Zillow Rental Manager shot into popularity in the US housing industry as a free rental listing site in 2006, as an inevitable alternative to Craigslist. However, in 2021, Zillow’s CEO, Rich Barton, officially announced a new policy of charging a weekly fee of $9.99 for each unit advertised on their site.
Before we dive into whether the policy succeeded or not, let’s take a look at Zillow’s business model first. Zillow operates on a Freemium model whereby it initially creates a market for its products and focuses on providing real value to its consumer base. Once the target audience gets addicted to the model, they monetize their services, making it to the headlines. They have already transitioned into brokerage while acquiring tech companies such as ShowingTime, and now it’s time for rentals.
As the economy reopens, it appears consumers are falling back into old habits, and the company doesn't project much growth in the second quarter of 2021. According to data provided by S&P Global, Zillow experienced a 23% drop in stock prices in March! And it doesn't take a genius to figure out why.
When Zillow was still free to use, it was the hottest spot to list your rentals, amassing an average of 34 million monthly views across its three listing platforms. Landlords and property managers alike flocked to the listing giant because of its ease of listing units. Convenience was the name of the game, and boy did Zillow capitalize on it.
Zillow was a great place to plant your roots as a budding property manager. Its users could overlook the (frankly) terrible service in return for its cost-effectiveness and its popularity as a listing site. But that was before Zillow rolled out its new policy. Now property managers cannot reconcile the outrageous fees with the poor service provided. We reached out to a small community of property managers, and here’s what we found out from our research.
At least 80% of the property managers were not in favor of continuing their businesses with Zillow, whereas the percentage of managers who were unsure of their marketing strategy was equal to the percentage of people who were content with Zillow and it's services. Shockingly, if the property managers in larger percentage continue to turn down Zillow's cheaper packages every month, there is a definite chance of people transitioning from a definite "Yes" to a "Maybe". Here's what property managers had to say:
Let's unpack that particular statement, shall we? Although it seemed like almost every rental unit advertised on Zillow had a lot of inquiries coming in, the reality was that the source of these inquiries were poor-quality leads which barely added any value to the lead generation cycle. A large proportion of property managers seemed to be better off without Zillow; some even went as far as to claim that Facebook Marketplace was better at generating quality leads. Once Zillow started charging for rental listings, property managers had to reconsider available options in the market and conduct a cost-benefit analysis. Surprisingly it appeared to most that Zillow was only resulting in junk leads and had lower conversion rates than other free options. Thus, making Zillow an ineffective marketing channel for their rental units.
Property managers reported that Zillow had inaccurate listing information up for their rental units. The site would not show the units for the categories they were tagged in, or sometimes even show them in different locations or cities altogether! These technical errors lead to multiple potential tenants ignoring the listing completely, resulting in a loss of quality leads for property managers as well as dollars lost in ad expenditure. This left property managers asking themselves what the point in paying for a listing was if the listing doesn't even show up for their potential tenants?
Zillow offers a 'lead guarantee' feature where, if property managers do not receive a lead within a week, the unit is free to list until they do find a lead (for up to 8 weeks). Sounds fair, right? Wrong. The problem with this particular feature was that Zillow has made it very easy for renters to immediately request information directly from the listing. Property managers dedicate a lot of time and resources to responding to these leads, but they often don’t lead to any follow-ups, let alone a showing or an application. But for Zillow, a lead is a lead, regardless of its quality. So, property managers might end up paying for the listing without even receiving a quality lead in return. Moreover, the hassle of deactivating a listing to avoid additional charges leads to unwanted renewal fees as well.
It is no lie that Zillow is still the category king with the highest share of visits per month. However, the new Zillow Rental Manager costs for each listing have led property managers to look for other rental listing sites for advertising their units. And rightfully so. With all these negatives stacking against each other, is it any wonder property managers have decided to turn away from Zillow?
Small property owners managing lesser units refuse to pay for Zillow as they intend on utilizing the free alternatives available The consensus is to attract more tenants by listing vacant units on at least 20 to 30 different sites. In case property owners openly request listings on Zillow, they have to pay the listing fee on top of the property management fee.
For most small and medium-sized property managers the decision to move away from Zillow, which initially felt like a daunting task, actually turned out to be profitable. They didn’t face any negative consequences such as a drop in quality leads, or higher days on market.
However, it is also important to acknowledge the role of current market dynamics that come into play for an upsurge in traffic. In a hot market, it is usually easier to attract tenants with free listing sites, but a change in the market’s direction can leave many struggling. The efficiency of each listing website varies for each state; therefore, it is important to research the market you are operating in before making a decision.
The best advice we can give property managers is to thoroughly research and be better informed about where your best leads and approved applications are coming from. Most property managers just assume Zillow is necessary. It’s not. With a multipronged approach, you may never need Zillow again.
1) Edit all listing descriptions advertised to refer people back to your website to request a showing via pre-screening form. Phone calls, drop-ins, general email inquiries – edit everything.
2) Get started on virtual tours and amp up your Facebook presence.
3) Utilize all the major marketing channels and ads, while ensuring they push visitors back to your website so that they recognize you as property managers with properties, not the property itself as a stand-alone. Work smart and this will guarantee exposure for your business.
4) Last but not the least look out for your competitors. It's not Zillow that's your competitor, it's the other companies that are leveraging tech-savvy options to their advantage. While you definitely want your bottom line to take the least hit with additional costs, when it comes to strategizing your marketing budget, emphasize on your relationship with your owners and their needs.
Sometimes, property managers have to deal with a few owners who insist on using Zillow. For them here is a list of a few free listing sites alternatives: Rental Beast, Zumper, or Apartments.com. Avail is a good option, too, especially considering their new relationship with Realtor.com. You can also think about using social media to find tenants - Facebook Marketplace and Nextdoor are both great options - or list your property in local newspapers, green sheets, and classifieds. In a non-COVID-19 world, sponsoring a community event or team can also be a good way to get your properties out there.
Zillow became the top rental listing site because it did not charge for listings and provided a great user experience with trusted data. But Zillow may be risking its position in the market by putting up a paywall and requiring fees to list rentals. Since they also own Trulia and HotPads, where the same paywall exists to advertise, their overall rental listing inventory could decrease across all three platforms. Few property managers, if any, would want to advertise on a platform when there is a paywall.
In the short term, it is unlikely that Zillow’s change in policy will not strongly affect the market. The listing site currently has the majority share of the market (27.2% as of 2017 data), so tenants will continue to search Zillow’s platform for their next home. We are already noticing a decrease in listings active in MLS than in Zillow by 20% in few regions. Hence, it is likely that in the long term, Zillow’s inventory will most definitely decrease, and property managers will start to shift to other free rental sites which offer the same or even better services as Zillow.
Ultimately, we recommend that rental property managers considering whether to list a rental on Zillow should carefully think about their priorities and look for the products and services that are best suited for them.
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