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Looks like they're being valued like a tech firm, and not a traditional brokerage. What makes Redfin a tech company? Why couldn't prudential (or another broker

Looks like they're being valued like a tech firm, and not a traditional brokerage. What makes Redfin a tech company? Why couldn't prudential (or another brokerage) build the same thing?

empath75 9y ago
Because the exact current form of their website today isn't as important as the development processes that got them there, and that is harder to replicate.
- frgtpsswrdlame 9y ago
  ...what? Perhaps you can clarify what you mean.
  - nerdponx 9y ago
    They spent a lot of time and effort building a high-quality web application. I doubt any traditional broker would have the wherewithal to match it, otherwise they would have put Zillow and Trulia out of business years ago.
  - empath75 9y ago
    So let's say prudential decides they need to replicate Redfin. They hire some developers, make a list of all the features that Redfin has, and probably finish it behind schedule and over budget. By then, Redfin has released dozens of updates and new features, etc, etc, because they're technology focused company. Now is it theoretically possible for prudential to keep up with them? Sure. But they'd have to transform themselves into a tech company to do it.
  - ChuckMcM 9y ago
    Short version: Tech companies have employees on staff who develop web based applications to transact business with customers. Non Tech companies have employees on staff who specify a set of requirements for a web tool that will allow the business to do their work and then hire a contractor to build it. It defines what management sees as being 'core' to their idea of what value the business is creating.
    - dalfonso 9y ago
      What's the long version? I've always struggled to define "tech company" vs. "non-tech company". I like your short version except for "hire a contractor to build it." What if the company actually hires on one or two engineers to build it? Would that company have made the jump from "non-tech" to "tech"? I wonder if it's simply a matter of engineer/development headcount i.e. what job function has the largest headcount. Google's is R&D (https://www.quora.com/How-many-employees-does-Google-have https://www.quora.com/How-many-employees-does-Google-have) and Microsoft's is Engineering (https://news.microsoft.com/facts-about-microsoft/#RevenueHeadcount https://news.microsoft.com/facts-about-microsoft/#RevenueHea...). I tried to quickly find examples of some non-tech companies' (Walmart, Target, BofA, Wells Fargo, Nike) headcount by function, but couldn't.
      - ChuckMcM 9y ago
        It's really about 'core' to the business which relates to vertical integration. How much of your product do you make versus buy? If you are an information business and you make the tools that deliver your product then I think of you as being also a technology business. If you are an information business and you buy the tools that deliver your product then you aren't also a technology business. Typically companies that have that technology component are able to respond faster, more creatively, and in a much harder to compete with way than companies that buy their base technology from third parties. The get a valuation boost from that.
      - stanleydrew 9y ago
        > What if the company actually hires on one or two engineers to build it? Would that company have made the jump from "non-tech" to "tech"? Can't speak directly for Chuck, but probably not. Does the company see the software they build as a living organism that needs care and maintenance, as well as adaptation to new technologies and platforms, and do they expect to make more software to solve other business problems in the future? Hard to tell when hiring one or two engineers what the company's longer-term intentions are.
      - jasode 9y ago
        >I wonder if it's simply a matter of engineer/development headcount That may be one way to look help define it. However, in Redfin's case, it's simpler than that. The 3 founders[1] are David Eraker (software programmer), Michael Dougherty (electrical engineering & programming maps), and David Selinger (ex Amazon data mining). Since the founders are still active and dictate the company's "DNA"... it looks like a tech company to me. Similar to Jeff Bezos (computer science with some programming before D.E. Shaw) starting a tech web company that happened to sell books instead of thinking of him as a bookseller that wanted to be online. [1] https://en.wikipedia.org/wiki/Redfin#History https://en.wikipedia.org/wiki/Redfin#History
mlinsenbardt 9y ago
