The Naked Truth is Out: Redfin is Profitable
The Naked Truth is over. Every terrace of the Olympic Sculpture Park was packed. All the panelists were mobbed. And we announced our big news: that Redfin was profitable last month, all while maintaining our 97% customer satisfaction. The business has been growing by leaps and bounds, in part because the real estate market has had a small rally this summer, but in part because we’ve started to figure out how to prosper in down markets too. What has made the difference for Redfin hasn’t been any one breakthrough that we could have pinned our hopes on, but a combination of small adjustments:
- Giving consumers a choice of agent, and unlimited home tours.
- Publishing agent reviews, which increased demand 36% in a single month.
- Simplifying the agent choices we offer consumers, which increased demand a further 16% in a single month.
- Generating referral revenues from customers in outlying areas that we can’t afford to serve ourselves.
- Figuring out Google optimization, which drove a 300% increase in traffic year over year, though that growth is now slowing.
It’s nice to wonder how much more profitable Redifn can be once the market really recovers. But since real estate is a seasonal business, we’ll have plenty more ups and downs in our fortunes along the way.
The difference now is that even if Redfin goes back down, we’ll always know that we can go back up. And knowing that is a huge salve for what’s most unbearable about startup life: the aching possibility that it can never work, that the game is so stacked against you it doesn’t even matter what moves you make. Well, Redfin has plenty of problems, and we could still easily fail, but we know now how we can win, too.
Wait, What About the Naked Truth?
And we’ll keep on trying to learn from others, like the entrepreneurs, journalists and investors who attended the Naked Truth tonight. We’ll post the Naked Truth video some time on Friday, but for now here’s what struck us as most interesting about the event.
Picnik’s Jonathan Sposato – wearing Gucci wrap-around glasses and a seersucker suit – said that partnerships only generated 16% of Picnik’s traffic, and that subscriptions accounted for 80% of its revenues. (I was surprised by how much Picnik’s margins seemed to be affected by photo storage, a feature I never cared about as a premium subscriber.) What really impressed me about Jonathan’s overview of Picnik – I have always been opposed to ads on Redfin, and more interested in subscriptions – was how important that 20% of ad-generated revenue was to Picnik.
And I learned a lot about ads. Urbanspoon’s Ethan Lowry – - who said that Urbanspoon employed only three people full-time when Michael Arrington picked out a fourth Urbanspooner in the crowd (”she’s part-time!”) – said that Citysearch’s local salesforce got top-dollar, whereas Adsense and iPhone ads paid much lower rates. The closer ads are to a point of purchase, the higher the rate; the best rates come from local restaurants hoping to get a reservation directly from the ad.
As a buyer of ads, Animoto’s Brad Jefferson explained that you can’t buy traffic until you understand how much revenue it will generate; at first, pay advertisers based on the revenue they generate, then later based on impressions or clicks. It sounded so obvious when he said it, but we paid for traffic in the early days without knowing diddly about what it was worth to us.
Michael Arrington said that TechCrunch makes its money mostly from events, not ads. Damon Darlin said the New York Times has avoided events so that it doesn’t become a cheerleader for the businesses it covers.
Twitter and Growth
Fred Wilson said that Twitter hadn’t chosen a revenue model because it was focused purely on growth — a luxury that it seems Twitter alone can afford to have right now — and Michael Arrington said that Twitter was like YouTube, which sold for a high valuation because Google had to evaluate it revenue potential in lieu of actual revenues.
Fred then claimed that his own blog got as much traffic from Twitter and Facebook as from Google, whereupon Michael Arrington told Fred he was wrong about his own blog. Which is why we all love Michael Arrington.
Fred Vogelstein said that startups could generate less revenue because they spent less money. Fred Wilson said that companies focus on revenues too much in lieu of earnings.
Ethan noted that a $5 iPhone application that sold to all 40 million iPhone owners would still only have a total possible market of $200 million. Fred Wilson shot back that iPhone developers will make far more money now on the new ability to charge for upgrades and transactions.
And Then The Fur Started Flying
Damon Darlin showed Michael Arrington his notes for their hotly disputed interview about bloggers’ accuracy and speed. Fred Wilson told Michael Arrington that his complaints against Seattle were a “crock of shit” but then — because Arrington gets blamed for everything — everyone pretended that it was Michael who had called out Fred (when all Mike said was: ”Name another big Seattle hit besides Amazon and Microsoft?”). Damon Darlin compared me to Steven Spielberg. I told Fred Wilson my blog posts took forever to write; he said, once he started writing, his never took more than 30 minutes. (How on earth does he do that?)
