Expedia & Zillow: Rich Barton

In the early 90s, Rich Barton arrived to work at Microsoft just as the world wide web was taking off. He wound up pitching Bill Gates on an idea that was transformative at the time: to let everyday travelers book their own flights and hotels by giving them online access to previously hidden reservation systems. Expedia launched from inside Microsoft but was so successful at transforming the travel industry that it was spun out into a public company with Rich as CEO. Then in 2005, Rich moved on to a new idea with some Expedia colleagues, co-founding Zillow as a way to "turn on all the lights" in another sprawling industry: real estate. When the site launched in 2006, so many people tried to look up their home-value "Zestimates" that the site crashed within hours. By 2020, pandemic-era interest in housing saw Zillow accessed almost 10 billion times. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

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• 0:46Guy Raz?

  build the prototype, analyze the market, maybe even come up with the idea, what separates the people who actually build something from everyone else? I don't have a clean answer yet, so I've been sitting with it with Claude. There's hope in hard questions. Ask yours at claude.ai/hibt. We get support from U.S. Bank. A question I love asking founders. What's the one decision you almost didn't make? The one that changed everything? Because it's never the obvious stuff. It's never, I decided to start a company. It's the small, boring, Tuesday afternoon decision you barely remember making until you realize it's the reason everything after it either worked or didn't.

• 1:32Guy Raz?

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• 2:14Guy Raz?

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• 2:58Guy Raz?

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• 3:40Guy Raz?

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• 4:23Guy Raz?

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• 5:07Guy Raz?

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• 5:13Speaker 01

  So the internet bubble had burst, and the stock market wasn't as interesting to people. But the housing market was on a tear. And somebody basically drew a stock chart on the board and said, what if we could create this stock chart but have it be your house value? That's when everybody kind of inhaled simultaneously. Like, oh, that is interesting.

• 5:41Guy Raz?

  From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 5:55Guy Raz?

  I'm Guy Raz. And on today's show, how Rich Barton's many frustrations with booking travel and buying real estate led to two startups that transformed those industries forever: Expedia and Zillow.

• 6:12Guy Raz?

  Back in 1970, the economist George Akerlof wrote what would become a groundbreaking paper on a concept called information asymmetry. It's a work that won him a Nobel Prize in 2001. That paper argued that used car sellers have an information advantage over buyers. They know more about the quality of the car, so they have the upper hand because they can set the price. His basic idea was that sellers almost always have the upper hand in any transaction because they have more information about the product they're selling. Akerlof's work spawned a whole series of business ideas that set out to put an end to information asymmetry.

• 6:58Guy Raz?

  Things like Carfax, a service that made a car's entire maintenance and accident history available to a buyer, or financial services companies like Vanguard that introduced transparency into consumer investing. But the idea of disrupting industries with an asymmetric advantage really took off with the rise of the internet. And in the early 1990s, a young Microsoft employee named Rich Barton was obsessed with this kind of disruption. It's an obsession that led him to cofound three major tech companies, companies that offer services that you have most likely used. There was a time when, if you wanted to book travel, things like flight schedules,

• 7:43Guy Raz?

  hotel availability, car rentals, all that information was only available to travel agents who had access to a proprietary booking system. And Rich wanted everyone to have access, so he came up with what would become Expedia. After it was sold, he turned his focus towards asymmetry in the real estate market. Because up until that point, only real estate agents had easy access to home values or what price your neighbor sold their house for. So Rich, he cofounded Zillow. And then, in 2007, along the same lines, Rich helped a friend cofound another site to share data about work culture

• 8:26Guy Raz?

  and average salaries at major companies. This time, they called it Glassdoor. Yes, this one person has been a driving force behind Expedia, Zillow, and Glassdoor.

• 8:40Guy Raz?

  Rich Barton grew up mainly in the northeastern part of the US. His dad was an engineer and his mom was in charge of the family. In the mid 1980s, he moved out west to attend Stanford, and it was his first taste of life on the West Coast.

• 8:57Speaker 01

  I did love this lack of focus on what's your name? And who's your daddy? And where'd you go to school in California? It just felt more egalitarian and more future-leaning and more free. I moved out there, and even as kind of a dumb 18-year-old, I completely remember the feeling. So I had a Honda Civic, and I drove it back and forth across country every year for school. And I distinctly remember going through, you know, that tunnel just north of San Francisco, right after you go over the Golden Gate Bridge?

• 9:33Guy Raz?

  Sure.

• 9:34Speaker 01

  I remember coming through that tunnel. I literally had the Grateful Dead on. I think I had "Estimated Profit", which the refrain is something like "California", basically, knocking at your golden door, right? And so I was listening to that, going through that tunnel with the rainbow painted, and then crossing the Golden Gate Bridge, and having this feeling that, you know, it's hard to describe. I was so excited and wide-eyed and, you know, ready for the future, ready for possibility.

• 10:03Guy Raz?

  I guess that after you graduated from Stanford, you got a job in consulting. And from what I understand, not too long after that, you decided that it wasn't for you, and you were, I guess, kind of just looking for an exit?

• 10:16Speaker 01

  I was, in fact, I was. My, really, one of my great friends from Stanford, she took a product manager job there at Microsoft and moved to Seattle right out of school, which was an interesting little company that recruited on Stanford's campus.

• 10:34Speaker 01

  The week after she got there, she started calling me up and saying, Richie, this is the place for you. This is where you should be. So it took a while, but eventually she and a few other key people there helped get me an interview and then as soon as I could, I moved out.

• 10:50Guy Raz?

  Wow. And what were you hired to do there?

• 10:53Speaker 01

  I was hired to be product manager of MS-DOS. MS-DOS version 5. I know you're not a tech geek at least, guys, so that's not going to mean much to you, but some of your listeners out there will.

• 11:04Guy Raz?

  I remember MS-DOS. Yep. So it's still pre-Windows.

• 11:07Speaker 01

  Yeah, this is, this is pre-Windows. It's on the cusp of Windows. It was exciting, actually. We sold DOS 5. MS-DOS 5 was the first time that Egghead Software, which was the big retailer, software retailer at the time, had ever, they ran a midnight madness sale on the first day that the DOS 5 upgrade was released. And they had people camping out and lining up outside of Egghead so that they could get an operating system. I know that seems crazy, but that's what happened.

• 11:35Guy Raz?

  When you got to Microsoft, did it already seem like a giant place?

• 11:40Speaker 01

  No, not at all. It was a pretty small company when I got there, probably just a few thousand people.

• 11:45Guy Raz?

  Not that small, but, but I mean, compared to today, certainly.

• 11:48Speaker 01

  Oh, goodness.

• 11:49Guy Raz?

  But like the kind of, like the kind of place where it wasn't odd or unusual to like see Bill Gates walking around?

• 11:55Speaker 01

  Oh, yeah, for sure. It was a small company. I knew most of the other product managers. I was one of the younger ones, most of the people that come out of business school. But it was quite a, and people, international people from all over the world because we were localizing all our products all over the world. It was, it felt like we knew magic before everybody else did. You know, it's just like the technology that we were working on, we knew had immense future ramifications for the way people lived and worked. And we knew how to build stuff. We did have a sense of being exceptional and kind of a sense of destiny. It was quite exciting.