As a past customer, I would say they're somewhere in between; perhaps leaning towards software. The process is highly automated, with 90% of the transaction handled via the apps/web and most hand holding in the beginning and the end of the transaction. While you are assigned an "agent", you will also work with other random agents as you make requests and your requests are sent through some kind of queue workflow. Further, their staff is paid a salary, not commission as the traditional agent/broker. As a result, Redfin splits the traditional buyers commission with you and you may use those funds towards your closings, etc. I am a happy customer and would use them again.
- wcfields 9y ago
  Past customer as well. I found them to be exactly what I needed in the competitive market of LA. I was already doing most of the research and finding the listings I wanted anyway on the MLS. So why would I want to pay a commission to an agent that isn't doing much for me anyway.
  - jamroom 9y ago
    If you were buying, then you don't pay a commission - both the seller AND buyer's agent are paid for by the seller.
    - StillBored 9y ago
      Which is standard BS and I can't believe people continue to say this. Maybe the seller would have accepted less if they didn't have to pay 6% (which can be tens of thousands on the average deal these days). In the case of redfin the buyer does _ACTUALLY_ pay less for a house since your getting a rebate against the money your spending. Unless the seller is losing money on the deal, it is the buyer that is effectively ponying up the cash to pay everyone (in this case themselves). I'm also a fairly happy ex-redfin customer, and I can't help but support them if for no other reason than a number of brokerages around me are now creating flat rate schedules to compete.
      - 9y ago
drawnwren 9y ago
Isn't this fundamentally the same as asking why PayPal isn't a bank and Uber isn't a taxi company? I'm all for tech skepticism, but I think it's pretty naive to suggest that the platform is not a major part of a business at this point in the game.
- jasondc 9y ago
  Paypal and Uber have network effects that are harder to replicate. Visiting a website and browsing real estate listings don't.
  - bdamm 9y ago
    Not so. As more agents learn that competing against RedFin agents is more difficult than it should be, they'll join in with RedFin. As more people learn that RedFin-style home buying works for them, they'll make RedFin a key part of their next home buying experience. I know I have, twice already. The down-stream network effects of this are likely more significant and harder to predict, as real estate is way slower than hailing a taxi. Think desegregation.
    - PenguinCoder 9y ago
      The current problem is if this were a truly online only method, Redfin would accept and sell listing anywhere. Currently it does not, and is only useful in a few US large population areas. I want to use a service like redfin, but they don't operate in my area. For redfin to really take off (or companies like it) and supplant the real estate broker, it needs to be more available even in rural areas.
      - eh78ssxv2f 9y ago
        IMO, one reason behind that is that the actual agents charge 3% no matter the absolute cost of the house. This does not make much sense since buying a 100k house sometimes involves as much work (if not more) as buying a 3M house. As such, it is better for Redfin to operate in the markets where house prices are higher since the absolute amount of money they can save is also higher in these markets.
fweespeech 9y ago
> What makes Redfin a tech company? Why couldn't prudential (or another brokerage) build the same thing? They can't because they'd need a brokerage in every state, real estate agents in every metro, and enough leverage to get the data out of the various regional MLS groups. Its a tech company the same way Airbnb, Lyft, or Uber is a tech company. They have built alot of automation that is difficult to duplicate because you need national workforce buy-in.
zippergz 9y ago
The reason I use Redfin is because of their technology. Their site, apps, and (probably most importantly) alerts are massively better than what I've seen from any other brokerage. Sure, someone else could build the same thing, but thus far they haven't even come close. There must be a reason. My guess is that it's because it's actually hard.
- ethbro 9y ago
  > My guess is that it's because it's actually hard. I'd imagine it's hard because the backing data is unreliable. Between hand typed listings and tax records, there's a lot of places for things to go off the rails if you set an algorithm loose on unmassaged RE data.
digikata 9y ago
They could have, but I don't think the vision was there. Some Realtor associations built sometime similar at realtor.com eventually (and fairly rapidly), but I think it only happened because RedFin led the way and is/was threatening to traditional realtor model. Before that, even large realty firms had local offices each with individual databases, with possible multiple disjoint regional MLS databases. So I think in large part, the organization just wasn't there to merge it all into a single system.
