Next company to take a cut of > $1 trillion annual transactions

[LearningMachine]

Some of the world's biggest companies today have effectively come into being by inserting themselves into the middle of economic transactions that were already happening while the form of those transactions was changing, and then taking a cut of those economic transactions:

 

• AMZN: Inserted itself into retail transactions when they were moving online
• GOOGL: Inserted itself into ad transactions when they were moving online
• META: Inserted itself into social transactions when they were moving online, and now trying to insert itself into transactions involving art/creation/entertainment
• UBER: Inserted itself into transportation transactions by making the experience better
• TCEHY: Inserted itself into social transactions when they were moving online
• BABA: Inserted itself into retail transactions when they were moving online
• NFLX: Inserting itself into entertainment related transactions
• TIKTOK: Inserting itself into entertainment related transactions

 

Now, what is another big transaction that someone could insert themselves into?

 

Well, housing is the biggest expenditure for the average person.   Per Zillow, U.S. annual rental market alone is $485B.  U.S. housing sales add up to about $3 trillion per year.  By comparison vacation rental market is about $83B, and will get to $119B by 2030.  https://www.grandviewresearch.com/industry-analysis/vacation-rental-market#:~:text=The global vacation rental market size was estimated at USD,USD 82.63 billion in 2022.

 

Which companies do folks think have the best chance of inserting themselves into > $1 trillion economic transactions? 

 

• Zillow: If you think Zillow, how do we reach Rich Barton to help him understand that diluting his own shares by 15% every year doesn't serve him well?  Does anyone know him to explain to him to stop the insanity so that it can be an investment worth considering? 
• Airbnb: Could Airbnb eventually stumble upon expanding to longer term rentals, and eventually property sales?  Also, insane here how Brian Chesky gave away to Silverlake instruments yielding double digit interest rates with free warrants for around 1% of airbnb at $18B valuation?  Looks like it was worse economics for airbnb for each dollar received than what Buffett did to Goldman Sachs back in 2008, and who knows Chesky won't do it again when under panic.  ABNB is still expensive, and doesn't look like they have even an iota of culture so far of returning capital to shareholders based on their last earnings call, despite having a lot of cash. 
• Any other companies on the horizon, within housing or outside housing that have a chance of inserting into a windfall of economic transactions? 

 

Edited July 26, 2022 by LearningMachine

[rkbabang]

It is unfortunate that no one has been able to do this yet.  Back in the 90s when the web was new real estate was one of the things everyone thought would be just totally transformed by the internet.   People thought Realtors and MLS listings would be soon obsolete and all the frictional costs of buying and selling property would disappear as online services of some type would do everything seamlessly for a fraction of the cost.  None of this happened (at least not yet).   Everyone still uses traditional Realtors and pays them as much as ever.  Besides seeing pictures online of the property before viewing it in person, not much has changed.   It turns out to be a more difficult problem than almost anyone suspected.

 

[Spekulatius]

31 minutes ago, rkbabang said:

It is unfortunate that no one has been able to do this yet.  Back in the 90s when the web was new real estate was one of the things everyone thought would be just totally transformed by the internet.   People thought Realtors and MLS listings would be soon obsolete and all the frictional costs of buying and selling property would disappear as online services of some type would do everything seamlessly for a fraction of the cost.  None of this happened (at least not yet).   Everyone still uses traditional Realtors and pays them as much as ever.  Besides seeing pictures online of the property before viewing it in person, not much has changed.   It turns out to be a more difficult problem than almost anyone suspected.

 

Well there is Redfin and several other discount brokers. The problem is that RE is a relatively complex transaction with of a non-standard assets that has a lot of angles.

 

The search process went already totally online - it was sort of online when I bought my first home in 2002, but you still needed the MLS access via a Realtor for timely access to listing as the listing sites (Realtor.com etc) only got the listings two weeks or so later. This is not the case any more.

