It’s difficult to compare apples and oranges (the two companies have totally different business models, after all) but if Zillow has $846 million in 2016 revenues, and Redfin has $267 million in 2016 revenues… that’s approximately a 3:1 ratio. Zillow’s current market cap is $9 billion. So that would make Redfin worth about $3 billion?
On the other hand, Redfin claims to be a brokerage company, so maybe the proper comp is Realogy? Well, Realogy’s market cap is about $4.5 billion on 2016 revenues of $5.8 billion. That’s right; its valuation is lower than its revenues… by $1.3 billion.
And Re/Max, a franchisor, has a market cap of about $1.7 billion on $176 million in 2016 revenues. It’s hard to think of Re/Max as a comp for Redfin though since they’re so different.
So there is good reason why Redfin is trying to paint itself as a tech company. Valuation is much, much higher for tech cos than good old brokerages.
I’d say the same about Tesla wanting to be a tech company and not an auto company. Also, software tech companies get MUCH higher valuations than hardware ones. Everyone is trying to re-spin themselves as a software company. It’s all about selling software and services. Even Apple is into this game as they constantly brag about their services revenue growth.
“If Redfin is a brokerage, making $256 million in revenues and losing tens of millions every year … it’s worth zip. Zilch. Zero. Nada,” wrote Robert Hahn, a management consultant at 7DS Associates who writes regularly about real estate and technology… “If Redfin is a technology company that happens to make money from commissions … it’s worth $3 billion or so (or more!)”
They really messed up their business model. Everyone I know uses their site to look at listings. Yet, almost no one uses them to buy/sell. They get zero revenue from the most useful thing they have.
Only read what was available without a pro account and it made me laugh. He says he loved the process. That means the company will survive more iterations until they nail down either cash flow or some other business model they can spin.
The fee reduction for home sellers is smart. It’s much more predictable than working with home buyers which could take forever to bring in revenue.
And honestly, from seeing how relatively little my RE agent did to sell my property, I just might use a low cost online outfit next time. Or, get my license and sell on my own.
Exactly. Working with sellers is much easier in a hot market. With buyers, who knows how many offers you’ll write before they win one. The agent is working for free until the buyers actually close on something. I could see buying agents disappearing eventually. Buyer’s agents will become something extra. Buyers that need extra hand holding will pay for it themselves.
I already said it. Redfin missed the train of innovation. Most sites have cookies, and once you click on it you have an imaginary friend asking you how you feel, are you buying a home, or selling, etc.
They also failed to attract advertisers. Home Cheapo and all the paint stores, Sears, and all sorts of skilled people could have advertised with them.