- StillBored 9y ago
  Wow how short people's memories are. e-reality (among others in ~2000) fought for the right to publish MLS listings on the internet (https://www.nar.realtor/legal-case-summaries/austin-board-of-realtors-v-e-realty-inc-court-dissolves-injunction-in-austin-board/e-realty-case https://www.nar.realtor/legal-case-summaries/austin-board-of...). This continued generally in favor of the MLS boards until the DOJ won big. https://www.justice.gov/atr/case-document/final-judgment-142 https://www.justice.gov/atr/case-document/final-judgment-142 Redfin, is one of the largest beneficiaries of the pile of defunct companies put out of business fighting the MLS organizations.
  - digikata 9y ago
    I didn't forget, I never knew that. It's pretty interesting!
pizzetta 9y ago
Maybe it's more due to the potential of leveraging network effects and becoming the predominant player in this sphere. They can leverage that to add on al kinds of add-on services (handyman/woman, decorators, etc. and extract some fee from those).
smogcutter 9y ago
So they're not built on some proprietary piece of tech (say, a search algorithm), but I don't see how that makes a difference for their valuation. Their business is the same as just about every "disruptive" tech company: replace a population of middlemen with a website that does the same thing more efficiently. Not that the label matters - the market will decide what the company's worth regardless.
RyanOD 9y ago
As a former Redfinian, let me share my perspective. The collective talent, intelligence, and drive for constant, data-backed improvements at Redfin is something to behold. It is both inspiring and intimidating. Replicating it would be quite a challenge. Beyond that, Glenn Kelman is a great CEO and person. He's transparent, affable, and genuinely cares about the people at Redfin and beyond. His leadership is contagious and inspires those around him. The same holds true for other members of Redfin in leadership roles. Finally, the complete and total commitment to using data to drive decisions is at the core of the Redfin offering and a big reason why I still believe Redfin is going to continue to be successful for years to come.
- apsec112 9y ago
  FWIW, as a software engineer, this type of vague, grandiose marketing language makes me think less of Redfin as a company. It definitely makes me think that me, and most of the talented people I know, wouldn't enjoy working there. If you really want to boost Redfin's reputation, I'd recommend following some advice from the YC application guide: "The best answers are the most matter of fact. It’s a mistake to use marketing-speak to make your idea sound more exciting. We’re immune to marketing-speak; to us it’s just noise. So don’t begin your answer with something like We are going to transform the relationship between individuals and information. That sounds impressive, but it conveys nothing. It could be a description of any technology company. Are you going to build a search engine? Database software? A router? I have no idea. (...) The best answers are the most specific. A surprising number of people answer with something like: Jordan is an exceptionally dedicated person who gives 100% effort to every project he undertakes. This kind of generic claim carries no weight. A single, specific example would be much more convincing." (https://www.ycombinator.com/howtoapply/ https://www.ycombinator.com/howtoapply/)
  - RyanOD 9y ago
    Thank you for that perspective. Makes perfect sense.
  - copenja 9y ago
    I felt the statement that management is dedicated to using data for decision making was pretty concrete and interesting. I certainly didn't know that.
prostoalex 9y ago
It seems that unless you have a technology-first company, this is extremely hard to retrofit. Agents who join Prudential join an agent-first company that has some back-office technology as a cost center. Commissions and fees likely reflect that. Without offending Redfin agents (my last two real estate transactions were through Redfin, so I'm obviously a fan), with Redfin one is dealing with the site first and "some disposable agent they've assigned to handle my case" second. It's unlikely that many in real estate world, driven by egos and projected success, would succumb to a role of a simple customer service agent.
paulie_a 9y ago
I will just outright say that the world of real estate is a terribly broken model. Redfin managed to take that concept from version 1.8 to 1.9. Basically this is real estate being in the late 90's and I wont't call out redfin in particular, but I will say zillow/trulia/realtor.com/etc are the equivalents of pets.com.

