August 22, 2007
The Web Is Becoming A Gigantic Lead-Generating Contraption for Business-As-Usual
The Wall Street Journal’s Rebecca Buckman published an article yesterday depicting Redfin as the oddball on an ad-crazed Sand Hill Road. Which is unfortunately true.
When we were meeting investors about our last round of financing, three huge deals for ad networks had just set venture capital abuzz: Microsoft bought aQuantive for $6 billion, Google bought Doubleclick for $3.1 billion, and Yahoo! bought RightMedia for $680 million.
Eager to capitalize on the trend, many potential Redfin investors seemed genuinely shocked that Redfin doesn’t run any ads whatsoever. Serving customers directly via flesh-and-blood agents, rather than simply sending them from our website to a traditional brokerage — this is a much messier business than running ads.
Yet having come to grips with this fact, investors couldn’t stop asking about “page views,” as if there were no other measure of a website’s success than how many ads it could have served. This page-view fetish is the reductio ad absurdum of the ad-driven mentality: a “page” after all is just a component of a web application, and a “view” is the most passive way to interact with that application. By measuring web applications in terms of page-views, we lose sight of what the application is supposed to accomplish, which in our case is the sale of a home. (We try to accomplish that goal with as few page views as possible.)
The circularity of the quest to generate page views perhaps explains the anomie behind many ad-driven Web 2.0 businesses. My friends at these businesses sometimes seem not merely daunted, which happens to all of us, but occasionally uninspired. Silicon Valley has gone from taking out the middleman to being a middleman, hoping to waylay users at a website before passing them on to a business that hasn’t changed at all how it serves customers. Travel sites like Kayak have become portals to other portals like Orbitz. The Web is becoming a gigantic lead-generation contraption for business-as-usual. It’s hard to get excited about that.
What’s funny is that Silicon Valley still thinks of itself as the swashbuckling foe of traditional industries, but every day it’s becoming more like Madison Avenue, minutely sensitive to traditional advertisers’ needs, and unwilling to rock the boat. The two used to be miles apart: Madison Avenue wants only to entertain you long enough to implant the urge to buy a Pepsi; Silicon Valley used to want to change the world. Now no one at an ad-driven real estate website can breathe a word about whether the real estate industry needs change.
And maybe they shouldn’t. It can seem naive or self-important to think that a business should have any purpose beyond making money. Yet many of the businesses most successful over the long haul — Apple, Hewlett-Packard, Sony, for example — have been built around a sense of purpose that motivates employees, appeals to customers and simplifies decisions. Nothing endures as well as a purpose.
And without some purpose, Silicon Valley will lose the fervor that once propelled us to build great companies. Of course Redfin is hardly great now, but we aim to be great. Our purpose is to use technology to put consumers in charge of buying or selling their home. This is the most valuable change we can offer the consumer. We hope that it can lead to our becoming the most valuable company in our industry.
If this makes companies like Redfin neither fish nor fowl, with real estate agents working alongside software engineers, then perhaps we will be the first awkward creature to stagger ashore on our own two feet, hopefully into a slightly better world.
Alex Mather said:
As a geek I’m always looking for ways to make money without doing anything, making anything, or having to deal with actual customers (gasp) but as an entrepreneur I find myself fighting those urges. Its just so tempting to skip the whole growth phase of a business and give away everything and bombard visitors with ads. It’s so much easier to direct people through the beaten (and treacherous) path than it is to blaze a new one.
In the end I don’t believe in an advertising business model, I spoke of this before on my blog and I’ll say it again - when it is a company’s goal to make money through ads - page views become the tactical missions of teams whether it is framed that way or not. Many companies will still wind up innovating and providing value while trying to attract more visitors (especially in such virgin territory like the world of real estate on the Internet) but in the end the law of diminishing returns will set in and new features will be less and less innovative and valuable and seem more like cheap tricks.
August 22, 2007 1:49 PM
Tony Wright said:
Good for you guys! I’m rooting for Redfin.
I think it’s a whole lot HARDER to provide a service/product that is valuable enough that web users are willing to actually PAY MONEY for it… Which is why a lot of companies fall back to advertising. Add to that that CPC prices have gone through the roof lately… And it’s a pretty comfy fall back position (for now).
August 22, 2007 2:27 PM
Technology said:
well, redfin has a good strategy in motivating customers to deal with business on them. offering direct transaction and keeping their focus on delivering good customer service and good value would really satisfy the needs of their customers.
August 22, 2007 3:50 PM
Chris Treadaway said:
Gee…VCs are unsophisticated in internet marketing yet they’ll tell you all about it anyway? shocking
…after the successes of google, overture, et al plus the impending success of facebook you’d think they’d add something to the conversation.
August 22, 2007 8:41 PM
Apella said:
Thank you Redfin for this post!
I was starting to feel a little bit alone in the world for having the idea that a blog or web site is for the company product or service, let alone being a company working to have purpose. Our site was designed to do the same as you point out… get the point across with the KISS mentality.
When the Apella main web site was being put together the debate over ad sales was very much toiled with and in the end the thought process was to put that on the back burner and concentrate on our main purpose of being an appraisal management company designed for real estate sales professionals and homeowners. Because the concept of what we do is new, we knew that our efforts would needed to be put into consumer education and introduction.
We have received much interest from others for our choice to do it the way we currently are and that being what seems to be Apella’s little concern over the lost revenue from add sales.
I say stick with your main objective and for the record, I foresee your service reaching rural markets by the means of the Internet, and when this happens the industry will be changed.
Good Luck!
August 22, 2007 8:46 PM
Bill Lyons said:
The person who can make it happen will be the next BILLIONAIRE in the space!
Bill
August 27, 2007 12:06 PM
Darryll Whaley said:
I think the article raises many questions about how we all perceive our own self as we seek to make a difference in the life of another. Sounds pippe longstocking but that is what we are all trying to do isn’t it? Make a difference. Sure we want to get rich, but the first taks is service. The only way this can be accomplished is by taking out te middle ma and getting back to grass roots marketing. Head on….one to one….
August 29, 2007 11:06 AM
Brian Brady said:
Genuine Tip: Stop calling yourself an online brokerage; the investors will be forced to look at you for your real value proposition.
September 14, 2007 8:35 PM
Apartamentos said:
Great pictures.
October 3, 2007 4:17 AM
Zeliem said:
That soccer ball in the side of the building is insane…it is a work of art - a sculpture really!
February 21, 2008 7:08 PM
Allison Scuriatti said:
I totally agree with Brian Brady.
July 4, 2008 4:59 AM