Archive for December, 2012
In 2008 – four years ago! – I penned a doom and gloom email that Greg posted to this here blog (with my permission). Soon thereafter, he invited me to join as a regular writer.
To sum it up, I thought (and still do believe) there is no way the government can automagically print currency in an effort to create real wealth. Paper is not wealth.
I expected inflation to hit much harder and more dramatically than it has. It’s been far more restrained. I suspect this is because that paper has been disproportionately sent to particular areas of the economy – large banks, for instance – that continue to hoard it.
I’m sure you don’t need me to tell you how easy it was to get credit in 2005 (when I bought my first home) compared to 2012 where the bank made me jump through all sorts of hoops to refinance a home I’ve got even though I’m in a much more financially sound position today than I was in 2012.
Still, my prediction that this recession would last years and years has borne out. I believe we are still in the first half of this financial crisis. That it simply feels like a crappy “normal” existence is a consequence of its duration.
But you aren’t getting the worst of it, unless you’re a recent graduate from a college or, wait for it, law school and now finding yourself saddled with six-figure debt earning a low five-figure salary.
Educational debt – non-dischargeable in bankruptcy – is like mortgage debt which is not cram-downable. That effectively keeps a whole class of citizens in debt-poverty. You can say, as you can say about indebted homeowners, that they made that choice of their own free will (I don’t agree with this view…), but the fact remains that hundreds of thousands of people in their mid-twenties and thirties are saddled with enormous debts punishing them for choices they made when they were 18 and 19.
This is not good for the economy, or society.
The consequence is an economy that limps along until this debt is cleared out, which means for the next 10 to 15 years.10 comments
Are Zillow and Trulia thrashing savagely in a blood-red ocean? Here’s a clue: Both of them are jumping the shark.
It is Citron’s primary thesis that Zillow is a Web 1.0 business presenting itself as a Web 2.0 investment. The entire premise of Web 2.0 is that smart managing and publication of information interactively to users can scale tremendously, while costs remain fixed. But unlike Netflix, LinkedIn, and even Facebook, Zillow isn’t voyaging forth into an ever-expanding horizon of unlimited sized markets opening up on the internet. It generates virtually all of its revenue from U.S. real estate agents. And it does so the old- fashioned way—by cold-calling them on the telephone. It’s been operating since 2006 more or less as it does today, and was consistently unprofitable, until the last two quarters.
[….] It is a “heavyweight” sales company masquerading as a “web 2.0” leveraged technology play. The only way it has to grow revenues right now is with the increasing intensity of the sales effort. It’s not light and leverageable like LinkedIn, or OpenTable (Sales and mktg 21.4% of revenues) Zillow is more similar to Groupon than a Web 2.0 company such as LinkedIn or Open Table.
Expressed another way, it is apparent to Citron that Zillow is buying revenues with an intense telesales effort. Put in its simplest terms, they spent an additional $3.8 million on sales expense last quarter, and only generated $4.8 million in new revenues!
By comparison, Open Table spends 21% of revenues on sales, and even LinkedIn spends 33%. This comparison shows how much Zillow is dependent on old school phone room sales—not Web 2.0 online leverage.
While management might spin a fun story about their company growing revenues at a rapid pace, the proof is in the numbers. The cost of sales demonstrates that customers do not buy Zillow ads; they are sold Zillow ads, which should be disturbing because they address a target niche market unlike OPEN or LNKD—and cost of sales should be lower.
Citron notes that MOVE.com, formerly Homestore.com, referenced above, could not make money during the real estate boom of the mid 2000’s. At the time, they were the only online destination for brokers to buy leads. (Citron wrote about MOVE when its market cap was over two billion “with a B”; today it is 350 million “with an M”).
How does anyone expect Zillow to thrive in that identical business, with competition from Realtor.com, Trulia, and a host of smaller competitors, all fighting for wedges of the same finite customer base? The inescapable market reality is that the business model of selling leads to real estate brokers just does not scale…read on.
Do read on. The Citron report is devastating to all of the Realty.bots.
Is it true? The suits deny it, of course, but for the minions of publicly-traded companies, it is a felony to tell the truth about business prospects. That Zillow and Trulia have hired a herd of Judas Goats — six-figure flunkies paid to write rah-rah-rah weblog posts — seems telling to me.
Meanwhile, note these bold new initiatives:
Trulia.com will give you a chance to win a Mercedes E550 just for building out your agent profile. That’s a car worth something like $75,000 in exchange for contributing free content to Trulia’s site. Why isn’t it worth your while to populate your profile without the incentive? Uh…
But wait. There’s more. Zillow.com will give you a chance to win a $10,000 Amazon.com gift card just for completing a Zillow Premier Agent web site. And this is not worth doing without the incentive because…? Yeah.
These are both instances of jumping the shark, and they’re both very loud statements that the big bosses at both Zillow and Trulia think their product — advertising paid for by schmucks like you — isn’t worth the money they charge for it. How can we know that for sure? Because free advertising is not the prize offered in their contests. Not even second-prize. Not even tenth-prize. Instead, your opportunity is to be their bitch and then not win a car or a gift card. The lottery is a sucker bet, too, but at least the lottery doesn’t hold you hostage forevermore.
Are the Realty.bots really in trouble? I have nothing invested in them in any way you can measure investment. But people who will say things like this
Think about the possibilities … $10,000 worth of free stuff.
will say just about anything…23 comments