Looks like they're being valued like a tech firm, and not a traditional brokerage. What makes Redfin a tech company? Why couldn't prudential (or another brokerage) build the same thing?

empath75 9y ago

Because the exact current form of their website today isn't as important as the development processes that got them there, and that is harder to replicate.

frgtpsswrdlame 9y ago
...what? Perhaps you can clarify what you mean.
- nerdponx 9y ago
  They spent a lot of time and effort building a high-quality web application. I doubt any traditional broker would have the wherewithal to match it, otherwise they would have put Zillow and Trulia out of business years ago.
- empath75 9y ago
  So let's say prudential decides they need to replicate Redfin. They hire some developers, make a list of all the features that Redfin has, and probably finish it behind schedule and over budget. By then, Redfin has released dozens of updates and new features, etc, etc, because they're technology focused company. Now is it theoretically possible for prudential to keep up with them? Sure. But they'd have to transform themselves into a tech company to do it.
- ChuckMcM 9y ago
  Short version: Tech companies have employees on staff who develop web based applications to transact business with customers. Non Tech companies have employees on staff who specify a set of requirements for a web tool that will allow the business to do their work and then hire a contractor to build it. It defines what management sees as being 'core' to their idea of what value the business is creating.
  - dalfonso 9y ago
    What's the long version? I've always struggled to define "tech company" vs. "non-tech company". I like your short version except for "hire a contractor to build it." What if the company actually hires on one or two engineers to build it? Would that company have made the jump from "non-tech" to "tech"? I wonder if it's simply a matter of engineer/development headcount i.e. what job function has the largest headcount. Google's is R&D (https://www.quora.com/How-many-employees-does-Google-have https://www.quora.com/How-many-employees-does-Google-have) and Microsoft's is Engineering (https://news.microsoft.com/facts-about-microsoft/#RevenueHeadcount https://news.microsoft.com/facts-about-microsoft/#RevenueHea...). I tried to quickly find examples of some non-tech companies' (Walmart, Target, BofA, Wells Fargo, Nike) headcount by function, but couldn't.
    - ChuckMcM 9y ago
      It's really about 'core' to the business which relates to vertical integration. How much of your product do you make versus buy? If you are an information business and you make the tools that deliver your product then I think of you as being also a technology business. If you are an information business and you buy the tools that deliver your product then you aren't also a technology business. Typically companies that have that technology component are able to respond faster, more creatively, and in a much harder to compete with way than companies that buy their base technology from third parties. The get a valuation boost from that.
    - stanleydrew 9y ago
      > What if the company actually hires on one or two engineers to build it? Would that company have made the jump from "non-tech" to "tech"? Can't speak directly for Chuck, but probably not. Does the company see the software they build as a living organism that needs care and maintenance, as well as adaptation to new technologies and platforms, and do they expect to make more software to solve other business problems in the future? Hard to tell when hiring one or two engineers what the company's longer-term intentions are.
    - jasode 9y ago
      >I wonder if it's simply a matter of engineer/development headcount That may be one way to look help define it. However, in Redfin's case, it's simpler than that. The 3 founders[1] are David Eraker (software programmer), Michael Dougherty (electrical engineering & programming maps), and David Selinger (ex Amazon data mining). Since the founders are still active and dictate the company's "DNA"... it looks like a tech company to me. Similar to Jeff Bezos (computer science with some programming before D.E. Shaw) starting a tech web company that happened to sell books instead of thinking of him as a bookseller that wanted to be online. [1] https://en.wikipedia.org/wiki/Redfin#History https://en.wikipedia.org/wiki/Redfin#History

mlinsenbardt 9y ago

As a past customer, I would say they're somewhere in between; perhaps leaning towards software. The process is highly automated, with 90% of the transaction handled via the apps/web and most hand holding in the beginning and the end of the transaction. While you are assigned an "agent", you will also work with other random agents as you make requests and your requests are sent through some kind of queue workflow. Further, their staff is paid a salary, not commission as the traditional agent/broker. As a result, Redfin splits the traditional buyers commission with you and you may use those funds towards your closings, etc. I am a happy customer and would use them again.