• 12:31Guy Raz?

  So you work on, on the DOS system. You worked as a product manager on the DOS system for, I guess, two or three years. And I guess around 1994, you actually request a transfer to Microsoft's consumer division, which, can you tell me about that decision?

• 12:50Speaker 01

  Well, I was basically getting ready to leave Microsoft and start my own business. I always wanted to be an entrepreneur.

• 12:56Guy Raz?

  Huh.

• 12:56Speaker 01

  And I figured if I was going to start something, it was going to look more like a consumer product than an OS. And so I actually jumped over to the consumer division at Microsoft at the time, which made all of these consumer products, most of them on multimedia CD-ROMs.

• 13:11Guy Raz?

  Yeah.

• 13:11Speaker 01

  One was called Rock Mania, one was called Cinemania, believe it or not, one was called Multimedia Beethoven, and one of them was an idea for an encyclopedia of travel guides, multimedia encyclopedia of travel guides on CD-ROM, and that's how I ended up working on travel.

• 13:29Guy Raz?

  Which, to me, seems a little weird, because you're not going to bring your computer with you when you travel around the world, but presumably, somebody thought, let's make this, people will print them out, like, what was the thinking behind that?

• 13:41Speaker 01

  That's exactly what I thought. I'm like, okay, sure, it's a bunch of pictures and text that would be great to have a whole library of on your, on a CD-ROM, but I, you know, the smallest portable computer at the time was the size of a suitcase from Compaq.

• 13:58Guy Raz?

  Right.

• 13:58Speaker 01

  But it weighed like 20 pounds. So, of course, yeah, it wasn't going to work as a travel guide in the field, which led me to look at different ways we might be able to have a travel guide be portable, and actually led me to thinking about how we actually plan and purchase travel itself, which I found way more interesting.

• 14:20Guy Raz?

  So, what did you start to do, or what did you start to think about?

• 14:24Speaker 01

  Well, I was quite a business traveler, and planning was pretty difficult, the way we had to pick up the phone and call a corporate travel agent, and say, I've got this three-stop trip, and I could, I remember hearing the click, click, click of the keyboard, I knew that the travel agent I was talking to was looking at a screen.

• 14:43Guy Raz?

  Right.

• 14:44Speaker 01

  I wanted to jump through the phone, turn the screen towards me, and do it myself.

• 14:47Guy Raz?

  Yeah.

• 14:48Speaker 01

  I figured I would care more about my routing and my timing and my hotel than anybody else would.

• 14:51Guy Raz?

  Yeah.

• 14:52Speaker 01

  Right? And so, I was using Prodigy, there was a service on Prodigy that enabled me to access directly the airline and hotel reservation systems. I could spoof being a travel agent.

• 15:02Guy Raz?

  Hmm.

• 15:03Speaker 01

  And I was a heavy user of that. And so I looked at that and, you know, I had a team around me as well. And we, we looked at that and then we were like, well, that would be interesting to bring to normal consumers. Like, people would go crazy, give power to the people to book this themselves, to turn on the lights in the room, to see it all. Anyway, so that ended up being my pitch to Bill Gates.

• 15:27Guy Raz?

  Sorry. So you had this idea, there was this idea that maybe we can, like, on Prodigy, you can start to pretend like you're a travel agent and directly book your own stuff. Maybe we can actually build this out. You got a chance to go to Bill Gates and pitch that to him?

• 15:41Speaker 01

  I did. Bill Gates, at the time, Microsoft was still relatively small and ran these, what were called product reviews every year. And the product teams would come through his boardroom and say what they're working on, what they wanted to work on in the future, what was cool, what was not, and get feedback. And so, at that time, you know, every six months or a year, I would be part of a team that would go in front of Bill and other, you know, Steve Ballmer and Nathan Mirbold, and talk about what we were doing.

• 16:14Guy Raz?

  Wow. So you go in to pitch Bill Gates on this idea to create some kind of online travel booking site that would also include travel guides?

• 16:26Speaker 01

  Yes. I showed him Prodigy, and it was all a command line, really ugly thing. But I talked about how I could see doing a, kind of a Windows version of this and giving it to consumers could be a complete game changer for consumer empowerment. And he agreed, yeah.

• 16:44Guy Raz?

  And, and this is still pre Netscape. Like, Netscape, I think, just, because I remember using it, I think I, I used it for the first time in 1995. So this is still pre, like, what we now think of as the web. But your, what you were pitching was, hey, let's build this out and make it really user-friendly, like Windows. He looked at this and said, yeah, there, maybe we can do this?

• 17:08Speaker 01

  He did. Yeah, you're right. Netscape had not shipped yet. The graphical web really hadn't launched. It was about to. But there were these online systems that did have these kind of hacked-together graphical interfaces. Microsoft was working on one itself called MSN.

• 17:25Guy Raz?

  Right.

• 17:25Speaker 01

  And so the context of the pitch was we'll build it as an MSN app.

• 17:29Guy Raz?

  So MSN was supposed, was looking at Prodigy, CopyServe, and whatever, AOL, and saying, we're going to make our own kind of version like this.

• 17:37Speaker 01

  That's right. We were, we were building a competitor to those services, and this would be an app. You know, we saw it as a potential killer app.

• 17:44Guy Raz?

  And do you remember, I mean, was, was, I mean, you're making it sound really simple, like he was like, yep, I'm sold. Was it that simple?

• 17:51Speaker 01

  Um, you know, it's hard to remember. But yeah, it seems that way. It was a pretty obvious idea. We'd been tasked by Bill Gates and a team there to think about how the coming internet might change industries. And so this was one of the ideas that we had.

• 18:08Guy Raz?

  I mean, I remember at that time, people were talking about how, you know, in the future, you're going to just sit in front of your TV and just order things. And, and it still seemed kind of far-fetched. But, I mean, were you hearing murmurings in the industry that other people were working on things like this, or, or not?

• 18:25Speaker 01

  Well, there was a small, you know, tech is a big industry right now. It was a rather small world back then. And there was this sense of destiny. Every, people who understood technology did feel the revolution coming. And so there was an excitement and a pressure and a competitive zeal. And for me, the excitement was all around how we could give power to the little guy in the face of...

• 18:57Guy Raz?

  The travel industry, in this case.

• 18:59Speaker 01

  In the travel industry, but also the same, I was actually thinking, you know, my team, Lloyd and I, were thinking about that relative to several industries. Stock investing was the same way. It was just, there were all these industries that seemed rigged against the consumer, that we felt the connected PC was going to...

• 19:22Speaker 01

  Reorder.

• 19:23Guy Raz?

  Hmm.

• 19:24Speaker 01

  You don't have to see too far into the future. If you can see a little bit further into the future than the rest, you know, you can, you can really get way ahead. And we, we were just lucky that we were at the epicenter of all of this technology ideation. And we were in a incredible environment where we were given free rein to dream big, take big swings. That was encouraged.

• 19:48Guy Raz?

  So Bill Gates gives you the green light.

• 19:50Speaker 01

  Yes.

• 19:50Guy Raz?

  And you, what, what do you do? You like gather a team and you have to come up with a name for this thing. And they called it Expedia.

• 19:58Speaker 01

  Yep.

• 19:59Guy Raz?

