Podcast

Scaling Up [S2.E1]: ‘Zillions of Pillows’ and why culture matters – Spencer Rascoff, Co-founder of Zillow Group

How much is my neighbor's house? Hold on, let me 'Zillow it'. Only a handful of brands reach the coveted status of becoming common verb, Zillow amungst that mix. In this episode, we get to learn from Spencer Rascoff, the Co-founder of Zillow, about his approach to scaling people and culture.

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Ed (00:56):
My guest on this episode is Spencer Rascoff. Spencer is a very large figure, as many will know in the US Tech scene twice. He’s co-founded billion dollar Businesses. His first, the travel website, Hotwire was sold to Expedia, and it was there. He met Rich Barton, the Expedia and Glassdoor founder. Together, they then set off and co-founded Zillow, which is now a US 2.7 billion revenue business with a market capitalization at the time of recording of about 11 billion. Spencer was CEO for nine years and he now sits on the board. For Australian listeners who’ve never heard of Zillow, it is all things real estate in the US. For anyone looking to buy or rent a house, obtain a mortgage, you’d have significant interaction with Zillow. Think realestate.com.au meets RP data, but on steroids, I often find guests who are no longer in the day to day grind make for great interviewees as they’ve had time to reflect without bias.

Spencer Rascoff, welcome to the podcast, could you give a sense of scale and reach of Zillow Group, a business that you not only co-founded, but you ran as CEO for for nine years and you now sit on the board?

Spencer (04:40):
Sure. Zillow is about a 15 year old company. Today we have about 5,000 employees. We’re by far the largest real estate portal in the US with around, oh gosh, between 150 and maybe 200 million visitors a month, a couple of billion of revenue and about a $10 billion market cap.

Ed (05:07):
Welcome to the new age of Coronavirus. That’s, it is a very big business. You’re right. And maybe you can give us a sense of the mission when, when you started that business.

Spencer (05:20):
Sure. The mission is to build the world’s largest, most trusted and vibrant home related marketplace in the world. and that was the mission really at the very beginning. In fact there are some great photos floating around the internet. If you Zillow, or sorry, Google Spencer Racoff, you know, Zillow mission, you’ll see pictures of me back in 2006 when we were just starting the company of me pointing at that mission on a whiteboard, and that was the mission for 15 years or so. And I think it’s incredibly important for companies to have missions. I know, I know you agree and we can explore why, but that mission was consistent for a very, very long period of time.

Ed (05:58):
And was there a mission around transparency and transparency of data and moving that transparency to the consumer? There’s obviously huge agency principle problems in real estate and that asymmetry of information that exists. And was it founded on that as well? It

Spencer (06:15):
Was. So, the sort of cultural hierarchy that I think of for Zillow or for any company is a mission statement supported by core values. And so I described the mission statement already, but one of the core values was turn on the lights and turn on the lights means information transparency from a product standpoint and a strategy standpoint. It also speaks to culturally how we wanted to run the company. So that’s why I actually always loved turning on the lights as a core value of the company. it describes the product that also describes the company.

Ed (06:47):
And when you started to ask, did you get a sense of the scale, not only that you could create through this business and the transparency of data, but it’s, it’s almost become a form of entertainment for, for many Americans? It, it’s so deeply emotional buying a house as you would know

Spencer (07:05):
Yeah, so the voyeurism of Zillow is deeply embedded in the brand and the brand promise and the product promise. The idea that you can Zillow your friend’s house and Zillow, your neighbor’s house and Zillow, your ex-girlfriend’s house that is definitely, that is part of the appeal and that was certainly part of the early audience growth and virality when we first launched in 2006. And we leaned into that actually, that was something from a brand standpoint we discussed quite a bit, which is, you know, does that make it seem too frivolous? Does that make it seem like not a serious home shopping service if you’re using it in this kind of sort of silly use case? And what are the privacy implications of being a service that allows you to virtually peek into people’s bedroom windows and see what their houses are worth? Ultimately we decided that we would draw that line on privacy in the name of the homeowner.