 

Then there is the whole thing with the RE lawyers, but that's more an east coast thing - in CA everyone uses standard forms and that pretty much eliminates the need to get a lawyer involved.

 

 

 

As for the thread question, I think the gig economy (UPWK, FVRR) may get to a trillion $ in transaction volume eventually, but it's not clear to me how good this business model is, especially for FVRR.

Edited July 26, 2022 by Spekulatius

[Guest]

2 hours ago, rkbabang said:

It is unfortunate that no one has been able to do this yet.  Back in the 90s when the web was new real estate was one of the things everyone thought would be just totally transformed by the internet.   People thought Realtors and MLS listings would be soon obsolete and all the frictional costs of buying and selling property would disappear as online services of some type would do everything seamlessly for a fraction of the cost.  None of this happened (at least not yet).   Everyone still uses traditional Realtors and pays them as much as ever.  Besides seeing pictures online of the property before viewing it in person, not much has changed.   It turns out to be a more difficult problem than almost anyone suspected.

 

 

 

Correct me if I'm wrong but haven't commissions compressed a little?

[rkbabang]

55 minutes ago, stahleyp said:

 

 

Correct me if I'm wrong but haven't commissions compressed a little?

 

I think, 4-6% is still pretty standard in New England depending on what the seller's Realtor offers to the buyer's agents.

[fareastwarriors]

6 hours ago, Spekulatius said:

The search process went already totally online - it was sort of online when I bought my first home in 2002, but you still needed the MLS access via a Realtor for timely access to listing as the listing sites (Realtor.com etc) only got the listings two weeks or so later. This is not the case any more.

 

Online search with Zillow and Redfin and esigning with Docusign/others have been life changing for me. Yes, there're still too many frictions along the way but it's a major improvement already! 

[Gregmal]

That’s typically where the huge winners come from. Something eventually clicks and then it goes right and in hindsite it looked obvious. And it kind of was obvious. The pieces just needed to come together.
 

I own Zillow, and we ve discussed the 15% dilution before. I own small ABNB as well. Uber also. Basket of RBLX, Nintendo and recently META. I generally try to find some businesses that fit what you’re going for here. Long runways and exposure to mega tails and some disruptive qualities.

[Gregmal]

And it’s definitely not in the ballpark of most here but I’d still throw a CRISPR basket as having that sort of upside and scalability.

[valuehawk91]

8 hours ago, rkbabang said:

It is unfortunate that no one has been able to do this yet.  Back in the 90s when the web was new real estate was one of the things everyone thought would be just totally transformed by the internet.   People thought Realtors and MLS listings would be soon obsolete and all the frictional costs of buying and selling property would disappear as online services of some type would do everything seamlessly for a fraction of the cost.  None of this happened (at least not yet).   Everyone still uses traditional Realtors and pays them as much as ever.  Besides seeing pictures online of the property before viewing it in person, not much has changed.   It turns out to be a more difficult problem than almost anyone suspected.

 

 

As some one who is looking to buy a house/condo, I have come to realize how inefficient the real estate market is in regards to realtor's cut.

I have felt I have done most of the leg work whenever I was interested in a listing as well as doing the background. Also, learned to do some ballpark estimation of the value.

It makes me wonder why should one get thousands of $$ for just showing up and preparing the papers. This is not to throw a shade on realtors, but I feel the value-to compensation ratio isn't quite fair, and both buyer's and seller's would be very happy to pay less fees. I know I would.

 

What kind of friction is it out there? I just had a start-up idea to get the middleman/woman out. lol

 

 

Edited July 26, 2022 by valuehawk91

[Gregmal]

The realtors don’t really do anything your attorney won’t. The attorney might charge $1.5-2k. The nut kick is when you pay a realtor 5 figures and the attorney his chunk of change as well. 

[valuehawk91]

oh gotcha! I didn't know all the other processes behind it!

