Comparing Zillow and….Nextag? Really?

The recent press around Zillow’s new service makes me recall the early 2000’s.

For background, Zillow is lauching a service that allows mortgage seekers to keep their indentity private while soliciting bids from mortgage lenders looking to secure their loan.

It’s rather ironic because Zillow’s roadmap is nearly the exact inverse of NexTag’s–only a few years later.

For those that don’t know NexTag started out as a reverse auction model (but didn’t have the traffic), essentially allowing customers to name their price for any hard good. Zillow is betting their collection of organic traffic is critical mass-enough to make a reverse auction worthwhile for morgage lenders who have seen their lead volumes drop in the wake of the subprime correction.

It’s a good bet–and personally I’d love to see a reverse auction work–but all the data suggests that it won’t.

It gets back to the ROI vs. effort level tradeoff. If I’m a morgage lender, I want to know how many leads I have coming in to satisfy the call center folks that I have at what price at what quality level, at what volatility (all the things you’ve heard in this column before). By putting lead supply essentially in the hands of the seller instead of the buyer, this creates a great deal of volatility and lenders may not go for this, meaning the buyer may not get the best price for their mortgage (not enough competition).

What Zillow has going for it obviously is the origination point. Whereas NexTag still has to purchase inventory through search and media display at a cost. Zillow’s audience is captive and costs nothing for Zillow to redistribute.

I’ll review this again in a few months. I think initially lenders using Zillow will use it much like LeadPoint to supplement lead volume on a remnant basis once their current lead sources are exhausted on a daily and monthly basis.

And that is not good for the consumer.


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