(08:00): So Zillow deliberately does not display the name of the homeowner, but we display all attributes and aspects of the home itself, the what they paid for it, what the tax assessment is, what the valuation is, but no owner name. so that’s where we drew the line on privacy and on voyeurism and vol, we decided to lean into it. And it’s also tied up in the name of the company. I mean, Zillow is a silly word. it’s a combination of zillions of pillows and that you know, that brand leans into the, the fun aspect of real estate

Ed (08:30):
That it does. I am curious to dig into your relationship with Rich Barton, who you co-founded the business with. He was chairman, he’s now CEO also like you, a modern tech founder of Substance. He obviously spun Expedia out of Microsoft many years ago. And, and both of you are sort of multiple time entrepreneurs. I’m curious as to how your relationship with him has developed over time.

Spencer (08:55):
Rich and I were co-founders of Zillow, along with a couple others, and we met when I sold my last startup Hotwire to Expedia. Rich was the founding CEO of Expedia. He was actually on the board of Expedia when they bought Hotwire. So, you know, our relationship was very important to the founding of Zillow and to its growth over the years. We had different roles in the company for those 15 years. First five or so, he was the CEO and I was the chief marketing officer and the chief financial officer and the chief operating officer. And then when I was CEO for those 10 years, he was executive chairman and was a very valuable mentor to me. And starting about a year ago, he became ceo and I’m now on the board. So our relationship has evolved as our roles have evolved over the years, but we’ve been a very valuable complement to each other through that 15 year history of Zillow.

Ed (09:44):
I guess that’s a nice starting point of really digging into a theme that I, I do want to explore today, and that’s a theme that I feel you have deep expertise in, and that is the power and importance of people in culture when you are scaling these businesses. As I said, two time entrepreneur, you mentioned Hotwire, which is a very successful business that got sold to Expedia. In my belief, it is the biggest piece of the scaling puzzle, and I know your thoughts around this have changed. I listened to a great podcast that you yourself hosted with Stuart Butterfield, the CEO of Slack. And, and one thing sort of resonated with me, you said when, when you were running Hot Wire, you didn’t understand the importance of people and culture. You were a young CEO admittedly, but then that really flipped on its head as Zillow matured as a business. And maybe you could take us through and talk us through that journey. Sure.

Spencer (10:35):
I started Hotwire when I was 23 and you know, I was an idiot like most 23 year olds, and we were very focused on the business and the product, but the people and culture piece was an afterthought. This was 1999. It was a different era. And while we certainly didn’t have an inappropriate workplace environment, cuz I would never have tolerated that, we didn’t really invest that heavily in people and culture except to the extent that we wanted it to be fun. Hmm. It was very much a San Francisco in 1999 type startup where we all went out at 10:00 PM and had drinks together and celebrated wins together. And it was social and fun and there was a lot of foosball and ping pong and Nerf guns and beer. And that’s kind of what you’d expect from a startup in San Francisco in 1999.

(11:25): Zillow was born of a different era. I mean, Zillow was started in 2005. By that point I was in my thirties, not in my twenties. I was not 88 anymore. I was married and I started to have young kids and I was interested in different things in life at that time. I no longer needed my whole social outlet to come from work. I didn’t want to play Foosball and hang out and drink beer at work. I wanted to create a culture where we would do the best possible work that we could in the office and then go home to our families. And that was kind of what the Zillow culture was based on. And so we developed a culture and a series of benefits and rewards and employee recognition really all around that, around a place where you would do your best work and bring your whole self to work. But it didn’t have to be, it didn’t have to be the end all, be all socially as well

Ed (12:17):
And were there any mistakes or learnings that you took out of that culture at Hot? I mean, you said it wasn’t a poor culture by any means, but what were the key learnings that you could then apply to creating the Zillow culture?

Spencer (12:30):
Well, one key learning is culture starts at the top for good and for bad. And we’ve, there’s been no shortage of stories coming out of Silicon Valley, of the bad examples of culture that comes out of the top. And another key learning is there are certain people that are culture carriers at the company. And I got that term in my very first job. Straight Outta College was Goldman Sachs. And Goldman Sachs has a very strong culture for finance, for the world of investment banking, which is not generally a place known for culture. You know, it’s a much more mercenary type profession. And so it, those firms don’t tend to invest in people in culture as much as tech startups do. But at Goldman, they pride themselves on investing in people in culture. And being called a culture carrier at Goldman is the highest compliment you can get.