wcfields 9y ago
Past customer as well. I found them to be exactly what I needed in the competitive market of LA. I was already doing most of the research and finding the listings I wanted anyway on the MLS. So why would I want to pay a commission to an agent that isn't doing much for me anyway.
- jamroom 9y ago
  If you were buying, then you don't pay a commission - both the seller AND buyer's agent are paid for by the seller.
  - StillBored 9y ago
    Which is standard BS and I can't believe people continue to say this. Maybe the seller would have accepted less if they didn't have to pay 6% (which can be tens of thousands on the average deal these days). In the case of redfin the buyer does _ACTUALLY_ pay less for a house since your getting a rebate against the money your spending. Unless the seller is losing money on the deal, it is the buyer that is effectively ponying up the cash to pay everyone (in this case themselves). I'm also a fairly happy ex-redfin customer, and I can't help but support them if for no other reason than a number of brokerages around me are now creating flat rate schedules to compete.
    - 9y ago

drawnwren 9y ago

Isn't this fundamentally the same as asking why PayPal isn't a bank and Uber isn't a taxi company? I'm all for tech skepticism, but I think it's pretty naive to suggest that the platform is not a major part of a business at this point in the game.

jasondc 9y ago
Paypal and Uber have network effects that are harder to replicate. Visiting a website and browsing real estate listings don't.
- bdamm 9y ago
  Not so. As more agents learn that competing against RedFin agents is more difficult than it should be, they'll join in with RedFin. As more people learn that RedFin-style home buying works for them, they'll make RedFin a key part of their next home buying experience. I know I have, twice already. The down-stream network effects of this are likely more significant and harder to predict, as real estate is way slower than hailing a taxi. Think desegregation.
  - PenguinCoder 9y ago
    The current problem is if this were a truly online only method, Redfin would accept and sell listing anywhere. Currently it does not, and is only useful in a few US large population areas. I want to use a service like redfin, but they don't operate in my area. For redfin to really take off (or companies like it) and supplant the real estate broker, it needs to be more available even in rural areas.
    - eh78ssxv2f 9y ago
      IMO, one reason behind that is that the actual agents charge 3% no matter the absolute cost of the house. This does not make much sense since buying a 100k house sometimes involves as much work (if not more) as buying a 3M house. As such, it is better for Redfin to operate in the markets where house prices are higher since the absolute amount of money they can save is also higher in these markets.

fweespeech 9y ago

> What makes Redfin a tech company? Why couldn't prudential (or another brokerage) build the same thing? They can't because they'd need a brokerage in every state, real estate agents in every metro, and enough leverage to get the data out of the various regional MLS groups. Its a tech company the same way Airbnb, Lyft, or Uber is a tech company. They have built alot of automation that is difficult to duplicate because you need national workforce buy-in.

zippergz 9y ago

The reason I use Redfin is because of their technology. Their site, apps, and (probably most importantly) alerts are massively better than what I've seen from any other brokerage. Sure, someone else could build the same thing, but thus far they haven't even come close. There must be a reason. My guess is that it's because it's actually hard.

ethbro 9y ago
> My guess is that it's because it's actually hard. I'd imagine it's hard because the backing data is unreliable. Between hand typed listings and tax records, there's a lot of places for things to go off the rails if you set an algorithm loose on unmassaged RE data.

digikata 9y ago

They could have, but I don't think the vision was there. Some Realtor associations built sometime similar at realtor.com eventually (and fairly rapidly), but I think it only happened because RedFin led the way and is/was threatening to traditional realtor model. Before that, even large realty firms had local offices each with individual databases, with possible multiple disjoint regional MLS databases. So I think in large part, the organization just wasn't there to merge it all into a single system.

