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C|Net’s Webware section has recently published a list of 11 “troubled web companies.” The piece appears to consist mainly of hypothesis by Rafe Needleman based on the various business models of the companies involved. Zillow made the list at position #4:

The real-estate site’s revenue model is advertising. Real estate and bank advertising. Unless the real-estate research site starts charging for foreclosure listings, I don’t see it doing too well in a hunkered-down economy, in which people are trying to hold on to their homes for dear life, not upgrade.

Not sure why Zillow was singled out among all the various real estate search aggregators, but I would imagine the same criticism would hold for any of them. For that matter, the same criticism might hold true for all advertising-based businesses as credit issues are not limited to real estate and banking.

Myself, I don’t entirely buy it. Needleman’s rationale for including Zillow involves the non-paying audience of the site (“people … trying to hold on to their homes for dear life”) and not the paying part of the Zillow audience. A commenter, Renoir, put the opposite spin on audience situation (emphasis is mine): “Zillow provides a valuable service and homeowners will be checking their home prices like they check the stock market to see which one rebounds first.”

Certainly banks and real estate are going to be looking pretty carefully at their expenditures; all businesses will. But do any of them think that decreasing their visibilty will help them improve their business? If Zillow can find a way to demonstrate value in a crumbling marketplace I’m sure they’ll do fine.

On the other hand, not everyone who is in the real estate profession today will be next year. If the ones that disappear are the ones who are advertising then I suppose there’s more merit to Needleman’s claim that Zillow is “troubled.”

I can appreciate C|Net’s requirement to publish eyeball-gathering content regularly. But a more interesting article might have actually looked into the business models of the “troubled” companies far closer and perhaps included financial information where it was possible.

[Update: Spencer Rascoff CFO and VP of Marketing (yeah, I admit that sounds a little funky) was interviewed by BlogTalk Radio and had this to say (about 19 minutes into the audio on the linked page):

Our whole goal is to get traffic to the website. Last month we got almost five and a half million people to the website. Up 42% versus the same time last year. … Our advertisers are typically real estate brokers or agents who are advertising themselves or their listings. As well as large national advertisers that are trying to capitalize on this decision point of buying or selling a home. Which drives a lot of purchase activity whether it be a new car or TV or washer/dryer or a new lawnmower or new cable service or new cell phone or you name it. A lot of those kind of transactions occur around the home buying transaction. So we sell a lot of advertising to a lot of those types of companies.

Later on (about 29′ 20″ into the audio on the linked page) Rascoff is asked about the direction of Zillow and he says:

So we’re a private company and we’ve raised almost 90 million dollars in venture capital. We someday may go public. We have very patient investors. The traffic is going great and the revenue monetization is coming along nicely our key areas of focus are improving the quality of the data that we have, the accuracy of the Zestimates, the information we have on all these homes, the quality of the listings. We have a lot of work to do on mortgage marketplace to really blow that product out. And we have a few other things up our sleeves as well so, we’re busy

Ok so obviously these are a just nice simple answers to softball questions. But perhaps they could serve as a starting point for asking more pointy questions if someone wanted to determine if Zillow really was “troubled.” Things that come to mind might be:

• Just how patient are the investors?
• What amount of the ad inventory is taken up by larger nationals or other types of clients who are likely to continue advertising through our current financial situation?
• Insert your question here.

My guess is that, if pressed, we could have answers to these questions. And then, based on those answers determine whether Zillow is “troubled” or not. But calling them troubled because they are a content play doesn’t quite seem worthy of the “troubled” moniker. As my brother-in-law might say: that’s just calling a dog a dirty name and hanging it.]

[Update Again: Today Zillow let go of 1/4 of its workforce. From the Zillow blog Rich Barton says:

This week we are reducing our workforce by 25%. This was an incredibly painful decision for me and the leadership team, but, in the end, we concluded that we had no choice but to securely batten down the hatches as we sail into a major economic storm.

He goes on to say (repeating some of the information Rascoff gave during his phone call the day or so before):

One of the reasons this is so difficult is simply because the business continues grow. In the midst of the madness that surrounds us, we counted 5.4 million unique visitors to Zillow.com in September, which was a 42% increase in traffic over this time last year. Fear, value-shopping, and curiosity are driving people in record volumes to our site. … While our revenues do not yet cover our expenses, those revenues have been growing at a rapid pace and we will continue to have open positions in areas that are directly tied to revenue, such as advertising salespeople.

Best of luck to the Zillow team past and present.]

All that said, I’m [ed note: clearly] no business forecaster, I have no insight into how Zillow is run or managed and I’m sure I’m missing something. Please correct me in the comments.