(13:15):I mean, I remember as a 21 year old first year analyst in my review when an MD told me I was a culture carrier, like that was 10 times more important than, Hey, you did a great job on that financial model or, you know, you’re gonna get this particular bonus. And so there are a couple people in each company when it’s small, when it’s 20, 30, 40 people that are culture carriers. And I remember at Hot Wire for example, there was a woman named Kate in hr who was an enormous culture carrier. There was another woman named Lori, a super culture carrier. If you’re listening to this, you know who you are. And these are just a couple people that make a huge difference. And I’m now involved in a lot of other early stage companies. I look for those people and they set the tone. So if they’re partiers and they’re gonna put the culture in that particular way, if they’re people that really are, you know, focused on employee development and personal growth, they’re gonna send the culture in a slightly different direction. So as a, as a recruiter or as a CEO or as a hiring manager, you really wanna think about that in that hyper growth stage when you’re adding people.

Ed (14:15):
I think that the great point that you make there is that while the culture starts with the CEO, it’s in fact organization wide responsibility of carrying that culture. And, and the culture is no more or less than the people at the front line.

Spencer (14:29):
That’s right. Yeah. Its culture is. They have to be curated, intended to like a garden. you know, if, if you just leave a garden on its own kind of weeds, take over the thing and it becomes kind of a big ol mess. And you know, and occasionally you look at a wild garden and it’s just beautiful and it’s amazing and it’s thriving and vibrant, but frequently it’s not. It’s kind of a, it’s a bit of a mess, but very quickly in high growth companies, the CEO can no longer just curate it entirely herself or himself. And so you need to be thoughtful about hiring people who can be culture carriers in addition to having great proficiency in the functional area that you’re hiring them for.

Ed (15:08):
I love the acknowledgement that culture is in fact a living organism and not something that lives on a page. I’d love to dig into it, and you mentioned the value of turning the lights on at Zillow. What were the other values that really drove that business?

Spencer (15:22): #Values
Some of the other core values were move fast, think big turn on the lights. There were a couple that were focused on equity and inclusion and, and, and diversity and equity and belonging. You know, I think move fast, thinking big is a good example, which is to say, you know, we wanted people to be very aspirational and we also wanted to build urgency. Now, interestingly and the reason I’m sort of stuttering over recalling some of these is as a board member now I’ve watched the company has actually changed some of the many of the core values and actually changed the mission too. And I’m not sure if the new core values and the new mission have been publicly disclosed or not, or if they’ve announced them, but it’s quite interesting. The reason that that Rich decided to do that is a lot of the business strategy has changed quite a bit as, as you know Zillow has really moved from being an information marketplace to being more of an eCommerce company where you can actually buy and sell homes themselves and you can sell your home to Zillow now.
(16:20):
And in making that switch rich, the board decided that the company needs to be more operationally intensive and function a little bit differently than an information marketplace. And that means a slightly different mission and slightly different core values so that they too are organic and change over time.

Ed (16:37):
Don’t feel bad. I, I don’t know a board member that would be able to name, name the values of a business on a, on a day to day basis. Yeah. I am curious in your thoughts as to the best way of taking the temperature of cultures and how you thought about that as a CEO