  Which, by the way, how did that happen?

• 20:01Speaker 01

  Yeah, we did a, um, we hired one of those naming consulting firms and we tried. I, I've participated in the creation of lots of made up brands. And that was my first experience with it. And I learned a tremendous amount. I believe when, for those of you out there who, who are dreaming of starting a company or naming something, creating a new word is very ambitious and very long-term and very difficult. But if you are successful, you completely own that word in the dictionary, so to speak. And you get to fill it with whatever meaning you, you can infuse into it. So it takes, it's a lot longer and a lot harder, but it ends up being much more valuable to have a brand name that you've, you've made up. And so I came into with that belief.

• 20:46Speaker 01

  Expedia was one of many names that we had to pick from. We liked it because it had an X in it, which is a high point scribble letter. So that means it's unique. It sounded like speed, expedite, expedition, all good associations for travel. One thing I did learn is that I didn't like ultimately that it had so many syllables, but that was hindsight. Since then, I've liked two syllables. I think that's the most memorable. Having it sound like a dog's name, a good dog's name can be turned into a verb. There's a bunch of rules I have now.

• 21:19Guy Raz?

  So explain something to me. I mean, you start to work on this product, right? And in the meantime, Netscape hits, right? And the world wide web becomes a thing. How challenging was it to build a site that would allow people to directly book their travel with the airlines? I mean, was there any resistance from the airlines? Or were the airlines like, we love this?

• 21:44Speaker 01

  Oh, no, they didn't love this. And Microsoft was scary. Microsoft was a very scary company to all industry at the time because it was executing so well, it was making so much money, and it kind of knew magic that everybody else hadn't figured out yet. However, we knew that if we started a travel agency, that from an equal access perspective, we ought to be able to plug into these electron, these big mainframe-based reservation systems that ran the industry and act like a travel agent. And if we got discriminated against, we could blow a whistle and say, that's not fair. And that's, I remember being a very young, you know, techie kid and going into very senior airline executives' offices.

• 22:28Speaker 01

  I remember one in particular, an American who just belittled and was very arrogant with me, saying, you know, it would never work. And I, you know, I worked hard to be as gracious as I could and explain what I thought the future looked like and how if you bet on empowering consumers and you bet on what people want and you build products for what consumers want, how could you possibly go wrong? That was my, you know, position. And, but it was difficult. I got a lot of resistance.

• 22:58Guy Raz?

  So you guys formed a travel agency at Microsoft in order to, I guess, kind of qualify to be able to do this?

• 23:05Speaker 01

  Yes.

• 23:06Guy Raz?

  Even though you were passing on that power to consumers, to users?

• 23:10Speaker 01

  That's correct. Yeah, we were an electronic travel agent, and that's what consumers wanted.

• 23:15Guy Raz?

  When you launched Expedia in 1996, what was the public response to it?

• 23:21Speaker 01

  Well, the web wasn't very, so we were building for MSN, which we recognized wasn't going to probably succeed as a platform. And so we quietly pivoted to building a web app, and we kind of didn't tell anybody. And so we launched, we never launched on MSN. We launched on the broad internet. And it was a hit instantly. Now, the web wasn't very big. So a hit at the time in 1996 is very different from now. I don't remember the exact numbers, but everybody sat up, bolt upright in their seats who saw it was like, oh yeah, this is it. That's the future.

• 23:58Guy Raz?

  And, and so this launches and it transformed travel in an instant.

• 24:05Speaker 01

  It did. And in hindsight, and at the time to us, it was, it was obvious. And the stuff that really got us excited was the consumer aspect, the consumer empowerment aspect of it, Guy, not, a lot of people like to talk about disruption. I know you do too. But these are about empowering consumers and then let the chips fall where they may from an industry perspective, right? Building for the future of what consumers want was what we were trying to do. And we were really secondarily thinking about the organization of the industry and how those dynamics might change. And that just wasn't our primary concern because we knew if we had the consumer on our side and we had millions, then tens of millions and hundreds of millions of them

• 24:49Speaker 01

  coming every month to our service, that we would ultimately get the business model figured out and get those partners to come.

• 24:57Guy Raz?

  Microsoft spun out Expedia as a public company in 1999 and, and you became the CEO, still pretty young of a public company at the time. But I guess pretty soon after that, just a few years later, the company was purchased by Barry Diller's IAC. I mean, clearly the company was, was doing really well, was financially successful. But, but I guess in 2003, you left, right?

• 25:24Speaker 01

  Yes.

• 25:25Guy Raz?

  And so what'd you do?

• 25:26Speaker 01

  Well, I'd worked pretty hard and I wasn't the greatest work-life balance guy. I was having kids, my twins, which were my second and third kids. It was a pretty tough, pretty tough pregnancy. They came a little bit early and it was scary.

• 25:45Speaker 01

  So we decided, my wife Sarah and I decided we wanted to pursue a dream that we had of moving abroad and living abroad. So she was in her OB practice and it took another six months for her to kind of work through her backlog of patients before we left. But we moved to Florence, Italy with the whole family for a year. It was lovely.

• 26:05Guy Raz?

  Wow. But I guess, I mean, it wasn't like you were retiring forever, right? I mean, you were presumably just like taking a break. And so during that year, were you starting to think about the next thing? I mean, were you, was that when you started to think about real estate, something with real estate?

• 26:22Speaker 01

  Um, we moved back because Sarah's dad began to get sick. And when we came back, we knew we needed to find a new house because our family had just grown by two people. And so in order to stay out of my wife's hair, I took an office with an ex Expedia, early Microsoft, Stanford friend of mine, Lloyd Frank. And we just were staying out of our wife's hair and brainstorming business ideas. And we happened to be shopping for houses,

• 27:03Speaker 01

  both of us at the time. And it's just, like so many business ideas, they're born of frustration.

• 27:12Guy Raz?

  And that frustration was, you've got to get an agent, you've got to, right? And the agent's going to get the commission and it's going to inflate the price. Are those the frustrations you were thinking of?

• 27:23Speaker 01

  Um, it was more that we just couldn't get the information that we wanted to get in order to have a successful, complete, transparent shopping experience. Like, It's 2005 and the web has been around for now nine years or 10 years. But still, I couldn't get pictures of homes and complete listings and prices and addresses even. Like, I couldn't get the address of a home I was shopping for online. It was just obvious to us. We were trying to answer a simple question. What is that house worth? What should we offer if we wanted to buy it? And so, anyway, that was the frustration.

• 28:01Guy Raz?

  In 2005, if you were looking for a new home, was there a single place online you could go to see all the homes available?

• 28:09Speaker 01

  No, there wasn't a single place. There wasn't a single place. It was, I liken it to shopping in a dark grocery store with a flashlight, you know? Worse than that, the flashlight is being held by an agent who you have to ask to point it at something. It was not a great user experience. And it was so obvious to Lloyd and me that, oh, here we are again. The lights need to be turned on in this particular store too, just like, just like the last one that we did.

• 28:40Guy Raz?

  And was your, were you starting to think, because I'm thinking if I'm, you and Lloyd, you'd worked on Expedia, I'm thinking, hey, maybe we can do this with real estate. Like, we can just put all these things up and people can just make the transaction through a site. Was that, was it literally like, that was the conversation you were having?

