right, typically via the bottom right quadrant. Closer to the transaction Far from the transaction More of the transaction Less of the transaction
  8. 8. Portals are moving towards much larger revenue pools, expanding their total addressable market. Closer to the transaction Far from the transaction More of the transaction Less of the transaction Advertising Finance Agent Commissions Moving Utilities Title Insurance Note: Bubbles not to scale; each market is different.
  9. 9. Recent big moves by Zillow, realtor.com, and IS24 show clear strategic intent. Closer to the transaction Far from the transaction More of the transaction Less of the transaction Zillow Offers, acquire mortgage broker Acquire Opcity for $210 million Acquire Finanzcheck for $330 million
  10. 10. Zillow acquired Mortgage Lenders of America in August 2018. • Originated around 4,000 loans last year. • Average revenue per customer of $9k-$12k. • Offers advantage for Zillow Offers program. • Around 300 employees. Zillow goes from $3.60 per mortgage lead to ~$9k per mortgage customer.
  11. 11. Over the past year, there has been over $730 million in M&A from the major real estate portals. Finanzcheck Opcity Hometrack Calcasa Mortgage Lenders of America
  12. 12. Activity across the value stream is varied by portal, with some common trends. Home inspiration Home services and repairs Valuation and data Agent profiles Mortgages Insurance Conveyancing Moving Utilities
  13. 13. The big acquisitions are in familiar categories: data and finance. Home inspiration Home services and repairs Valuation and data Agent profiles Mortgages Insurance Conveyancing Moving Utilities $330 million $93.5 million$38.9 million $65 million
  14. 14. 2018 is shaping up to be a big year in overall M&A activity for the major real estate portals. Source: Company data, investor reports.
  15. 15. With their massive acquisitions, Move and IS24 move up the rankings in overall activity. Note: Zillow does not include the Trulia merger. 199% 157% 157% 56% 22% 21% 1%
  16. 16. The strategy is multi-dimensional. Real estate portals are operating along two axes. Closer to the transaction Far from the transaction More of the transaction Less of the transaction
  17. 17. The traditional classifieds model is a search engine for property. But that’s changing. Closer to the transaction Far from the transaction More of the transaction Less of the transaction Search Engine
  18. 18. Portals are evolving from providing search results to providing actual services to users. Closer to the transaction Far from the transaction More of the transaction Less of the transaction Search Engine Service Engine
  19. 19. Insight into iBuyers
  20. 20. The Phoenix market is seeing good growth, with most market share going to Opendoor.
  21. 21. Included Excluded Single-family detached, townhouse and condos New homes Short sales and pre-foreclosures Mobile and manufactured homes Normal sales through MLS and outside MLS Bank-owned homes Investor purchases and sales GSE-owned homes Maricopa and Pinal counties HUD-owned homes All price ranges Trustee sales Sheriff sales IRS sales Sales under eminent domain Bulk sales (e.g. investor to investor) 8,220 + 8,220 204 + 226 = 2.6% I’ll show you my denominator if you show me yours. September:
  22. 22. Offerpad’s gross margins are higher, but both are being pushed down over time. Note: Gross margin is the difference between what an iBuyer buys a home for and subsequently sells it for. It excludes all holding costs.
  23. 23. Zillow’s margins are significantly lower. Note: Gross margin is the difference between what an iBuyer buys a home for and subsequently sells it for. It excludes all holding costs.
  24. 24. Zillow is buying more expensive houses.
  25. 25. Here comes Zillow…
  26. 26. Zillow is generating a huge amount of leads. 200 20,000 Purchases Leads 1,354 >2,700
  27. 27. Zillow’s seller lead opportunity is huge!
  28. 28. Technology vs. psychology
  29. 29. But what about human psychology?
  30. 30. High Value Low Value Low FrequencyHigh Frequency
  31. 31. High Value Low Value Low FrequencyHigh Frequency
  32. 32. High Value Low Value Low FrequencyHigh Frequency Divorce lawyers Investment bankers
  33. 33. High Value Low Value Low FrequencyHigh Frequency Divorce lawyers Investment bankers
  34. 34. High Value Low Value Low FrequencyHigh Frequency Hard to disrupt Easy to disrupt
  35. 35. At scale, the players with the most traction have around 10% technical staff. 7% Source: LinkedIn company stats, February 2018. 10% 4%10% Duproprio
  36. 36. At scale, the players with the most traction have around 10% technical staff. 7% Source: LinkedIn company stats, February 2018. 10% 4%10% Duproprio Compass often describes itself (and is valued) as a technology company. Is it?
  37. 37. The big risks
  38. 38. Risk #1: Hubris
  39. 39. Market traction is closely correlated with money raised (and spent). Note: Live listings as of Feb 2018.
  40. 40. $80M
 equity raised $34.5M
 equity raised iBuying is being driven by multi-billion dollar organizations, not scrappy start-ups. $9B 
 market cap $1.045B
 equity raised $1.75B 
 market cap
  41. 41. The new models are less about new ideas, and more about doing what’s only possible with lots of money.
  42. 42. Risk #2: Psychology
  43. 43. There is a strong correlation between keeping people involved in the process and traction. Traction Peopleinvolvedinprocess In other words, tech-only solutions have limited traction.
  44. 44. High Value Low Value Low FrequencyHigh Frequency Divorce lawyers Investment bankers
  45. 45. VC: How are you addressing loss aversion?
  46. 46. Risk #3: Different, not better
  47. 47. Production (the average number of transactions per agent per year) is a reflection of efficiency. Source: Public statements and disclosures, based on full year results and number of agents at the midpoint of that year. Industry average of 7/year based on various Inman reports and Real Trends report for 2016. Purplebricks based on 78% listing-to-sale completion ratio.
  48. 48. Production (the average number of transactions per agent per year) is a reflection of efficiency. Source: Public statements and disclosures, based on full year results and number of agents at the midpoint of that year. Industry average of 7/year based on various Inman reports and Real Trends report for 2016. Purplebricks based on 78% listing-to-sale completion ratio.
  49. 49. Production (the average number of transactions per agent per year) is a reflection of efficiency. Actually more efficient More efficient? Source: Public statements and disclosures, based on full year results and number of agents at the midpoint of that year. Industry average of 7/year based on various Inman reports and Real Trends report for 2016. Purplebricks based on 78% listing-to-sale completion ratio.
  50. 50. • Buying a house • Selling a house • Getting a mortgage • Getting new leads
  51. 51. Make things better!
  52. 52. Mike DelPrete www.mikedp.com

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