Zillow Just Bought DotLoop: Does it Matter?

In 2013, over cocktails at a Real Estate Connect function, I asked Austin Allison, DotLoop’s founder and CEO, whether the company was a secure document management platform.

“No,” Allison replied. “We’re about collaboration and ‘peoplework,’ not paperwork.”

DotLoop, Allison continued, was a platform dedicated to managing people, discussions, tasks and documents that happen to be related to a real estate transaction. He built DotLoop to get people to effectively work together in “loops” and quit wasting time on tedious paperwork.

The company was (and continues to be) focused on collaboration.

DotLoop wasn’t trying to be the be-all and end-all of document security, although that was an important part of DotLoop’s solution. Though DotLoop has since substantially beefed up its security on documents and secured its loops, document security and collecting big data was never the primary focus of the company, nor its unique selling proposition.

Why take pains with this definition? Because it’s meaningful for everyone who is worried about Zillow’s acquisition of DotLoop.

For brokers and agents (whether they’re on the DotLoop platform or not), I believe that Zillow’s acquisition of DotLoop is a move designed to expand their advertising offerings — not to solely suck up all the juicy sold data in agents’ transaction files. I also don’t think Zillow is angling to become a nationwide brokerage, or is out get rid of agents.

Spencer Rascoff, Zillow’s CEO, said it himself in response to a comment from Steve Mallet, a broker associate at Keller Williams in Austin, on Brad Inman’s post about the acquisition:

Why would Rascoff say this? It’s because he’s under pressure to boost revenue. I also think it’s true. He’s got another play in mind, and that’s to get more agents to use DotLoop because it’s likely to become another advertising channel for Zillow.

Trusted Service Providers = New Adverting Revenue

Consider this: One of the jewels in DotLoop’s crown is its service providers platform, launched in December, 2014, which enables “trusted” affiliated businesses (like attorneys, moving companies, title concerns and others) to advertise right in someone’s loop.

While it is possible for those who use DotLoop on a paid or free basis to select which, or if, providers appear in their loops — those who don’t will have selected service providers appear at DotLoop’s suggestion, and by default.

How many trusted service providers are in DotLoop’s network?

Some 11,000 as of this writing, with some of those listings are coming straight from Moving.com (which is owned by Move). Sure, Move might cut Zillow off once the acquisition clears (see the ListHub kerfuffle for a playbook), but there are still thousands of vendors already on DotLoop’s platform, and Zillow also has legendary and aggressive sales force to replace those local vendors who might leave as part of Move’s actions.

When you stack up the numbers, 300,000 users on DotLoop, 100,000 paying accounts on Zillow, 11,000 service providers in a market worth billions — it all of a sudden becomes a tasty advertising opportunity, and Zillow is well-equipped to gobble it up.

Putting Ads in the Middle

The point is that Zillow sees an opportunity to sell more advertising to all of the vendors connected with the real estate transaction — right in the middle of the transaction. It joins a long list of others who are also keen to sell advertising and leads to those who are connected to a home sale, like Amitree and HouseHappy.

Zillow also acquired Retsly a little more than a year ago. It’s another component necessary to build a dynamic transaction marketplace, because Retsly allows companies to synch with Zillow’s platform using the company’s Tech Connect Services. These acquisitions are about building a comprehensive media platform — although doing so will be fraught with challenges and competing priorities from organized real estate, brokers and agents.

I believe Zillow cares a lot about what brokers and agents think, and that it really is a media company. It’s built its business on selling ever-more ads and services to more real estate professionals, but it needs to grow. Its stock has fallen by nearly half over the last year, and Wall Street expectations are brutal.

That’s why it makes sense that Zillow believes it will build advertising revenue if it touches the actual transaction. It doesn’t hurt that DotLoop brings an audience of 500,000 people every month who are accessing the platform, signing documents, and generally going about the business of buying a house.

But my question is simple: Will everyone who’s on DotLoop now stay on DotLoop once this deal closes in the third quarter?

What will Brokers and Agents Do?

It’s easy to look at all of the social media hoopla about this deal, and surmise that many are upset about Zillow’s perceived intentions. Many say that Zillow only acquired DotLoop for access to the platform’s detailed and accurate transaction-level data, such as sold prices that are available nowhere else (particularly in non-disclosure states). But these are the most vocal — it’s hard to know what the rest of DotLoop’s user base is worried about.

Despite the hue and cry, I believe Zillow is just too savvy to use all of this proprietary data without some sort of permission-gathering exercise.

After all, user agreements really do exist between DotLoop and its customers. While the California Association of Realtors and others have pointed out that those agreements pretty much give DotLoop the right to do whatever it wants with that data, I think it’s absurd to think that Zillow would tinker with it given the general environment that favors data security and protection of personally identifiable information for consumers.

It just seems like a boneheaded move from a really smart, capable and public company to use or take this information without permission.

So where does this leave brokers and agents?

The Future: Dedicated Transaction Management Platforms

The real estate community needs to assess what it wants from a transaction management platform, and think clearly about the future of the real estate transaction. Consumers are going digital. Paper is going the way of the do-do. Agents expect and need a secure mobile solution. And brokers want visibility into their pipelines, clients and agent activity.

That’s good news for companies like DocuSign and SkySlope, who are dedicated to digital transaction management.

DocuSign, the goliath in digital signatures, has gone so far as to create a global “Trust Network” that’s all about protecting data and signatures. It acquired Cartavi to enable agents and brokers to manage the people, tasks, forms and other documents in the transaction within a secure transaction room.

Other transaction management providers are equally as dedicated to providing a secure and robust environment for agents and brokers to do business. But if you want to use an ad-free, robust and secure transaction platform in the future, you’re going to have to pay for it — just as you do today.

The unfortunate bit about this acquisition is simply this: It puts a lot of agents and brokers at a crossroads. They can wait to see what happens, or they can transition now to a different platform, which will most assuredly be painful.

Either way, these are tricky times.

[FULL DISCLOSURE: DocuSign is a client of Eight11’s sister company, August Partners.]