Spencer (16:52):
Thought about it a lot and it’s super important. You don’t get what you don’t measure. and there are a lot of ways to measure it. So I’ll start with the sort of most obvious is my BAU management by walking around. And I used to block time on my calendar for that at least a couple hours a week where whatever office I was in, I would just literally walk around and plop down in some common area or sit at someone’s desk or just walk around and talk to people. There’s no substitute for that. And that can’t be delegated. It can’t be done remotely. It has to be done in person and, and that’s the most important way. Secondly, you can learn a lot through Slack if your company’s on Slack or some other, some other communication platform. Thirdly, I think employee surveying is really important and there are a lot of services that do this well.
(17:38):
Zillow has taken analytics of this to a whole new level and, you know, there are tons of companies that help with that type of employee analytics. Then there are other startups and indirectly through a venture fund and an incubator, I’m an investor in one of these. There are startups now that look at metadata from the enterprise and try to infer employee sentiment. So they read Slack, they read email, they read code check-ins and other, you know, other, other communication mechanisms and try to tell you, Hey, it looks like engagement’s pretty low over on that side of the floor and engagement’s pretty high over on the side of the floor. I think that’s a really interesting field. It’s unclear to me if that’s, if that’s accurate or not. I think it is. I hope it is. And it’s an investor in a couple startups like that.
(18:22):
And then finally, I’m an investor in another company called All Voices, which has an equity and inclusion lens on top of all this. It basically lets you report inappropriate workplace behavior anonymously. And I think that’s critical. Oh, and then finally, sorry, how could I forget? Glassdoor I think is another really good source for this. And I used to read every single review at Zillow on Glassdoor. I’d respond personally to many of them, and every month, actually every board meeting to this day, but also every month with my HR leadership, we would review Glassdoor trends and other employee engagement trends as well in addition to employee surveys. So the answer is like a lot of different ways to measure culture and employee engagement.

Ed (19:02):
One aspect is, is of course, measurement, but the most important thing from that is to drive action.

Spencer (19:09):
Yes. So the employee engagement survey that we do at Zillow, which we’ve built in house, does a really good job of teasing out not just what is people’s sentiment, you know, what’s the NPS of working here and how, how long do you intend to stay? And those things. But it really draws correlation and we think causation to other key metrics. So for example, last 20 questions about, you know, how connected are you to the mission? How much do you understand how your work relates to what the company’s trying to achieve? How well do you feel that your manager understands you and your goals? you know, how connected do you feel to your manager? These types of questions. And then separately, later in the survey, what’s your nps? Would you recommend working to a friend? How long do you intend to stay? And we’ve been able to figure out what are the key drivers of those NPS metrics. And it’s usually connected to the mission, understanding how your work contributes and connection to your manager. But in certain functions it’s different. You might find in, in sales, it’s a, it’s different motivators than in marketing than in tech.

Ed (20:26):
We have touched on the lens of a CEO, but now as a board member. Yeah, essentially you are a representative of the owners of the business. How, how important are board members and investors in culture creation? ?

Spencer (20:39):
I think it depends on the board member. I mean, I think it’s very important. And so I tend to over index on that as an example. We have a Zillow board meeting tomorrow and we got the board materials for it. And there are hundreds of pages of memos and decks for a board meeting, as you would expect for a big public company. And you know, the ones that I personally first turn to page 89 of the deck or whatever are the glass door trends and the employee engagement trends which are in the HR section. And that’s where I, those are the questions that I ask about those, you know, that’s what I tend to ask about. That’s what I tend to focus on. I think that’s a leading indicator to business results. I think when you start to see those things slip six to 18 months later, you start to see a weaker product and six to 18 months after that you start to see weaker business results. And then a year after that you started to see a weak stock price. And so that is the tip of the spear, I think for all things company success related.

Ed (21:33):
Couldn’t agree with you more. I have a theory that culture’s moving out of HR and it’s moving into the CEO’s office. So I’m interested that it still sits in the HR report, for instance.

Spencer (21:43):
It does. but at least at Zillow it’s considered very important. you know, I spent as CEO Zillow, this will probably surprise you, I spent more time with the CHRO Dan significantly more time than with the CTO David. You know, think about that. That’s a tech company, right? And the head of engineering and product and design, I spent quite a bit less time with an hr. Now it’s not like that at all tech companies. I would guess that most tech companies, they’re, you know, more product oriented. My point of view was always I want to focus my time on the things that I have differentiated competitive advantage over. And I’m probably not the best person in the world to sit in a three hour design review meeting and recommend that this icon be slightly bigger and that, you know, this little image be moved two inches to the right.

