{ "docId": "019dd923-622c-750b-8b99-74af5c9e9edb", "docSlug": "de028a1085e6", "documentTitle": "Zillow Group, Inc. (Z)", "authorId": "54_Spruce_Point_Capital", "authorName": "Spruce Point Capital Management", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2024-03-05 00:00:00", "orientation": "landscape", "aspectRatio": 1.3333334, "pageNumber": 43, "pageCount": 103, "prevPage": 42, "nextPage": 44, "slideType": "preempt_rebuttal", "function": "preempt_rebuttal", "density": "overcrowded", "nDataPoints": 6, "notes": "Uses external survey data (1000watt) and industry analysis (KBW) to build a bearish case.", "elementsJson": [ "headline_text", "paragraph", "callout_box" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b99-74af5c9e9edb/43", "deckHref": "/decks/019dd923-622c-750b-8b99-74af5c9e9edb", "deckJsonHref": "/decks/019dd923-622c-750b-8b99-74af5c9e9edb.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b99-74af5c9e9edb#slide-43", "components": [ { "bbox": { "h": 0.11, "w": 0.84, "x": 0.08, "y": 0.81 }, "kind": "callout", "text": "This survey data supports the thesis that if compensation cooperation requirements were eliminated and home-buyers had to compensate their agents directly, a significant population of home-buyers would try to negotiate commissions, seek agents with lower fees, or even try to purchase a home without an agent.", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "ec86b0b1-eff3-4f4e-851b-102f5700dcc6", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "metric", "text": "commission compression: 30%", "attrs": null, "subkind": "primary", "toolName": "Quantification", "toolSlug": "quantification", "confidence": null, "componentId": "019dd953-3f42-76f3-adc9-2911ed20412c", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.96, "x": 0.02, "y": 0.27 }, "kind": "paragraph", "text": "Analysis from Keefe Bruyette & Woods suggests that if commission cooperation were eliminated, as many of 80% of real estate agents (or roughly 1 million agents) could leave the industry. Their analysis determined that the industry’s $100 billion annual commission pool could be reduced by as much as 30% and agent commissions could decline by as much 200 bps or more with most analysis suggesting that agents who focus on home-buyers will be disproportionately impacted relative to selling agents. Ultimately, we believe this would have a dramatic impact to Zillow’s business as two-thirds of the Company’s revenue is driven by the advertising budgets of buyer agents and the Flex model is based on receiving a commission split.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "8e015afc-3cb6-4175-8dc5-e38490bbba54", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.28, "w": 0.84, "x": 0.08, "y": 0.46 }, "kind": "paragraph", "text": "3) Ultimately, buyers don’t believe they are getting great value from their agents, according to the 1000watt survey. Respondents said they felt buyer agents are overpaid and they would consider alternatives if they were required to sign a contract with their agent and compensate them “out of pocket.” About 40% of respondents said they thought a 2.5% commission for a buyer agent was too much (the exercise assumed the agent worked 150 hours over 2 months, implying $83/hour, to earn $12,500 on a $500,000 home purchase). When explained a scenario where a buyer was required to sign an agreement with their agent and pay “out of pocket” for their services, just 14% said this was acceptable. Roughly 53% said they would have some reservations but likely still hire an agent, while 16% said they would probably seek agents who offered lower fees or allowed them to work with other agents, and 8% said they would just work with the seller agent.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "cbec1123-a39e-4ddb-a39d-04184e2fe7b1", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.96, "x": 0.02, "y": 0.17 }, "kind": "paragraph", "text": "The CEO of NextHome, Inc., a national real estate franchise, believes that additional regulation in the space is likely and commission cooperation is virtually guaranteed to end, either through regulation or changes in industry practices; he also believes the industry will almost certainly face commission compression.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "d3d349dd-f215-4037-b9a0-366ed004066c", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "Respondents said they felt buyer agents are overpaid and they would consider alternatives if they were required to sign a contract with their agent and compensate them \"out of pocket.\" — 1000watt survey", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-3f42-76f3-adc9-256cc81265da", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.3, "x": 0.02, "y": 0.97 }, "kind": "source-note", "text": "Source: Housingwire article, Local Logic conversation", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "c701daa7-bb88-486f-87ca-bf6298dd0aef", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.035, "w": 0.324, "x": 0.338, "y": 0.055 }, "kind": "title", "text": "Likely Outcomes From NAR Lawsuits", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "4d5a57f8-da69-4e45-b83b-3380ecb90db2", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [ { "name": "Audience Definition", "slug": "audience-definition", "agent": "Storyteller", "layer": "slide", "matchId": "3da15cc5-c5ed-450e-b355-9b393ec851cd", "evidence": "Respondents said they felt buyer agents are overpaid and they would consider alternatives if they were required to sign a contract with their agent and compensate them 'out of pocket.'", "confidence": 0.7 }, { "name": "Problem Statement Canvas", "slug": "problem-statement-canvas", "agent": "Architect", "layer": "slide", "matchId": "19e427eb-dd34-43af-b0e4-459847a2cc47", "evidence": "Ultimately, buyers don’t believe they are getting great value from their agents, according to the 1000watt survey.", "confidence": 0.6 } ], "frameworks": [ { "name": "evidence-matrix", "slug": null, "matchId": "8fcd5fda-5192-4aad-86df-de211f5d1bbf", "evidence": "Uses survey data and expert analysis to support a specific thesis.", "confidence": 0.8 } ], "arcBeats": [ { "to": 50, "from": 21, "beatId": "2825f36d-3055-4526-b439-677abc0e48a8", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "Evidence", "beatSlug": "evidence", "evidence": "The document presents evidence to support Spruce Point's claims, including data on Zillow's declining site traffic and revenue per visit.", "position": 2, "confidence": 0.8, "parentBeatName": null, "parentBeatSlug": null } ], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }