Rocket Enters The Portal Wars

With a Super Bowl ad followed by the $1.75 billion acquisition of Redfin, Rocket has emerged as a serious player in the U.S. real estate portal space.

Why it matters: Rocket is going down a similar path as Zillow, in search of, as I said in the Wall Street Journal , the holy grail of real estate: a one-stop shop that combines home search, buy & sell, financing, and title insurance.

• Zillow and Rocket are approaching the same goal from different directions; Zillow with top of the funnel traffic and a large agent network, and Rocket with tons of loan officers and consumer marketing.

These are titans of the industry – which, including CoStar, are the companies with the highest operating cash flow (profit) in real estate.

• Cash flow = investment potential. These companies can afford to invest more, at a scale higher than anyone else, in innovation, disruption, and guiding consumer behavior.
  

• The chart below also makes it clear why Redfin could no longer compete against this collection of profitable behemoths.

The annual advertising budgets of these companies are massive; CoStar and Rocket are approaching $1 billion each.

• This is a reflection of the firepower available to try and move the needle in consumer behavior; not just to build awareness, but to promote the one-stop shop of a seamless real estate transaction.
  

• CoStar and Rocket’s advertising budgets are for the entire company, not just the residential portals, but remain a good reflection of the resources available.

Rocket's entry into the space raises an interesting question about, at a category level, who's disrupting whom.

• For years, real estate tech companies have been going after mortgage, but now mortgage is going after real estate.
  

• This chart is from my 2021 article, The Real Estate Disruptors Serious About Mortgage — A 10x Story .

The bottom line : The total addressable market for a one-stop shop experience is absolutely massive; there is more than enough room for many players to be successful.

• It’s like the explorers Magellan and Vasco de Gama – just because one is successful doesn’t mean the other can’t succeed, too – and there’s more than one path to success.
  

• While it remains uncertain if a consumer will specifically seek out a one-stop shop solution, it does mean that the more opportunities the portals capture at the top of the funnel, the less opportunities there will be for everyone else.