• 28:56Speaker 01

  Pretty much. Pretty much. And we also, we also loved the category of real estate from a consumer perspective, just like travel. It's this really interesting blend of the yin and the yang of emotion and finance. It's like, homes are so entertaining to shop for. I mean, I was one of those kids who rode around in the backseat of my mom's car on Sunday afternoons and we'd just go look at open houses. You know? Like, shopping for homes is entertainment because it's, you're dreaming. And by the way, shopping for travel, a lot of that was dreaming too.

• 29:31Guy Raz?

  And when you described this to people, I mean, obviously you had a successful exit, but was anybody saying, you know, travel's complicated? It's kind of regulated? Real estate's really complicated. It's super regulated. There's like, really powerful industry lobbying groups. Like, it's really hard to break into that. Did anybody say that to you?

• 29:51Speaker 01

  Everybody. Everybody.

• 29:56Guy Raz?

  When we come back in just a moment, how Rich and his co-founders figured out the one thing that would make users flock to their new real estate site, and how, when that finally happened, they were totally unprepared. Stay with us. I'm Guy Raz, and you're listening to How I Built This from NPR.

• 30:28Guy Raz?

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• 31:11Guy Raz?

  speed and scale, and people bring taste, judgment, and control. Learn how you can get more out of your site from a Framer specialist, or get started building for free today at framer.com/built for 30% off a Framer Pro annual plan. That's framer.com/built. Rules and restrictions may apply. AI isn't just opening new business opportunities, it's changing the way businesses get work done. The questions they ask, the decisions they make, the routine tasks they can hand off. That's the idea behind NetSuite Next, the next generation of NetSuite with AI woven

• 31:51Guy Raz?

  into the tools your business already relies on. NetSuite Next surfaces insights exactly when you need them, puts agents to work on routine tasks and problems, and lets you ask complex questions in plain Language like talking to a knowledgeable colleague. But technology is only part of the story. AI is also reshaping how people and teams work together. And that shift is already underway. That's why NetSuite wants to put a new expert-created business guide in your hands today. It's called Aligning for the Agentic Era: How AI is Changing Everyday Work. And right now, it's yours, absolutely free. Inside, you'll discover how AI could reshape work across your entire organization,

• 32:36Guy Raz?

  and how to position your business to prosper from it. If your revenues are at least in the seven figures, get NetSuite's free business guide, Aligning for the Agentic Era: How AI is Changing Everyday Work, at netsuite.com/built. The guide is free to you at netsuite.com/built. netsuite.com/built. Stripe is built for whatever comes next, because the pace of change has never been faster than it is right now. New business models, new currencies, and new expectations for speed, reliability, and scale. Stripe builds financial infrastructure that helps businesses start, grow, and operate globally.

• 33:20Guy Raz?

  From payments and billing to fraud protection and cross-border payouts, Stripe is built to support the new pace of commerce. They're trusted by the companies building at the frontier, from 86% of the Forbes AI 50 to global leaders like Salesforce and OpenAI. In fact, more than 1.6% of global GDP flows through Stripe, with Stripe's users processing a combined $1.9 trillion last year. So if you're already thinking about what's next for your business, see what's possible at stripe.com.

• 34:03Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 2004, 2005, and Rich, his friend Lloyd Frank, and their fellow founders are trying to figure out the best way to build a real estate marketplace on the internet. And they decide to experiment with selling houses in an online auction.

• 34:25Speaker 01

  Yes, we didn't. We thought auctioning was quite interesting as a price discovery mechanism. Basically, it's pretty hard to figure out what a house was worth.

• 34:35Guy Raz?

  Right.

• 34:36Speaker 01

  And we had an extended kind of testing period where we kept adding really smart people that we'd mostly, we'd worked with before. And it was just, it was an idea lab. It was an idea incubator around real estate. Everybody on the team loved real estate. As we were recruiting people, we didn't tell them what we were doing. You know, it was kind of, there was some mystery. We didn't really know what we were doing. We were just playing around. And we did a deal with a guy we went to Stanford with, Gordon Stevenson, who was a regional broker here in Seattle. And we said, "Gordo, let us try to sell one of your houses. We want to just try it." So we didn't have to take any risk, really.

• 35:18Speaker 01

  We just tried to run a test auction on it, and it didn't, it failed miserably.

• 35:23Guy Raz?

  How did you do that? You put his house on this website, and then how did you even get people to know?

• 35:28Speaker 01

  It was silly. Like, you know, I remember our CTO, who's CTO to this day, David Bytel. I remember David and Lloyd and I running around with literally flyers in the rain of the North Gate Mall and putting flyers under people's windshield wipers. I mean, it was very scrappy, but fully test. I mean, we knew, we weren't doing things that we thought would be scalable. We were doing things to learn. Anyway, one of the things we learned in that, that the whole team learned, was just how difficult it is to sell homes. And we gained a real appreciation, actually, for what real estate agents do, honestly.

• 36:05Guy Raz?

  So did anybody, I mean, did anybody get the property?

• 36:09Speaker 01

  No, we didn't sell it.

• 36:10Guy Raz?

  You didn't sell it.

• 36:10Speaker 01

  But Gordon was selling it himself, you know? So he ultimately sold it. We just didn't sell it.

• 36:15Guy Raz?

  Right. And by the way, did you have the name of the business, Zillow?

• 36:19Speaker 01

  Yeah, we'd had it for a while, because we like to make up words, as I said before. We really liked the word Zillow. We knew it was going to be real estate, so... We brainstormed over coffee and beers and whiteboards and we came up with Zillow, which I really love.

• 36:36Guy Raz?

  Just a totally made up word.

• 36:38Speaker 01

  I tell you what we did. We knew we wanted a high point Scrabble letter, so Z was just the very, very best, very best. And we knew that there was this yin and yang of real estate, this kind of highly emotional portion of real estate, and then the highly financial. You know, it's the biggest transaction most people do in their lives, right? And so we literally on a whiteboard had a column of words that were meant to imply money, lots of data, you know, analysis, kind of geeky column of words. And then we had this emotional column of words: picket fence, window, doormat, pillow. Pillow was one of them. And in the first column, zillions, zillions of data points, zillions was one of them. And so

• 37:22Speaker 01

  we literally just started making words by drawing lines between the two columns and Zillow, we hit Zillow and everybody's like, that's it.

• 37:29Guy Raz?

  That's it. Wow.

• 37:30Speaker 01

  And it cost $9.99 to buy the URL, which I was kind of cheap and people wanted to sell us homes.com for $5 million. And I was like, but I can make up a word and spend $9.99.

• 37:44Guy Raz?

  And you and Lloyd initially were financing this. You didn't go out, you didn't have to go out and get any financing initially, right?

• 37:51Speaker 01

  That's, that's correct. We both had resources from Expedia and Microsoft. And in this really brainstorming phase of the business, we didn't need to, nor could we conceive of even raising money against no plan.

• 38:06Guy Raz?

  All right. So from what I understand, you recruited a pretty high level team that you'd worked with at Microsoft and then at Expedia. But a year, like almost a year into this Zillow venture, like you really, you weren't really kind of going anywhere.

• 38:23Speaker 01

  Um, no, we were always going somewhere. We always were making progress. We never had a period where, you know, we felt stuck. We had crazies ahead.