(22:32):
There are plenty of other people that can do that better or just as well as I, but I’m one of the only people that can try to motivate 5,000 employees. And so I always over indexed on people in culture because I thought that was the best way to get leverage for my time. And that’s why I spent more time with the HR team and the HR business partners and the recruiters and all the people that are responsible for getting 5,000 people to lean forward. Yeah, I mean, I’ll tell you, I’ll tell you a quick story on this. a real light bulb went off for me and I apologize if I’ve told this story in other settings and listeners are sick of hearing this story, but if you are, then you probably listened to too much of my, of my spiel in other, other mediums.

(23:09):
Anyway, about five years ago there was Seattle, a meeting of Seattle tech CEOs that was convened for the purpose of trying to deal with employee recruiting and retention in the face of the Bay Area, the San Francisco companies moving to Seattle. Yeah. So it was, you know, Expedia, Zillow, Microsoft, Amazon, a bunch of other CEOs and other executives, 30 of us or so got together to say, Look, Uber’s moving up here, Facebook’s moving up here, Dropbox is moving up here to Seattle. What are we gonna do? Like how are we gonna maintain our, our, our people in the face of all these invading conquerors from San Francisco. And we spent half an hour talking about recruiting and you know, we’re going to different colleges and, and PhD programs to try to get more people here. And, you know, here’s how we’re being more aggressive on our offers and here’s what we’re changing with our investing schedule.

(23:57):
And SA and Adele from Microsoft, you know, stood up and immediately of course commanded the attention of the room cuz he’s such an Ella. And he said, you know, I think you’re all kind of off base on this. And that really got my attention, got all of our attention, and he’s like, you know, we’re spending all this time talking about recruiting and how we can hire more great people. Frankly, I’m just focused on employee engagement. If I can get the hundred plus thousand people that work at Microsoft here in Seattle and just get them all from being, you know, 60% engaged to 65% engaged, just get them all to lean forward in their chair just a little bit more. Get them to stay 5% longer at work or just, or work 5% smarter. Forget about 5% longer. The productivity explosion from that will far surpass any recruitment change. Who cares about Uber and Facebook, you know, opening Seattle engineering offices? I just care about employee engagement. And that, for me, was like one of the very few moments in my career where I just totally, like everything changed in my head about how I thought about these types of things. And I said, he’s right. Like, how can I get 5,000 people to, you know, to just be more engaged?

Ed (25:01):
It’s amazing how small incremental guidance can make such a difference when you’re talking about the power of large numbers.

Spencer (25:07):
Yes. And of course it goes the opposite. So Trip Advisor is a good example. I’m on the board of Tripadvisor and I had a call with Steve, the CEO yesterday, and you know, we’re talking through how the company’s responding to Coronavirus and you know, what are, you know, how are we reacting, et cetera. And we had layoffs about two months ago or so. I think we had about 10% layoffs. And all I wanted to talk about on this, my one on one with the CEO was what is employee morale post layoffs and what’s the employee productivity and employee engagement post layoffs? Are people fired up? Are they connected to the mission? Are they, you know, and I wasn’t that interested in what’s happening with traffic trends or how, you know, what’s happening with cancellations or whatever. I, I, maybe I’m wrong. Well who knows? But my point of view is that what matters most to TripAdvisor success is the quality of the employee base and their engagement. And that will mean good or bad results down the road.

Ed (25:58):
Wouldn’t mind maybe coming back to how to deal with cultural adversity you know, in situations like laying people off. But I know we’re short on time, so I’m gonna keep going along. maybe a bit more of a micro theme, but as a ceo, you were a coach and a team builder. One sort of data point that really comes to mind for me is the longevity of the team that you assembled. Their capability continued to grow for many years, not off a low base, but they became remarkable and many grew their skillset dramatically as the business continued to grow. So to me, it says one of two things. Either your hiring practices were amazing, you’re a great coach, and you’ve the ability to, to upskill or you managed to attract really skillful people when the business was a bit more in its infancy. So someone that comes to mind is Kathleen Phillips mm-hmm. , who became the CFO, but she was the chief legal and the c o and then the CFO and even yourself, your own journey. you mentioned you were the CMO, then you were the CFO and the CEO, so this upskilling of employees. I’d love to dig into your your mindset

