Spencer Rascoff explains why Zillow abandoned its early auction platform despite building one and testing it in Seattle. Americans associate auctions with foreclosures and distressed sales, not normal homes, making the model culturally unacceptable even though it theoretically works better for price discovery.
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Or do you want to come on? So my question is about why don't we see auctions as a price discovery mechanism in the US residential real estate, kind of outside of like kind of the foreclosure or maybe the luxury part of the market seem commonly used abroad. And it seems like the ideal solution for kind of idiosyncratic inventory markets like the Bay Area where ML doesn't work.
It's a great question. And actually this is where Zillow started. This is like a little known fact deep from the vault. In that period of time when we're like, okay, we should figure out what everybody else is worth. We're like, well, actually the best way for everybody else's worth is to run an auction. Maybe we should create an auction website. And I don't think, I almost never talk about this publicly, but you could maybe find something on the web somewhere about it. I probably mentioned it on a podcast or something. Homeauctionweb.com was the very first version of Zillow, which we launched with that URL intentionally as a brand that nobody would pay attention to. And we auctioned one house. And, you know, we read, it was a Seattle house. We readied the home for sale. We put the pictures online, we put it in the MLS, blah, blah, blah. And the original business plan for Zillow was to be an online brokerage that sold through auctions. We listened to all these Australian auctions online on like online radio and then streaming and really went deep on different auction models in Australia, which where most homes are auctioned in Australia, as it sounds like, you know, And we concluded at the end of that 3-month kind of diversion that the US just isn't ready for auctions. That the stigma is that there was some drug deal that went down on the house, or it's a foreclosure or something weird is wrong with it. And while it kind of makes sense intellectually for price discovery and buyers and sellers meeting in the middle and blah, blah, blah, all the reasons why it academically makes sense, like It's just, we're just not there culturally and it is what it is. And this new company at the time with no traffic wasn't going to move the needle. You know, maybe if today Zillow launched an auction product, you know, could maybe it get traction? Maybe. But like, it's just cultural stigma is kind of why we moved away from the idea. But we spent months thinking about it.
