The Real Benefit to the Zillow and Trulia Merger

Big advertisers need big media sites. Zillow is big and Trulia is big, but they are not huge. "Huge" would be Facebook.

Think of the Madison Avenue crowd. Both companies have sales staff pitching pretty much the same value proposition. That sales team now turns into one. Zillow CEO Spencer Rascoff pretty much said exactly this in an interview with Jim Cramer, the host of Mad Money.

"Rascoff noted that when it comes to the Internet, user experience rules. Once you have an audience the advertisers will follow, he said, which is why the Trulia acquisition makes sense. Zillow will operate both brands when the acquisition closes, allowing users to pick the brand that fits them best or advertise on both platforms"

WAV Group has seen this before, but not at this scale. For example, when a large phone carrier wants to target real estate agents, they come with a budget of $1 million or more to spend. There are not enough B2B impressions to fill that order. I presume, by extension, that Zillow and Trulia will combine to go after the huge online advertisers – Fortune 100 types.

Furthermore, they have put a moat around the business with Zillow, Trulia, Yahoo Real Estate, MSN Real Estate, AOL Real Estate, Scripts, 360 Newspapers. Aside from the MOVE network, it is pretty hard to access homebuyer and sellers at scale without going through the Zillow network. Better yet, Zillow and Trulia will not undercut each other's prices. The fact remains that the home buyer and seller impression value is far above the current rates because of the amount of money they spend in the home transaction process. Thousands of dollars are up for grabs.

We saw some other signals this week that will continue to play out if the merger is successful. Brokers will be able to negotiate terms with both sites in concert. Although the pricing for each site may be different, the principles around things like fair display guidelines are likely to apply to both sites.

Most firms treat Z & T as a category of sites. They treat MOVE differently because of the National Association of Realtors affiliation to realtor.com. For example, I imagine that the Edina Realty agreement with both sites was pretty uniform and Allen Tate's choice to drop both was pretty uniform. Not being involved in either of those transactions, I can only suspect to what went down.

Consolidated sales teams, consolidated accounting, consolidated advertising programs--but, more importantly, consolidated data management will all put margin back into each company in pretty significant ways. Just to give you some perspective, it likely costs about $20M to consolidate data on each site.

As the old saying goes--game on!