Spencer (27:11):
Around that. Yeah, it’s a great question and I don’t, I don’t think I’ve ever been asked it, but you are right that it is one of the key reasons Zillow was successful. It’s also one of the proof points to show that it was successful for you and it is distinctive, I believe. and there are many stories of that. I mean, Amy Buttinski started as the head of PR and became head of marketing and then head of hr and then also the coo. And you know, people have this jungle gym career path as opposed to a career ladder straight up and down this jungle gym kind of, you know, two steps to the right, one step up, one step back. it was quite deliberate actually throughout all parts of the organization. At Zillow in, we have this thing called the Leadership Playbook, which codifies all of this.

(27:49): It basically puts like HR structure and you know, some might say jargon behind this, this topic. And it embraces this concept of a jungle gym and really pushes people to move laterally. And I mean, I just found out yesterday that, or the other day, that the woman that runs competitive intelligence is now focused on some business analytics in the premier agent business. I mean a total switch for her from one discipline to another. And the attitude that we always took right from the very beginning was, if you’re a high performer in one area, you can probably learn the skills required to be proficient at this other area. But being a culture carrier and and committed to the mission and committed to the company and being a great manager of people was more important than subject matter expertise. It is actually, it’s back to the very first meeting I had to decide to join the company.
(28:42):
It came up, I mean, I I, when I met with Rich and Lloyd, I said, Look, you bought my company Hot Wire and it brought me to Expedia, and then you guys left Expedia shortly after I’m sort of unhappy, let’s start a company together. And they said, Great, let’s do it. The only thing is we want you to run marketing. And I said, Well, I don’t know anything about marketing. I’ve never run marketing before. and they said, it doesn’t matter, you know, you’ll figure it out. And their point of view was, and I agree, if you surround yourself with great people and you’re smart and hardworking it, for most disciplines, you can, you know, that Trump’s Trump’s experience or historical proficiency and that pervades the whole development culture at Zillow.

Ed (29:22):
I love that. I would like to discuss cultural mergers and Zillow and Trulia, the two biggest online real estate portals in America, two and a half billion dollar merger. They would’ve culturally been very different to Zillow. I’m curious as to how you assess their culture at the time? How, how did you think about integrating the two businesses culturally?

Spencer (29:47):
We did 16 acquisitions in my tenure at Zillow, and every single one of them started with a cultural assessment. Every acquisition we did started with me sitting down with the founder and CEO and saying, Tell me about the company. Tell me about the culture. In the case of Trulia, I remember that first meeting with Pete Flint, the founder and CEO of, of Trulia. We sat down and we shared Glassdoor reviews. We had a laptop between us. And I went first and I said, let’s, you know, said, Pete, you pick up Glassdoor review. He picked one and it said, you know, this employee is unhappy in the Seattle office of Zillow and he’s complaining about the bad benefits or whatever. And I was like, Okay, I’ll take that one. And I explained, you know, here’s what I think is happening, here’s why I think the benefits are good, and here’s why I think this employee’s off basically said, Okay, now you go Pete, what says here that this employee in the Denver office thinks that, you know, the sales management is not very good, whatever.
(30:37):
And so we went back and forth for, I don’t know, more than an hour going through reviews and talking about culture. And then we went through our core values together and we literally wrote the true ones down, the Zillow ones down and compared them and compared our missions. And it turned out that our culture and our missions and and our core values were much more similar than they were different. In fact, when we merged the company, Zillow had five core values and I think truly had five. And they were almost all the same except Trulia had won, which was an act with integrity, while Zillow didn’t have an equivalent ethical one. And I, I saw that, I said, Oh my God, how could I forget ? How could I forget that? That’s such a, that’s so terrible. You know, I guess I just thought it sort of went without saying and we stuck with the Zillow core values, but we added integrity from Trulia. One of the only acquisitions that was not a successful acquisition was one that really fell down over culture where the culture of the company wasn’t what we expected and wasn’t consistent with ours. So culture is super important in m and a. We walked away from dozens of potential acquisitions that made all the sense in the world strategically, financially, you know, in terms of product fit, et cetera, but weren’t the right cultural fit. And we let those slip away and I think that was the right decision.