• 38:33Guy Raz?

  But I mean, were any of those people like who had joined you thinking, hey, you know, we need to, we gotta go get jobs?

• 38:40Speaker 01

  No, no, we were having a blast and we were paying people. So it was super fun and everybody felt like we were close. We were on the cusp of, of the aha. And we had it pretty shortly after the failed auction. We had the, the kind of light bulb moment.

• 38:56Guy Raz?

  What, what, what was it?

• 38:57Speaker 01

  Well, back to the idea of price discovery. We kept experimenting around that. And at one point, I don't even remember who it was. We were talking about how the home is so emotionally important, but it is the most valuable asset for most Americans. And this was at a time when house prices were really appreciating very rapidly. If you remember back in this, in this stage, right?

• 39:21Guy Raz?

  Oh, four or five, it was insane.

• 39:23Speaker 01

  Right. So the internet bubble had burst and the stock market wasn't as interesting to people, but the housing market was on a tear. And we literally, somebody basically drew a stock chart on the board and said, what if we could create this stock chart, but have it be your house value? And that's when everybody kind of inhaled simultaneously. Like, oh, that is interesting. Like people would really be excited about that.

• 39:50Guy Raz?

  If people could follow the ups and downs of their home price.

• 39:54Speaker 01

  Yes, and everybody else's.

• 39:56Guy Raz?

  And by the way, even to this day, like when you apply for a loan or something or you buy a house, like you, it gets assessed by a professional assessor. And that was, and I guess that was the only way you would know what your house was assessed at or valued at. But otherwise, if you just lived in a house, you would have no idea what it was worth or not a strong idea, not a very strong idea?

• 40:18Speaker 01

  The way people did it was to just basically watch the market in their local neighborhood, right? Which was kind of hard to do, but if you keep some basic tabs on homes around you or like yours that are being sold, what they're listing for, what they're selling for. It was hard to find out what they sold for, but you could see what they're listed for. And people would kind of triangulate and make guesses. So they're running their own little version of the Zestimate algorithm now. But anyway, they're doing math. They're saying, oh, that place across the street, that's listed for $600,000. That's got one less bedroom and we're a little bit bigger and our view's a little better. Maybe our house is worth $700,000. People were doing that, but there was no resource to go to.

• 41:02Guy Raz?

  So I imagine you were a small team, right? There was like fewer than 10 of you in that first year. Is that right?

• 41:09Speaker 01

  Yeah, that's right.

• 41:10Guy Raz?

  And did you, I mean, when people said to you, so Rich, how are you guys going to make money off this? Did you know? Did you have an answer to that question at that point or not quite yet?

• 41:18Speaker 01

  Uh, no, we didn't. And I was very comfortable with that. Fundamentally, we knew we were fishing in a big pond. Okay. Real estate, the biggest industry. Okay. And if you're fishing in a big pond and you have good fishermen, you're going to figure it out. And so we knew that if we could build something that consumers loved and people talked about on the sidelines of the kids soccer games, we knew if we could attract audience, we could turn that into a business model somehow.

• 41:46Guy Raz?

  So the idea was if you could create something compelling enough to capture eyeballs, you could figure out the business model afterwards.

• 41:54Speaker 01

  That's right. We were marketplace builders. We had marketplace mentality. And so we knew the elements of building a great marketplace. And it was unique and rich content that was difficult to find elsewhere. Having all kinds of pricing information, having historical transaction pricing information. Think about the stock market and the bid and the ask and the historical transactions and the pricing. And we knew that that same kind of marketplace wanted to be built in real estate. We dreamed of having a bid and an ask on every home in the country. Why not? Why not? Every home in the country ought to be for sale at the right price. And so if we could somehow have a rich database of information and pricing information,

• 42:36Speaker 01

  which would enable a new kind of digital marketplace, we knew that we were at the nexus of something important.

• 42:43Guy Raz?

  All right, so you're trying all these different things. How do you eventually stumble on what would become something that was going to work?

• 42:52Speaker 01

  Well, the scene I described where we drew the stock chart on the whiteboard, but not stock, it's your house, it's an address. That was it. That was the moment. At that point, we dropped everything else and began to figure out how to build that.

• 43:08Guy Raz?

  How to build something that would give anybody the opportunity to see what the value of their home was, just like their stock portfolio, if they had one?

• 43:17Speaker 01

  That's right. And so we landed on this estimate pretty early on. And further, mapping on the web was still relatively new then. We fantasized about having that godlike, that bird's eye view, looking down on the rooftops in neighborhoods and having little prices on, having little numbers, values on every roof, and then having that updated every day. And we thought that was just a head-slapingly obvious viral killer product.

• 43:45Guy Raz?

  That everybody could look at their home and see the number attached to it.

• 43:49Speaker 01

  That's right.

• 43:50Guy Raz?

  And their neighbor's home.

• 43:50Speaker 01

  Fly around their neighbors, fly around neighborhoods that they were interested in shopping in, just to see. And if we could do that, we wouldn't have to spend any marketing to get people to come to the site, because of course, everybody would want to come.

• 44:02Guy Raz?

  Everyone would just tell other people about it. "Did you see what your house is worth?"

• 44:06Speaker 01

  "Did you see what your ex-boyfriend's house is worth?" The one that you didn't, decided not to marry?

• 44:11Guy Raz?

  Because adults talk about really boring things, like real estate, as my children have told me. Why do adults talk about real estate, Dad? It's so boring.

• 44:21Speaker 01

  Yeah.

• 44:22Guy Raz?

  All right, so you have this idea. And how did you get, suck in all this data and process it? Because you can't do, it's not one person typing each home value by hand into a database. How did you guys do that?

• 44:36Speaker 01

  Well, we're technology people, so big databases didn't scare us. And so it was simply a matter of doing the business deals to license the data.

• 44:44Guy Raz?

  But a lot of it wasn't online, I guess, I imagine, in 2005?

• 44:48Speaker 01

  No, not online, not online. So we went to companies whose business it was to sell this information to, say, the mortgage industry for analysis, et cetera. And we came along and we said, "Hey, we want to..." License your data as well.

• 45:04Guy Raz?

  So these were companies that would go to like, I don't know, the Suffolk County courthouse and just literally take the paper documents and then just put it into a database by hand.

• 45:15Speaker 01

  Correct.

• 45:15Guy Raz?

  Digitize it. And then they would sell that that information to mortgage lenders and realtors and other people.

• 45:21Speaker 01

  Exactly.

• 45:22Guy Raz?

  So that was available. Was it was all of it in the US available?

• 45:26Speaker 01

  Most of it through different providers, which we had to go cut deals with multiple providers and they were very wary of us. As you might imagine, if you're licensing data, you don't want somebody to license it from you and then provide it free to consumers.

• 45:40Guy Raz?

  Yeah.

• 45:40Speaker 01

  Which is what, which is what our intent was.

• 45:42Guy Raz?

  Right.

• 45:43Speaker 01

  And so we didn't get the market leader at the time, wouldn't do business with us, but there were two other companies that would because we just kept writing bigger checks. Lloyd and I are digging into our checkbooks to do it, but we wrote shockingly large checks early on.

• 45:57Guy Raz?

