The Potential of $3.5 Billion
Years ago, prospective homeowners would go to local real estate agencies to look for housing. It used to be that real estate agents held exclusive knowledge of the local and national housing market and that any buyer had to go through their local agency to find and purchase a new house.
Today, companies like Zillow Inc. and Trulia Inc. streamline the process with their online platforms. They offer searchable databases of real estate data for free to any online user, and make profits on advertising and agent listings. Together, both companies dominate the online marketplace and have 68.4 million unique users as of June.
On July 28, Zillow Inc. announced it had agreed to acquire Trulia Inc. for $3.5 billion in stock transactions. The purchase comes at a time when both sites are booming with user interaction, but profit from the online platforms is not yet optimal. Zillow CEO Spencer Rascoff believes the acquisition of Trulia Inc. will help both companies cut costs and increase efficiency overall. As the Chicago Tribune reported, Rascoff told financial analysts that both companies “independently [have] very large rental audiences and…both [are] in the early stages of monetizing those rental audiences.”
The deal has the potential to help consumers engage with real estate data more efficiently and at a cheaper price, but the money spent on Zillow’s acquisition is substantial. If spent on advancing the interests and development of the poor, that money would have a tangibly greater social impact.
The World Food Programme (WFP,) for example, recently announced that it was unable to provide food to nearly 800,000 due to budget shortfalls. United Nations WFP Executive Director Ertharin Cousin and U.N. High Commissioner for Refugees António Guterres urged donors to provide an additional $186 million in funding to provide food rations to nearly 800 thousand. If not, food aid would have to be cut, threatening already high levels of malnutrition and anemia among refugee populations.
If the same money that was spent acquiring Trulia Inc. went to providing food to refugees, approximately 15.1 million more refugees would benefit from food rations from the WFP. Put another way, 2.4 million refugees depend on food aid from the WFP each year. If $3.5 billion was invested, every African refugee would have his or her nutritional needs met for over six years, based on U.N. and WFP figures.
The money spent on advancing the online potential of the real estate industry is an important development to consumer interests; however, even small monetary developments can have significant impacts when invested in the poor.
– Joseph McAdams
Sources: Chicago Tribune, LA Times, World Food Programme
Photo: LA Times