Rocket Can Win Without Zillow Losing
When Compass announced its new partnership with Rocket, bringing its exclusive inventory to Redfin, the first reaction of many was “Zillow is screwed” – but the reality is far different.
Why it matters: Zillow is the natural target, but the mechanics of the industry and the power of network effects – plus a liberal application of math – reveals that the real party at risk isn’t Zillow, it’s everyone else.
Dig in: My past research revealed that portal traffic is non-zero sum – new traffic can effectively be conjured out of thin air because consumers will visit more than one portal to make sure they’re not missing any inventory.
For example, as Homes.com blitzed on the scene, the traffic it generated did not come at the expense of other portals – it was additive.
And if you look at the overall portal ranks over the past four years, very little has changed in terms of overall placement.
Zillow is still #1, realtor.com remains #2, and the distance between them is effectively the same.
Given the evidence, even if there are unique listings on Redfin, it seems unlikely that consumers will stop visiting Zillow.
However, unique inventory on Redfin gives consumers a very compelling reason to also visit Redfin.
While traffic isn't zero-sum, transactions are — every deal that happens inside Rocket’s ecosystem is one less deal available to Zillow.
If a Compass exclusive listing sells before it hits the MLS, it never appears on Zillow, and Zillow never gets a shot at facilitating that transaction.
Today, about 35 percent of Compass listings go through its off-MLS program (Coming Soon + Private Exclusives), but 94 percent of those listings eventually hit the MLS, meaning Zillow permanently misses roughly 2,600 listings per year.
The Compass/Redfin press release math includes a 500,000-listing claim, but that’s a 3-year total that assumes Anywhere adopts Compass's program at the same rate Compass took years to build; annualized and adjusted for realistic uptake, the number is smaller.
Even this assumes every off-market sale would have been a revenue-generating opportunity for Zillow.
Only a fraction of listings on Zillow actually convert into an agent lead or mortgage transaction — in 2021, Zillow said it facilitated about 360,000 out of 12.2 million total customer transactions, roughly 3 percent.
Even if that conversion rate is tripled to 10 percent, we're talking about ~260 lost transactions pre-merger, or ~500 for the combined entity — numbers that range from 0.1–0.2 percent of Zillow’s assumed total of 500,000 monetized transactions per year.
Some of these assumptions could change (feel free to use your own), but at the end of the day, multiplying a number by three percentages is going to yield a tiny result.
Here’s the point: Zillow and Rocket are two of the biggest companies in real estate, effectively investing billions into building an end-to-end ecosystem – the Holy Grail of real estate – for tens of millions of consumers.
It’s less about how Rocket affects Zillow, and more about how Rocket and Zillow affect everyone else.
It’s a straightforward math equation: with a fixed number of brokerage and mortgage transactions, each one captured by Rocket’s and Zillow’s expanding ecosystems is one less for the rest of the industry.
The bottom line: The math is clear — the Compass/Redfin partnership barely registers against Zillow's transaction base, even under aggressive assumptions.
The real story is what happens to everyone outside these two ecosystems: with a fixed number of brokerage and mortgage transactions, every deal captured by Rocket's or Zillow's expanding funnels is one fewer for the rest of the industry.
The real risk to Zillow is trust: its moat is the perception of comprehensiveness – even a small number of missing listings chips away at that brand promise, and that's a harder problem to model than transactions.