  Well, you could understand why they wouldn't want to give you that information because you could argue that that would be the end of their business, right?

• 46:02Speaker 01

  That's right. You know, we had to agree to stuff like not selling it to businesses.

• 46:07Guy Raz?

  Right.

• 46:08Speaker 01

  And we wrote big checks and most, most managers of businesses, when you write a big enough check, will take it because they get a bigger bonus.

• 46:15Guy Raz?

  But say you got like the data of a house, right? That was purchased in 1960 and this is now 2005 and it was maybe purchased for around $15,000, $20,000. And now it's 2005 and you had the lot size and you had some information about improvements. You had to then figure out how to create a formula to value that house, right?

• 46:37Speaker 01

  That's where the magic was. And that's where, that's where the magic of having people who understand artificial intelligence and can write interesting algorithms to be able to ingest data and do smart things with data and make smart predictions from data. That's what we did.

• 46:53Guy Raz?

  So this was a math challenge, like you basically had to come up with a formula that would enable you to give a plausible home value.

• 47:01Speaker 01

  Correct. And to say formula is simplifying it, but yes, initially, you know, now we run all of these, you know, galactically complex artificial intelligence models and just feed as much raw data as we can get our hands on into these. Machines, these software machines and see what comes out. And then, of course, we get to test the results every day because there are more transactions every day.

• 47:27Guy Raz?

  And this is 2005. And when were you planning on launching, publicly launching, this website?

• 47:32Speaker 01

  As soon as we got it done, as soon as it hit some acceptable level of bugginess, I suppose. We figured we'd open it up as a beta, which was a cute way that technologists have of releasing buggy products. And say, look, you know, use it at your own risk. It might not work as well as you want it to, but hey, it's free. Tell us what's wrong with it.

• 47:52Guy Raz?

  So you start to suck in this data and process it and then run it through a proprietary formula. I'm not oversimplifying, but it starts to spit out estimates for homes all across the country.

• 48:05Speaker 01

  That's right. We do, development now becomes how well our latest algorithm does in guessing home values. How much better can we get? How much closer can we get? What is the median margin of error? We wanted to get it as good as we possibly could before we unveiled it.

• 48:26Guy Raz?

  So you launched February 2006. And by the way, was it totally stealth? Like, did you kind of, I don't know, let the real estate industry know that this was going to come out? And yell the people involved in that industry? Or did you just kind of put it out into the world?

• 48:40Speaker 01

  Completely stealth, engineered by Amy Batinsky, our marketing chief. We used stealthiness as intrigue. And so, and there was a lot of it. We were, you know, known entrepreneurs and we did a good job of dribbling out little tidbits of crumbs to get people interested. And so people were watching and waiting and wondering.

• 49:00Guy Raz?

  And I think it was leaked, right, by the Wall Street Journal?

• 49:03Speaker 01

  Well, so we finally are ready to unveil it. And I don't know if you remember Walt Mossberg, you know?

• 49:10Guy Raz?

  Sure.

• 49:10Speaker 01

  He had that personal technology column. And so I flew to DC to go pitch Walt, to give Walt a preview, a secret preview. And we did that with several reporters and we asked that it be embargoed until such and such a date. And Walt, just because he was Walt, kind of broke embargo by three hours and published a little bit early. And it just, the world showed up at our, you know, at Zillow.

• 49:36Guy Raz?

  That, that article in the Journal, all of a sudden, bam. And what happened? Did it, was it able to handle the traffic?

• 49:43Speaker 01

  No, no, I can't remember exactly, but it was down by 8:00 AM. It had tipped over and was sad and sick and dead by 8:00 AM of the launch day. Like, yeah, it immediately crashed.

• 49:57Guy Raz?

  Everybody was looking to see what their house was worth.

• 49:59Speaker 01

  That's right. And just, it just sounded like Walt, you know, Walt wrote about it. I can't remember what his headline was, but real estate porn or something. And everybody was curious, so they showed up. I remember being kind of curled up in a ball on David Bytel, our CTO's couch, and just kind of rocking back and forth, saying, make the pain stop, get things back up.

• 50:22Guy Raz?

  Because it crashed. Because Zervu crashed.

• 50:24Speaker 01

  Because it crashed. Yeah, all these people, we knew all these people were showing up and seeing nothing.

• 50:30Guy Raz?

  When we come back in just a moment, how the Zestimate became a provocative new tool of real estate, and why, after just a few years into the business, Rich decided to step away as CEO, and then, why he came back. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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• 52:30Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's early 2006 and the brand new real estate platform Zillow has just launched and just crashed because it can't handle all the traffic. And Rich is freaking out about it. But Amy, the head of marketing?

• 52:49Speaker 01

  Amy made lemons out of lemonade on this one. She was ready for it because she figured it was going to fall over. And at Lemonade Out of Lemons, for her, it was basically a round of stories saying, wow, it's so popular, it tipped over. It just made more people want to come.

• 53:04Guy Raz?

  I think you had about 60 million homes at that point. So not, not every home in the US was on there.

• 53:09Speaker 01

  Right.

• 53:10Guy Raz?

  But you were adding it, that information as quickly as you had the data?

• 53:14Speaker 01

  Yeah, we figured 60 million was good enough out of 100, maybe a base of 100 million. His estimates were good enough. They weren't great, but they were good enough. I mean, just imagine, if you're in the market for a home, you're going to go look, right?

• 53:26Guy Raz?

  Yeah.

• 53:26Speaker 01

  You know, because it's key marketplace information. Like, what do these Zillow folks think this house is worth that I'm looking at? What's my house worth?

• 53:34Guy Raz?

  I imagine when this was launched, a lot of people were pissed off, starting with real estate agents and assessors, like, right away. Because this is like, what are you doing? Who are you? They must have been really pissed off.

• 53:48Speaker 01

  Yeah, I mean, I might use provoked. So the industry being provoked was for sure, certain. Most of the industry people kind of dismissed us as a parlor trick.

• 54:01Guy Raz?

  They were saying, oh, this is nonsense. These estimates are not accurate. Don't even pay attention to them.

• 54:07Speaker 01

  Right, exactly.

• 54:08Guy Raz?

  And by the way, real estate agents, speaking from experience, still do say that.

• 54:12Speaker 01

  Many do, but we have 235 million users a month, many of them real estate agents.

• 54:20Guy Raz?

  Yeah.

• 54:21Speaker 01

  It provokes and kicks off a conversation about what real value is. And the great professionals and the forward-thinking professionals in the industry recognized that immediately and saw it as a tool, a tool to start conversations with clients and potential clients.

• 54:38Guy Raz?

  In those early days after you launched, shortly before you did launch, you took some outside investment. And I have to assume that you had to think about, how is this business going to make money? So, I mean, did you start to, like, build a team to get advertisers on board, things like that?

• 54:56Speaker 01

  Yes, absolutely. The easiest thing for us to do was to drop Google AdWords and start generating a little revenue, which it did immediately. And then we started hiring business people to actually go sell custom ads that were targeted and relevant to real estate for us to experiment with running ads alongside all this traffic.

• 55:18Guy Raz?

  So you thought that, you know, hey, we can get real estate agents to advertise on the site. And what about other ways to? Because advertising alone would not, I'm assuming, wouldn't be enough. What other ways were you thinking of generating revenue?