Thanks to everyone who came to the event, to our fantastic panelists who traveled from far and wide to participate, to our sponsors Madrona, Fenwick & West and Square 1 Bank, and to Angela Cough and the rest of the Redfin crew here who put it together. And thanks most of all to our wonderful clients, to this community, to all the hard-working folks of Redfin, past and present, who got us to this big milestone!
Galen said:
Congratulations!
July 10, 2009 9:08 AM
Alex Loddengaard said:
Congrats!
July 10, 2009 9:09 AM
Jon said:
I have been looking for a home now for 7 months. I check your site daily for new listings and price reductions. Thanks to your site I have a lot more say in the homes I want to preview while also being picky on what I want. Thanks REDFIN!
July 10, 2009 11:16 AM
Nick said:
Congratulations!
I have been using Redfin to keep up on market trends in general, and although I’m not near buying a new house currently, when I get there I fully intend to use Redfin (if I move to a covered area). The features are great, the service is great, and the info is essential. Keep up the great work.
July 10, 2009 12:52 PM
Redfin Turning a Profit Even in Serious Down Market | Seattle Bubble — News & discussion about real estate & the housing bubble in the Seattle area. said:
[...] to Redfin, who announced today that they are officially profitable: The Naked Truth is Out: Redfin is Profitable Redfin was profitable last month, all while maintaining our 97% customer satisfaction. The business [...]
July 10, 2009 2:59 PM
Toni Mancaruso said:
I think that is great news! I am a Redfin addict myself. I too check for new listings and price reductions daily. There are so many features, I can’t think of one thing you have missed. As a web developer myself, I have a real bad case of site envy. I would love to be part of the team that put this awesome product together!
July 10, 2009 9:16 PM
wunsacon said:
Great site. Congratulations on profitability.
July 11, 2009 9:56 AM
Maggie said:
Just took my first Redfin home tour yesterday in DC. Loved the process & your business model, and glad to hear you’re making it work. Keep up the good work! Like the commenter above, I work on the Web, and our whole team loves this site, and looks to it as an example of Web best practice!
(suggestion: would love to see at least a few photos archived of properties sold in last 6 months to help me determine my offer based on upgrades/property condition)
July 11, 2009 10:45 AM
Redfin Profitable said:
[...] Congrats to all the folks at Redfin. Their model, while clearly controversial, seems to be succeeding. [...]
July 11, 2009 1:10 PM
Glenn Kelman said:
@Maggie, glad you had a good tour, and we’ll try to get photos of recently sold listings added to the site, hopefully by this fall.
@Toni, we aren’t hiring too many folks just now, but drop us a line anyway, and we’ll contact you when something comes up…
@Wunsacon, thanks for your kind words!
July 11, 2009 5:02 PM
rick said:
Congrats ! A lot of hard work went into Redfin and its good to see it pay off.
July 12, 2009 6:46 AM
Harvey said:
Congratulations, I’m impressed to see a startup take hold under adverse market conditions simply by providing openness, honesty, and transparency to the process.
Redfin is all about providing knowledge and information to the consumer. The concept is entirely modern and people will appreciate it.
July 12, 2009 8:30 AM
Sarasa said:
Congratulations! And thank you so very much for educating us, the consumers, and helping us to see through the opacity of homebuying.
July 12, 2009 11:57 AM
Brad-Bakersfield Homes said:
I’m glad to see the success! In this real estate market good news is very welcome.
July 12, 2009 7:35 PM
Redfin Out of the Red | Property Portal Watch said:
[...] bit worried: last month the company earned its first monthly profits. Writing on the company blog CEO Glenn Kelmann [...]
July 12, 2009 9:15 PM
Redfin Out of the Red | propertyadguru.com said:
[...] bit worried: last month the company earned its first monthly profits. Writing on the company blog CEO Glenn Kelmann [...]
July 12, 2009 9:19 PM
Adam said:
That’s big. If you can make money in this down economy, especially in real estate, that’s a very positive sign.
July 13, 2009 5:44 AM
liidkkaa said:
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July 13, 2009 7:44 AM
Glenn Kelman said:
@Sarasa, @Rick, @Brad-Bakersfield Homes, @Adam: thanks very much for all your kind words. We still have a long ways to go, but this is a huge milestone!
