Zillow has been at the lead marketplace building business for about two weeks, and I bet internally they are saying, “wow this is hard!” Early responders to the Zillow Mortgage Marketplace were easy to categorize, as I pointed out in my Zillow Gets Negative Reviews (from Non-Adopters), outside observers (non-adopters) were pointing out all of the potential challenges and hazards.

Meanwhile, those willing to put some effort into using the model were seeing glimmers of opportunity:

Brian Brady, thinks he has isolated the secret formula for spotting true intent…

“Traders” will profit from the Zillow Mortgage Bourse. Armed with the data byte that announces consumers’ intent, traders will be able to act quickly, provide HUGE tangible net benefits to the borrowers, acquire long-term clients, and lower their marketing costs.

And Owen Raun tracks, with excellent data and detail, the results of their efforts in the marketplace…

• The first few hours learning Zillow Mortgage
  
• The next few hours in the Zillow Marketplace
  
• Some first week suggestions to Zillow
• Honeymoon is over it is time to make this dog hunt (that means make money!)

The obvious conclusion is that making a marketplace is hard. Particularily, when the trading involves an infrequent and complex transaction, as Sean Purcell points out on the BloodHound Realty Blog.

However, as hard as it is, I am impressed by Zillow’s willingness to be transparent and continue to innovate the process.  For example, one of the early complaints is the low percentage of responses from quoted customers, causing loan officer fatigue and sacking motivation. This may be helped by the announcement of Zillow’s exposure of loan requests in a search feature, possibly filtering “window shoppers” into searches for indicative quotes instead of requests for quotes.

The synthesis of the early feedback on this innovative initiative seem to boil to a few key points:

• Creating a new marketplace is challenging
• You have to quickly achieve a good balance of motivated buyers and sellers
• Filtering/policing disengenious buyers (window shoppers) and sellers (low ballers) is critical to building value and credibility
• Transaction transparency builds confidence and helps manag expectations

The critical factors for success, in my mind, are how fast can Zillow tune the marketplace to:

• Maintain and grow transaction volume (buyers and sellers)
  
• Lift quote to call back ratios (continue to innovate segmentation system)
  
• Mature the reputation management system

Again, I see good opportunity.