• 55:32Speaker 01

  Well, it turns out when you have a big enough audience, advertising can work quite well.

• 55:37Guy Raz?

  Yeah.

• 55:38Speaker 01

  And when you can have super-targeted, relevant advertising in the product experience, it isn't viewed as intrusive or advertising by the consumer. It's actually viewed as valuable content. And so a real estate agent advertising alongside a listing to say, hey, if you have questions about this property, give me a buzz, here's my number.

• 56:04Speaker 01

  Well, that seems helpful and it is helpful. And it's advertising, too.

• 56:08Guy Raz?

  Yeah. And what about, was there part of the idea initially was let's eventually get into the business of selling homes? Did that, because that was initially the idea. Let's do auctions. But now you're listing home prices where you're starting to think about, okay, maybe we can do this digital real estate thing.

• 56:26Speaker 01

  Well, our dream right from the start was to bring e-commerce to real estate.

• 56:34Guy Raz?

  Right.

• 56:34Speaker 01

  With right through to the transaction and to take all this kind of frustration and inefficiency and scariness out of the transaction. And so our way in was through search and find and the Zestimate and kind of the turn on the lights in the room aspect of the kind of first era of Zillow. And that worked extremely well and we had a great business model based on that. But the hard work of digitizing the transaction and turning this into a proper e-commerce transaction, that's just begun. So it's exciting.

• 57:07Guy Raz?

  Meantime, Rich, while you were launching Zillow, you co-founded Glassdoor, which is another similar kind of site where you can go and see what companies pay their employees and it's a review site on businesses. Some people hate it, some people love it. Are you just, I don't, do you have like an attention thing? Like, do you have, like, what's going on?

• 57:29Speaker 01

  I've always liked to do lots of things and we had just such a great, the kind of Microsoft slash Expedia diaspora, such a talented group of people that I loved. And one of those great people, Robert Homan, who had been a development manager at Expedia, he had left and he was a gamer and he had spent like six months in his basement playing Starcraft or something and his wife had had it. She's like, Rich, you gotta help me get Bob out of the basement. And so Bob and I started brainstorming about new businesses and we landed on, you know, this is Bob, you know, Bob's baby. We landed on Glassdoor and I helped him out.

• 58:06Guy Raz?

  Wow.

• 58:07Speaker 01

  You know, provocation is a fantastic marketing strategy. I've had many companies now where I've used this as a tool. Being able to see what salaries are at different companies for different jobs, you could call that creepy, or you could call that just and fair and transparent and empowering.

• 58:27Guy Raz?

  So back to the Zillow situation, I mean, not that long after you launch, the stock market crashes. It turns out that the housing market in the US was totally, all of a sudden it collapses. When you started to see that in late 2008 and certainly began, really began to hit hard in 2009, 2010, first of all, what happened to your business?

• 58:50Speaker 01

  Well, we were still pretty small. We didn't have much business to be at risk, but we were very concerned about, you know, the next few years ahead. And so it was an incredibly scary time and quite a shock. Truthfully, our traffic held up quite nicely throughout the whole thing, but because of massive uncertainty around business model and the pretty high expense burn rate we had, because at the time, we had about 150 people at the company, this was the most difficult six months of my professional career because we had to downsize the company.

• 59:27Guy Raz?

  You had to let go of people because you saw a drop in your revenue?

• 59:32Speaker 01

  Our revenue did drop, but the scarier thing was that we didn't know when and how revenue was going to come in the future. And it was, I kept a diary at the time, it was pretty tough. I mean, these are people that, you know, I loved and had gone through a lot of hard work with in the trenches and, you know, we had to, we had to let them go. It was a learning experience and it turned out to be a fairly short-term bump in the road for the company, but it was a tough time.

• 1:00:04Guy Raz?

  When the bottom fell out of the housing market, the US homes lost like $2 trillion in value, right? So all of a sudden, Zillow is not that fun to look at. You're just watching your house like tank in value. Just kind of explain to me how Zillow's like prospects are tied to the real estate industry at that point. I mean, and maybe still to this day, are they? Are they joined at the hip?

• 1:00:28Speaker 01

  No, not at all. And it's because the big trend is the move from the old way to the new way, from the offline, difficult legacy to the new. Digital efficient, pick your vertical industry. That is the history of the last two decades of technology taking offline things and moving it online. That is what drove, has driven Zillow right from the start. And that trend exists regardless of the minor ups and downs in the housing market.

• 1:00:57Guy Raz?

  All right. So you, you're now like five years in. Zillow, I guess, is getting ready to go public in 2011. You were the CEO of the company. And right before you do go public, you, around then, you stepped down. And the title CEO goes to Spencer Raskoff, who was a co-founder of yours. Why did you, why did you step down? Were you just bored? Were you looking to do something else?

• 1:01:23Speaker 01

  No, Spencer was ready to run the company and he was excited to take a company public. I had had that experience and knew the joys and woes of being a public company CEO and taking a company public. And so, and I had a lot of things going on. And so, we decided to switch chairs around a little bit and I kicked myself upstairs to executive chairman. I didn't leave the company. I was still an executive at the company as chairman. But Spencer took over the day-to-day leadership.

• 1:01:54Guy Raz?

  I think you come back to run the company in 2018. I mean, Zillow grew a lot, obviously. It's publicly traded and there was lots of acquisitions, including of Trulia and other, some other brands. Why did you return to, to the CEO spot in 2018?

• 1:02:14Speaker 01

  We had accomplished the kind of first false summit that we were after in amassing a huge audience that we empowered with information they hadn't had before. But as we were speaking about before, we had not yet streamlined and integrated and digitized the transaction itself. And that, that, we kind of all decided that that new mission required a set of skills out of the captain that were more like a startup. And so Lloyd and Spencer and I all kind of decided that this was the, a good opportunity for me to come back and put my hands on the wheel.

• 1:02:55Guy Raz?

  One of the things that, I don't know if you, you were sort of overseeing or if it started before you, you returned was this, um, this new product you offer is like called Zillow Offers where basically people can offer to sell their homes to Zillow directly and Zillow can acquire the home, fix it up and then resell the home. And this is now something you offer, right?

• 1:03:16Speaker 01

  That's right. What we're basically trying to do is solve the frustration problem that anybody out there who sold a home has gone through and knows well, which is how much is it going to sell for? When is it going to sell? How many people are going to come through my house and not wipe their shoes and use my bathroom and go through my closets? And, and by the way, how am I going to line up the timing to get into the new place? Cause I'm moving somewhere. It's a fraught and emotional and financially fraught process, right? And so we saw a way with Zillow Offers to offer a service, kind of a market making service to say, look, we're going to give you a fair price for the house

• 1:03:59Speaker 01

  so that you can pick your date and timing. You don't have to have anybody other than us come through your house. You can get your next house all lined up and then on a date of your choosing magically click your heels and push a button and move.

• 1:04:12Guy Raz?

  So basically Zillow buys a house from the seller and what, I mean, does that mean it eliminates a lot of the transaction costs?

• 1:04:20Speaker 01

  We basically can eliminate a bunch of the transaction costs and streamline the whole thing because there's a bunch of waste in the process, but we do charge a fee for the service. We charge around, you know, five to 7% of the transaction to be the market maker.