StillBored 9y ago
Wow how short people's memories are. e-reality (among others in ~2000) fought for the right to publish MLS listings on the internet (https://www.nar.realtor/legal-case-summaries/austin-board-of-realtors-v-e-realty-inc-court-dissolves-injunction-in-austin-board/e-realty-case https://www.nar.realtor/legal-case-summaries/austin-board-of...). This continued generally in favor of the MLS boards until the DOJ won big. https://www.justice.gov/atr/case-document/final-judgment-142 https://www.justice.gov/atr/case-document/final-judgment-142 Redfin, is one of the largest beneficiaries of the pile of defunct companies put out of business fighting the MLS organizations.
- digikata 9y ago
  I didn't forget, I never knew that. It's pretty interesting!

pizzetta 9y ago

Maybe it's more due to the potential of leveraging network effects and becoming the predominant player in this sphere. They can leverage that to add on al kinds of add-on services (handyman/woman, decorators, etc. and extract some fee from those).

smogcutter 9y ago

So they're not built on some proprietary piece of tech (say, a search algorithm), but I don't see how that makes a difference for their valuation. Their business is the same as just about every "disruptive" tech company: replace a population of middlemen with a website that does the same thing more efficiently. Not that the label matters - the market will decide what the company's worth regardless.

RyanOD 9y ago

As a former Redfinian, let me share my perspective. The collective talent, intelligence, and drive for constant, data-backed improvements at Redfin is something to behold. It is both inspiring and intimidating. Replicating it would be quite a challenge. Beyond that, Glenn Kelman is a great CEO and person. He's transparent, affable, and genuinely cares about the people at Redfin and beyond. His leadership is contagious and inspires those around him. The same holds true for other members of Redfin in leadership roles. Finally, the complete and total commitment to using data to drive decisions is at the core of the Redfin offering and a big reason why I still believe Redfin is going to continue to be successful for years to come.

apsec112 9y ago
FWIW, as a software engineer, this type of vague, grandiose marketing language makes me think less of Redfin as a company. It definitely makes me think that me, and most of the talented people I know, wouldn't enjoy working there. If you really want to boost Redfin's reputation, I'd recommend following some advice from the YC application guide: "The best answers are the most matter of fact. It’s a mistake to use marketing-speak to make your idea sound more exciting. We’re immune to marketing-speak; to us it’s just noise. So don’t begin your answer with something like We are going to transform the relationship between individuals and information. That sounds impressive, but it conveys nothing. It could be a description of any technology company. Are you going to build a search engine? Database software? A router? I have no idea. (...) The best answers are the most specific. A surprising number of people answer with something like: Jordan is an exceptionally dedicated person who gives 100% effort to every project he undertakes. This kind of generic claim carries no weight. A single, specific example would be much more convincing." (https://www.ycombinator.com/howtoapply/ https://www.ycombinator.com/howtoapply/)
- RyanOD 9y ago
  Thank you for that perspective. Makes perfect sense.
- copenja 9y ago
  I felt the statement that management is dedicated to using data for decision making was pretty concrete and interesting. I certainly didn't know that.

prostoalex 9y ago

It seems that unless you have a technology-first company, this is extremely hard to retrofit. Agents who join Prudential join an agent-first company that has some back-office technology as a cost center. Commissions and fees likely reflect that. Without offending Redfin agents (my last two real estate transactions were through Redfin, so I'm obviously a fan), with Redfin one is dealing with the site first and "some disposable agent they've assigned to handle my case" second. It's unlikely that many in real estate world, driven by egos and projected success, would succumb to a role of a simple customer service agent.

paulie_a 9y ago

I will just outright say that the world of real estate is a terribly broken model. Redfin managed to take that concept from version 1.8 to 1.9. Basically this is real estate being in the late 90's and I wont't call out redfin in particular, but I will say zillow/trulia/realtor.com/etc are the equivalents of pets.com.