Compass lays off 15% of staff

https://therealdeal.com/2020/03/23/zillow-slashes-expenses-by-25-percent-cancels-revenue-guidance/

Zillow slashes expenses by 25%, cancels revenue guidance
Company responds to economic mayhem caused by coronavirus

Zillow Group suspended its full-year revenue guidance and said it would slash expenses by 25 percent to ride out the coronavirus pandemic.

The Seattle-based company announced the suspension of its capital-intensive iBuying program Monday morning. During an earnings call after the market closed, it also announced plans to freeze hiring, suspend marketing expenditures and cut discretionary spending to offset an anticipated drop in revenue.

With buyers in major U.S. cities sheltering in place, Zillow said traffic to its site dropped 20 percent year-over-year in the last few days. In New York City, traffic is down 36 percent, and it’s off 19 percent in Seattle. “We can’t know what lies ahead,” co-founder and CEO Rich Barton said during the call.

“Things are pretty foggy and uncertain right now,” he added. “We hope this will be enough … We’re clear-eyed. If we have to control expenses more than we have, we will do that.”

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Zillow slashes expenses by 25%, cancels revenue guidance
Company responds to economic mayhem caused by coronavirus

TRD NATIONAL
Mar. 23, 2020 06:45 PM
By E.B. Solomont
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Zillow CEO Richard Barton (Credit: JD Lasica via Flickr, iStock)
Zillow CEO Richard Barton (Credit: JD Lasica via Flickr, iStock)

Zillow Group suspended its full-year revenue guidance and said it would slash expenses by 25 percent to ride out the coronavirus pandemic.

The Seattle-based company announced the suspension of its capital-intensive iBuying program Monday morning. During an earnings call after the market closed, it also announced plans to freeze hiring, suspend marketing expenditures and cut discretionary spending to offset an anticipated drop in revenue.

READ MORE
Zillow is latest iBuyer to press pause
Zillow revenue surges on iBuying, but so do losses
With buyers in major U.S. cities sheltering in place, Zillow said traffic to its site dropped 20 percent year-over-year in the last few days. In New York City, traffic is down 36 percent, and it’s off 19 percent in Seattle. “We can’t know what lies ahead,” co-founder and CEO Rich Barton said during the call.

“Things are pretty foggy and uncertain right now,” he added. “We hope this will be enough … We’re clear-eyed. If we have to control expenses more than we have, we will do that.”

Despite Zillow pausing its home-buying, Barton said he remains bullish on the business, which he previously said would be an “existential threat” to ignore. “We will unpause Zillow Offers as soon as the health situation stabilizes and we feel the housing market is functional,” he said.

“Interest in it is really high,” he said. “We are keeping the apparatus in place and the people in place while we pause and get ready to accelerate out of this.”

Zillow was one of the last iBuyers to suspend home-buying, following Redfin, Opendor, Realogy and Offerpad.

According to an investor presentation Monday, Zillow had $2.5 billion in cash on its balance sheet as of Feb. 29 after selling $1.1 billion of convertible senior notes in September. Its decision to suspend the iBuying program came after several weeks of intentional reductions in its owned-homes inventory. It owned $645 million worth of homes, down from $837 million at the end of 2019.

30Y: Regarding Compass, if they are expecting a 50% revenue drop, I'm actually surprised that they only cut 15% of staff. I wouldn't think they are a major fixed cost business, so I'm not sure how the math works out here, unless they plan to cut more people in the near future.

At least the CEO stopped his own salary and the exec team also took a 25% pay cut. That's good to see. Too many execs in the US are completely tone deaf about this.

https://www.urbandigs.com/forum/index.php?threads/is-compass-the-next-wework.36/

thoth,
I think a bigger problem they will have is that their biggest asset (agents) can't be locked down. Agents aren't under contract, are free to move whenever they want, no non-compete agreements, etc

And historically when agents have a bad year the first thing they blame is the agency they are with and think "maybe it's time for a change."

But more than that, the VC money from SoftBank seems to be drying up and these agents are losing the tools which drew them to Compass to begin with - like its Concierge service which lent sellers money for renovations and staging. When Compass suspended that I think it removed the single biggest competitive advantage its agents had over others.

@30Y But you know that this time is different!

All kidding aside, it's pretty easy to tell whether a company is an actual tech company by looking at the amount of labor required for them to scale. I have no idea why supposedly smart investors fall for this nonsense over and over again.

SoftBank seems like it will go down as a classic case of hubris.

Margins are just too compressed in the real estate brokerage model to hand out a lot of money to agents and sellers.

Streeteasy offers more than enough information and technology for the typical buyer to easily source listings and information on those listings.

When I started my company I went in the complete opposite direction. Focused on providing a very high level of service that was more consulting with zero salesmanship. And by creating a low overhead company, I can share my profits with our clients. Technology certainly plays a big part in making things efficient, and for the most part it's all free, thanks to Google.

I've yet to see any residential real estate company that could be called a technology company. You can't call yourself that just because you utilize technology; ) Perhaps ZipRealty was one of the closest though?

Doesn't seem to be good business practice to have a residential real estate company burning through VC money searching for the pot of gold at the end of the rainbow. Unless you're developing some proprietary technology's that will later be sold or licensed. otherwise you're just opening up a bunch of offices in search of critical mass.

Here's the one which comes closest that I know of:
https://www.inman.com/2018/05/30/i-toured-exp-realtys-virtual-reality-heres-what-its-like/

Yes, I've referred a few friends that have signed up with EXP. Now I haven't read the whole article, been on the phone most of the day with other matters...

But I'm not sure whether they're just a great utilizer of technology or an actual creator of proprietary technology? I think zip realty actually created quite a bit of their own tech, enough so that realogy bought them a few years back.

Boy was I wrong:
"I think a bigger problem they will have is that their biggest asset (agents) can't be locked down. Agents aren't under contract, are free to move whenever they want, no non-compete agreements, etc"

https://therealdeal.com/issues_articles/when-compass-comes-clawing/

It always amazes me that people will sign documents that could have a major impact on their life without reading them.

>> The New York agent who owes $400,000 accepts the blame for failing to scrutinize the agreement but said their prospects for repayment are bleak.

I’m having a hard time sympathizing:

- If the clawback is $400K, presumably the amount paid out was substantially higher.

- If you don’t scrutinize your own agreement, I shudder at the level of scrutiny you provide to clients whom you are charging such a handsome sum.

- Your income is so large that the clawback Is $400K, but you can’t scrape back together the $400K (pre-tax) less than a year later?

rumors of more broker cuts ?