Ed (31:45):
And in the instance where you do make a mistake and there is friction to cultural change or just a, a pure misalignment, at what point in time do you rip the bandaid off

Spencer (31:55):
As quickly as possible? It’s funny, I mean we could do a whole episode on, on integration. I had a call with the founder the other day, a founder of a tech company that’s negotiating a similar deal to Zillow, truly a deal. He wanted me to wax on this topic for a while. And what I told him was, if you know what the end state is supposed to look like, just get there as, as quickly as humanly possible. If you know that, you know, end years from now you think only one of the brands should survive and only one of the offices should survive, or you should both have consumer facing front ends, but you should integrate the the back end or you know, or one’s gonna be subsumed into the other in one way or another. Like just don’t take your time to get there.
(32:32):
Even though it seems more painful and maybe it looks like it might make sense, oh, we’re just gonna leave everybody kind of the way they are and everything will be fine. Just rip that bandaid off as quickly as possible. Get to that end state as soon as you know what that end state’s supposed to be. And if I have any regrets in the case of the Zillow truly integration it would be in this regard. So we spent the first year integrating the back ends. So we integrated all the shared data and ad products and, and listed information that was the right decision. Then we spent the second year basically having Zillow and Trulia coexist and sort of compete for resources from the mothership. And then only more recently did we basically defund Trulia and have more of the Trulia team focus on things at the Zillow group level, that kind of mm-hmm. corporate parent company level. And I think I probably should have gotten to that end state faster.

Ed (33:19):
Interesting. retrospective thoughts. One thing I also wanna dig into is the public markets and Zillow did go public very early in its journey as a business world. Well certainly compared to, you know, how long Yeah,

Spencer (33:34):
The current thinking. Yeah, 65 mil. So we had 65 million of, I can’t remember if it was a forward one year revenue or backward one year about a 15 million revenue quarter. Yeah. Which is like nothing compared, right? And we went public with about a 500 million market cap. So we were one of those let’s go public early people. That is now out of favor.

Ed (33:53):
I think it will come back at some stage, and there are, there are lots of benefits as well, either I think that the ease of raising money, you perform m and a, you know, employee stock options have a number and they’re worth something. And of course there’s the rigor of being a public market and reporting quarterly. But I am really interested that quarterly reporting creates a short termism.

Spencer (34:17):
It doesn’t have to, Not from a CEO point of view, from an Oh yeah, yeah, from an investing point of view, yes. And there’s this gross misalignment with management who are long term thinkers and obviously the biggest lever to pull in in often long term growth is people and culture. And, and you would’ve sat in thousands of meetings with fund managers and tried to explain to them the importance of people and culture and, and they wouldn’t have been listening. How can CEOs do a better job of explaining the long term value in creating great cultures?

This is one of the benefits for me too. It has brought the importance of people and culture into the mainstream in a way that I am grateful for, and didn’t really expect. So you’re, you’re absolutely right. When we went public in 2011, zero out of 100 investors wanted to talk about employee engagement and retention and recruiting and culture and core values and mission, and they would see a bunch of that stuff in the S one and, and mostly secretly rolled their eyes. I saw that this evolution of investor perception to the importance of people and culture is very similar to their perception of the company’s involvement in social media. In 2011, I got a lot of questions. Why are you on Twitter? Why do you read what people write about you on Glassdoor? Who cares? Why are you on Facebook? Like, this whole social media thing is stupid, you know?

(35:38):
And now fast forward to present day, obviously, and it’s, you know, it’s very customary now for public companies, CEOs to be very engaged on Twitter and ev and investors. I mean, they most expect it. And the general belief that, look, that’s where the conversation is happening. So I wanna be in the conversation. That’s where people are talking about our brands, our products are services. That’s where our customers are. I think that people generally accept it just on the social media point, and then we’ll come back to people in culture. When we filed the S one in 2011, in that underwriting meeting or sorry, in the drafting session. I want to put our Twitter handle on the cover of the S one, you know, where it says since RAs cups ceo and then the address I was like, Is this is crazy.