• 1:04:35Guy Raz?

  So the value proposition is not necessarily saving money. It's just saving the hassle of like open houses and, and that stuff.

• 1:04:43Speaker 01

  Correct. Eventually as we scale, maybe it's, maybe it's saving money too. Right. Eventually, you know, maybe it's not.

• 1:04:48Guy Raz?

  Rich, I'm curious because you also have to manage.

• 1:04:53Guy Raz?

  A constituency that you also depend on. Like, when you had Expedia, there were lots of travel agents who were mad about it. Well, you could argue, look, that's technology, guys. This is the way the world is going. And there are some very successful travel agents today who provide very high-level service. I have to imagine that real estate agents didn't like this, but they are also a constituency that you need because you work with them. So, talk about managing that relationship and how you assure them that you're not going after their turf.

• 1:05:29Speaker 01

  Look, it's not as tricky as it might seem. The future, for those who care to look, is pretty clear. The trends are pretty clear. The consumer wants access and control. The consumer wants less frustration. The consumer wants 3D shopping and wants to be able to go visit the house as many times as they want and use their Zillow iPhone app to let themselves in. This is what the consumer wants, okay? Great real estate professionals absolutely know that as well. You're mistaken if you think we're trying to replace the agent and replace the industry. We're literally just trying to give consumers a better experience and let them choose the door they want to go through.

• 1:06:12Speaker 01

  And we're there to help them, no matter how they want to do it.

• 1:06:16Guy Raz?

  I'm wondering about this past year, the pandemic, because it's actually, your stock price has just skyrocketed, along with other companies. Does that have to do with the way consumer behavior has changed during the pandemic?

• 1:06:34Speaker 01

  Well, I guess in part, Guy, but I guess the first thing I'd say to that is that, obviously, the company isn't, in reality, that much more valuable in the space of one year, which just highlights how the stock price is not the business. The business is the business, and in the long term, the stock price reflects the business. Warren Buffett likes to say, in the short run, the stock market is a is a voting machine, a popularity contest.

• 1:07:07Guy Raz?

  Right, right.

• 1:07:08Speaker 01

  In the long run, it's a weighing machine. It's how much, what, how big is, you know, how much of a business did you create? And so we try not to focus too much on that. Now, all that said, pick your trend, be it business, political, social. Pick your trend that pre-existed COVID, and I'll show you something that was accelerated by at least five years during COVID.

• 1:07:32Guy Raz?

  Yeah.

• 1:07:33Speaker 01

  And this transition from offline to online, from legacy to digital. It was, in real estate, it was accelerated, just like e-commerce was accelerated for Amazon. And just like, you know, Netflix became even more essential.

• 1:07:46Guy Raz?

  And has it changed the way people are buying homes? Like, I mean, presumably, because it's still, you go on there and there's, you know, your home value. But let's say you want to buy a house. Like, does it change how people are using your platform?

• 1:08:01Speaker 01

  Well, they're using it a lot more, just like they're using Netflix more. It's more important. They're not only being entertained, but everybody wants to move. But more interestingly even than that is that all of these digital tools that we've been using for safety purposes during the COVID, so 3D touring, remote touring, digital closing. Like, I don't want to show up anywhere to sign the 300 pages of documents that happen at a closing. Let's do that all digitally. Okay, so all of this was required for safety during COVID, has been, and still continues to be. But of course, all of these things are going to be the convenient, you know, going to be demanded as convenience in the future, post-COVID.

• 1:08:46Speaker 01

  So, yes, the move towards e-commerce in the real estate business has been accelerated dramatically, permanently.

• 1:08:53Guy Raz?

  Rich, I know that you guys have introduced a whole bunch of different offerings. You've got rental listings now and other kinds of listings that generate revenue. But Zillow is yet to turn a profit. Is that just par for the course from your point of view? Like, well, you know, it's just going to take some time.

• 1:09:12Speaker 01

  Well, of course, I want to show a profit. And we've actually recently had a few quarters that we have. You know, just because I'm such a, I dream so much about what can be in the future.

• 1:09:22Guy Raz?

  Yeah.

• 1:09:23Speaker 01

  As long as we as a team and our investors truly believe in the long-term growth opportunity, investors are more than willing to take not much profit in the short term for a chance at a much bigger business in the long term and look no farther than Amazon or Netflix.

• 1:09:43Guy Raz?

  Most people are uncomfortable with this topic. And as you probably know, as a listener to the show, I'm uncomfortable with almost nothing. You have more money than you will ever need and for many generations after. What do you plan to do with it?

• 1:09:56Speaker 01

  Well, it'll be fun to give it away.

• 1:09:59Guy Raz?

  Have you started to do that yet or not quite yet?

• 1:10:02Speaker 01

  Oh, yes, yes. I mean, I would say we're fairly mature philanthropists, Sarah and me. When we sold Expedia, we created a family foundation. So this was a long time ago, though the scale of our philanthropy is increasing dramatically and will continue to do so. And that's, you know, that's very exciting to me and it's exciting to Sarah. And it's hard to do well.

• 1:10:26Guy Raz?

  Yeah.

• 1:10:27Speaker 01

  We're very focused on criminal justice reform. So that's been the primary focus of what we've done. But we will do a lot, a lot more into the future.

• 1:10:35Guy Raz?

  When you, when you think about your journey and all of the things that you were able to do, you know, and the opportunities you had, do you attribute your success to how hard you work and how smart you are? Or do you think more of it has to do with luck? What do you think?

• 1:10:54Speaker 01

  Yeah, I mean, I'm a grateful guy. I feel like I have been consistently lucky to team up with such an insanely smart and hardworking bunch of people who kind of, who knew, who knew magic that I didn't necessarily know and that I've always been good at painting a mission that was exciting, that I felt I was passionate about. And so passionate leaders have come to join the team. But there's really, I'm having so much fun doing this. We really are on the cusp of changing the biggest industry there is. And I am lucky.

• 1:11:37Speaker 01

  I'm not just being coy when I say I really love what I'm doing and I have no plans to do, to do anything else.

• 1:11:45Guy Raz?

  That's Rich Barton, co-founder of Zillow and Glassdoor and founder of Expedia. By the way, traffic to Zillow skyrocketed this past year. In 2019, the site had 1.5 billion views, but it rose to more than 9.6 billion views in 2020. Thanks so much for listening to the show this week. If you're not yet a subscriber, please do subscribe wherever you get your podcasts. If you want to write to us, our email address is [email protected]. And if you want to follow us on Twitter, we're at Guy Raz or at How I Built This. You can also find us on Instagram. That's at How I Built

• 1:12:28Guy Raz?

  This NPR or my personal account, at Guy dot Raz. This episode was produced by Casey Herman with music composed by Ramtin Arablouei. It was edited by Neva Grant with research help from Derris Gales. Our production staff includes J.C. Howard, Rachel Faulkner, James Delahoussaye, Julia Carney, Farah Safari, Liz Metzger, Janet Wu-Jun Lee, and Annalise Ober. Our intern is Harrison Vijay Choi. And Jeff Rogers is our executive producer. I'm Guy Raz, and you've been listening to How I Built This. This is NPR.