 

Also, if you are betting on crisper, I would highly recommend this book: The Gene: An Intimate History

It was a very insightful book on diseases, genes, and how/if gene editing can play a role in treatment/cure.

 

My input to the list:

Lab grown meat. If it can be produced with similar taste/texture, it would be game changer. 

[Spekulatius]

1 hour ago, Gregmal said:

That’s typically where the huge winners come from. Something eventually clicks and then it goes right and in hindsite it looked obvious. And it kind of was obvious. The pieces just needed to come together.
 

I own Zillow, and we ve discussed the 15% dilution before. I own small ABNB as well. Uber also. Basket of RBLX, Nintendo and recently META. I generally try to find some businesses that fit what you’re going for here. Long runways and exposure to mega tails and some disruptive qualities.

Luckily, there is no 15% dilution. I don’t know where @LearningMachine has his numbers from, but the dilution run rate is in the single digits (still high), but not 15%.

[LearningMachine]

35 minutes ago, Spekulatius said:

Luckily, there is no 15% dilution. I don’t know where @LearningMachine has his numbers from, but the dilution run rate is in the single digits (still high), but not 15%.

 

I got the numbers from their 10K and posted them at 

 

[LearningMachine]

9 hours ago, Spekulatius said:

Well there is Redfin and several other discount brokers.

 

 

Interesting that even though Zillow currently has better brand awareness than Redfin in some parts of U.S., Redfin searches on Google have been increasing at a faster rate than Zillow has been over the past 5 years.  See https://trends.google.com/trends/explore?date=today 5-y&geo=US&q=%2Fm%2F0bdn1t and https://trends.google.com/trends/explore?date=today 5-y&geo=US&q=%2Fm%2F0c2gbc

 

Now, I wonder if Redfin will be able to cut back on expenses a lot to not burn cash and sell equity to survive the lull in housing sales?

 

 

[Gregmal]

5 minutes ago, LearningMachine said:

 

 

Interesting that even though Zillow currently has better brand awareness than Redfin in some parts of U.S., Redfin searches on Google have been increasing at a faster rate than Zillow has been over the past 5 years.  See https://trends.google.com/trends/explore?date=today 5-y&geo=US&q=%2Fm%2F0bdn1t and https://trends.google.com/trends/explore?date=today 5-y&geo=US&q=%2Fm%2F0c2gbc

 

Now, I wonder if Redfin will be able to cut back on expenses a lot to not burn cash and sell equity to survive the lull in housing sales?

 

 

That’s actually where I think you could see some magic if the ibuying works. If someone can buy through the cycle they’re gold. Easier said than done. 

[stockman500]

Opendoor Technologies

Insert itself into the family home transaction by buying and selling homes. 

 

They have an even better 5 year chart: https://trends.google.com/trends/explore?date=today 5-y&geo=US&q=opendoor

 

They also started OpenDoor Exclusives in Texas. For Sale By Owner, buy directly from OpenDoor at their set price, no bidding wars, first offer gets it, no Buying Realtor commissions offered. Seems to be gaining traction.

Edited July 27, 2022 by stockman500

[crs223]

This is interesting.  Reminiscent of Buffett/Dimon/Bezos trying (and failing) to redo healthcare.

 

For real estate transactions: the buyers “don’t pay” the commission so they might as well use the trusty Realtor.  But what about the seller?

 

When your home goes from $400k to $700k… do you really care about spending an extra $15k to use a trusty realtor over some website?  No.

 

There is just too much profit for sellers to care.  Everybody is gorging at the trough and everybody is happy.  Perhaps if/when the gravy train stops, then the transformation can begin.

Consumers love credit card “points”.  consumers/buyers don’t see/know/careabout the markup as long as they get their airline miles.  So perhaps another transformation to watch out for is a new style of commission that focuses on a buyer kickback.

 

This is a great thread.

 

A website with pictures and maps of homes evidently is not going to transform this industry.  I bet the fanciest pictures and maps (drones/3D/VR) won’t do it either.