(36:15):
We have the phone number here of the company. We don’t even have a receptionist. Nobody answers that phone. I don’t even know what our phone number is. Why do we have a phone number here? Let’s put our Twitter handle. We have two employees whose job it is to respond to people when they tweet at us, but we have no employees whose job it is essentially the phone. And you know, we spent like three hours with the lawyers and the accountants and the investment banker debate and can you put a Twitter handle? No one’s ever done that, Blah, blah, blah. Then do we have, does that InCorp, you know, do we have to incorporate by reference into the S one everything that we’ve ever tweeted from that handle? And how will the SEC respond? What if it draws a comment letter Ah, and we’re like, I was like, okay, forget it. I give up. And then two quarters later I snuck it into the 10 Q. So we, Zillow, was the first company to have our Twitter handle and an SCC filing. we couldn’t get in the S one cuz too many lawyers were paying attention. But we did get it on the cover of, of a 10 Q and now most companies do it anyway. Back to the people in culture. I think many, many investors get it now and you guys are at the, for, you know, your firm is at the forefront of, of raising awareness of this. It still only comes up, you know, 10 or 20% of the time. But I think I don’t know, just as an example, you look at the Elliot management activist campaign on Twitter. Their basic argument is there’s a great company with a CEO who’s splitting his time between two bubble companies. And that can’t possibly create the level of focus, but also employee engagement at the company. It’s, it’s, it’s, it’s really a culture driven activist campaign, which is so gratifying instead of the usual activist campaign is like, let’s sell off this distressed asset or, you know, let’s defund this new initiative. It’s, you know, very financial engineering related, It’s not kind of employee engagement related. So I think that’s encouraging.

Ed (37:55):
And where do you think the majority of investors sort of miss the core impact that culture can have in their analysis of

Spencer (38:02):
A business? I think they miss it because in their own firms and in their own industry, it is less important. I mean, if you, and again, I think that there are a couple exceptions in finance, but generally speaking, a 20 person, couple billion AUM hedge fund, the employees there are more mercenary than missionary and they’re generally driven by their, the financial results that they can get and that the firm gets. And so they think it’s a little hot, you know, wishy washy, you know, cheesy, touchy feely for companies to invest in people and culture, the world. I live in the tech world with 0% unemployment, people are absolutely driven by working at companies that are mission oriented, that they can bring their whole self to work, that they’re connected to, that invest in their development, that allow them to be themselves. Like, I mean, that’s what people in my world care about. And if you want to retain and recruit and engage those people, you have to invest in this stuff.

Ed (38:56):
And maybe some advice for your investor as well. And as you mentioned, sit on multiple boards, but any advice to other investors how they would diagnose cultures of businesses that they’re looking at? You mentioned glass or is an obvious one, but are there any other sort of key things that you’d look at?

Spencer (39:15):
Yeah, I mean if I were, if I were running a hedge fund, Glassdoor would be an invaluable resource to me. I think employee interviews with former or current employees are really valuable. Obviously customer interviews, a number of, of Zillow’s top shareholders have managed to sort of talk their way into different industry events where they get to interact not just with customers but also with employees. So just as, as close as you can get to the employees. I’ve often wondered if there are, you know, if, if even there are some employees at some of these companies that are basically moles for some of these firms. I bet. I’m sure there are. But you wanna get to the source and the source is the employee experience.

Ed (39:54):
I promise I’ll get you out of here by 1130 and we’re bunny against time, so I’m going to have to wrap it up. But thank you so much Spencer, for your time. That was enlightening, informative and, and just so refreshing to hear.

Spencer (40:07):
It’s my pleasure. I mean, I want to commend you. I think the more we can shine a light on the importance of people in culture, in the investment community, that will create a, a positive loop back to the companies themselves who already care about this, but will be given license by the buy side and sell side to continue to invest in these things and, and our employees deserve it. And I think that this is not just about some communist socialist, touchy feely kibbutz, whatever, happy, happy thing. I actually think better business results come from having more highly engaged employees. So that’s why I think it’s important.

Ed (40:40):
We’re certainly on the same page. Thanks for your time.

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