July 13, 2009 12:20 PM
Cynthia Nowak said:
Congratulations! It’s been awesome to watch Redfin evolve and grow.
What a gorgeous day and setting for an event, too. I’m glad I wasn’t the only one whom noticed Sposato’s hip attire. He was one of the first people I saw and I wondered if I was at the right event.
July 13, 2009 1:20 PM
Cynthia Nowak said:
… and that was meant as a compliment to Jonathan
Thanks to all the panelists too!
July 13, 2009 1:34 PM
Glenn Kelman said:
We need to hold more events so we can see more outfits, I agree Cynthia…
July 13, 2009 2:49 PM
The school of Redfin revisited | 1000Watt Consulting said:
[...] well-documented fact may be an anomaly, the brief shining moment of a real estate Camelot in which [...]
July 14, 2009 8:11 AM
Congrats to Redfin… « Lightning | Twice said:
[...] Being a startup (albeit self funded) ourselves I thought this was really great to hear that Redfin recently announced they had turned their first monthly [...]
July 14, 2009 9:10 AM
Delvoy said:
Good to see I visit your site every day
July 16, 2009 7:05 AM
Susan Brady said:
I’ve always had the faith and am so glad that it came this soon. (Although it probably doesn’t seem that soon to you!) Keep up the good work!
July 16, 2009 10:11 AM
OnBlog: Weekly Roundup said:
[...] client Redfin turns a profit in a down market while keeping homebuyers [...]
July 17, 2009 11:24 AM
Steve said:
Congratulations – I’m very happy you have worked out some of the kinks. I extensively used your website to do research about a year and a half ago and tried utilizing some of your agents. Unfortunately, I was frustrated on some of the old policies you had in place. I felt like a leech using your exceptional website so extensively but giving nothing back in return – but it was a comfort level thing and unfortunately it was not there at that time. I am hoping to use Redfin the next time I sell and buy.
July 20, 2009 6:49 AM
Glenn Kelman said:
@Steve, don’t feel bad, just give us another shot when it makes sense.
@Susan Brady, great to hear from you and thanks for following our progress…
July 26, 2009 8:17 PM
Teens and Twitter | Redfin Corporate Blog said:
[...] thoughts. I can search for all mentions of Redfin to see how people are reacting to the news that we’re finally profitable, or I can see what people are saying about the new Harry Potter movie. But I’ve got news for you: [...]
July 26, 2009 10:42 PM
Redfin Profitable | said:
[...] Congrats to all the folks at Redfin. Their model, while clearly controversial, seems to be succeeding. [...]
July 26, 2009 11:46 PM
Redfin’s July Newsletter… | Redfin Corporate Blog said:
[...] Is Profitable Meanwhile, life at Redfin is very busy and just super fun too. We notched our first profit this past June, and expect to make more money all summer. When representing home-buyers, our agents are the [...]
July 28, 2009 8:42 PM
Paul said:
Just saw you (Glenn)talk on a couple of panels at Inman Connect, San Fran this week. Conference was weak. No matter.
Anyway I wanted to say well done! On reaching profitability of course, and for showing real backbone, integrity and openness on those panels. You shared genuine, honest insight and that was a standout.
You mentioned your challenges with the seasonal nature of the Real Estate business. My thought (and yes you didn’t invite opinions) was that Redfin have the advantage of committed employees who can collaborate and coordinate over work, rather than jealously compete over it, which should make it possible to share workload across employees and offices. Yes I know Real Estate requires local knowledge, but not to the extent that a qualified Realtor cannot assist in different markets and understand local regulations and conditions. It takes a bit of IT infrastructure to enable the workload management and it impacts the business process of course, so not a trivial choice, but that was my thought; generate economies and competitive advantage through virtual office team(s). I think buyers and sellers could appreciate that they’ve got a team behind them and not just a lone agent.
August 9, 2009 5:49 PM
September Newsletter: Prices Up, Sales Down | Redfin Corporate Blog said:
[...] 10% of our overall traffic on weekends when home-buyers are out touring homes in force. Since our break-even month in June, we’ve kept the profits coming; our buyers’ agents are still the top producers in almost every [...]
September 29, 2009 5:09 PM
Greylock Leads a $10 Million Investment in Redfin | Redfin Corporate Blog said:
[...] is to keep performing, taking on new risks rather than just consolidating existing gains. We’ve been profitable since June, but didn’t have much money in the bank, and,as we explained this morning to John [...]
November 12, 2009 10:25 AM