When we look back on 2019, we will realize that Rich Barton stepping back in as CEO of Zillow (NASDAQ: ZG) was one of the industry’s most significant events. Barton is our choice for the most powerful leader in real estate for 2020 as he wields significant control over the largest and most significant technology company in the real estate space, and using it to embark on a significant pivot.
Barton, as a controlling shareholder and as CEO for the first five years of the company and then executive chairman, led Zillow’s evolution into a lead-gen powerhouse. His return to the top seat, then, should be understood as a real commitment to Zillow 3.0. As he said in March 2019:
There are some things that only founders have the authority to do to get people to realize that this isn’t just a small, minor tweak and change that’s happening at the company here. This is a massive redeployment of resources, a complete transformation of our P&L, and a dramatic expansion of the opportunity that we face.
T3 Sixty outlined this transformation in Chapter 3 of the 2020 Swanepoel Trends Report, “Zillow: Accelerating the Transformation.” The STR is a sister publication of the SP200 and also owned by T3 Sixty.
Barton and Zillow co-founder and executive chairman Lloyd Frink solely own Zillow Class B shares, which have 10 times the voting power of Class A shares. Effectively, Barton and Frink have total control over Zillow with 31.5 percent and 20.5 percent, respectively, of the company’s voting power. Outside investors cannot force Zillow to do anything Barton and his fellow controlling founder do not want to do, no matter how far Zillow’s stock price drops, and no matter how much real estate prognosticators talk about Zillow’s losses. Perhaps more than anything, this control insulates Zillow from the whims of investors as it embarks on a high-risk, high-return strategy.
Based around the iBuying service Zillow Offers, Zillow’s 3.0 strategy, is a total game-changer. Giving consumers the opportunity to sell their homes directly to Zillow without repairs, staging, updates, and the hassle, time and expense of a traditional list-and-sell process changes the nature of the transaction itself. Opendoor pioneered the model in 2014, but Zillow has moved into the iBuyer business with the aggression of a race car driver.
Barton and Zillow Group has not been shy about going for hypergrowth. In the first nine months of 2019, Zillow’s Homes division generated $762 million in revenue – big growth for a business that launched in 2018 and had $11 million in revenue for the first nine months of 2018 (note: revenue includes the total price of the homes it sells). At the same time, net losses at Zillow widened to $204 million compared to $45 million for the same period in 2018. Huge revenues coupled to giant losses signifies a big bet. And big bets will be the hallmark of the second Barton era.
Before Zillow, Rich founded Expedia within Microsoft in 1994 and successfully spun it out as a public company in 1999. He served as president, CEO and board director of Expedia from 1999 to 2003. He also co-founded and served as nonexecutive chairman of Glassdoor from 2007 to 2018. Rich was a venture partner at Benchmark from 2005 until 2018. He’s served on many public company boards and continues to be a board director for Netflix, Qurate, Artsy and Zillow Group. He earned a Bachelor of Science in general engineering: industrial economics from Stanford University.