New Zillow Tool Helps Homeowners Daydream About Remodeling

2/5/13Follow @bromano

Zillow is aiming a new service at the one major portion of the real estate marketplace it hasn’t touched yet: remodeling.

The Seattle company is launching Zillow Digs, an iPad app and Web service that will compete to improve the process of gathering and sharing remodeling ideas, and give homeowners a sense of whether that granite countertop will blow the budget.

At the heart of Zillow is its “living database of all homes,” containing information on 110 million homes, including countless photos of gleaming kitchens, colorful playrooms, and fancy master baths. (The company’s name is a mashup of “zillions of pillows.”)

With Digs, Zillow plans to put that database to use in a new market. Chief executive Spencer Rascoff calls it “a natural next step for us in consumer empowerment and transparency of information to help people make smarter decisions.”

Zillow (NASDAQ: Z), which reports fourth quarter 2012 earnings next Wednesday, is not yet saying how it plans to make money with Digs, but models for the other parts of its business point toward a service connecting homeowners with remodeling contractors.

Surrounding Zillow’s homes database are marketplaces serving various parts of the real estate industry.

The most developed of these connects real estate professionals with consumers. Another connects consumers with mortgage providers. Zillow Rentals, the latest marketplace—launched last fall on the back of Zillow’s acquisition of RentJuice in San Francisco—serves renters and landlords. Several of the company’s acquisitions in the 19 months since it went public have helped bolster its suite of tools for professionals in each of these areas.

Zillow is positioning Digs as a consumer-focused tool. And first and foremost, it is. You can smoothly swipe through a stream of pictures drawn from Zillow’s database to gather, share, and comment on remodeling ideas, and see the ideas and comments of others.

For kitchens and bathrooms Digs provides a range of cost estimates—generated by an algorithm including contractors’ estimates—with a breakdown of materials and labor, adjusted for the user’s local market.

“We’ve sat down with contractors and gone through photos and they’ve told us how much they think everything is worth,” says Katie Curnutte, the company’s communications director. “Just as the Zestimate is a starting point for determining a home’s value, the Digs Estimates is a starting point for figuring out whether that room is in your reach or not.”

The company is collecting data on the cost of specific elements of a remodeling project—granite countertops, for example—which it will then plug back in to new photos uploaded to Digs to scale up its database of room estimates. “Tagging will be a lot of it, and we’ll have a team going through tagging and curating the photos a bit,” Curnutte says.

The photos will come from consumers and from professionals, including contractors and designers, who will be able to build out free profiles with portfolios of completed projects, Curnutte says.

Through these profiles, Zillow Digs would connect homeowners thinking about a remodel with contractors—a business model that would put the company squarely in competition with countless startups such as Handybook and established players such as Angie’s List.

Display advertising is another possibility, as is e-commerce.

“The strategy has always been to build a really vibrant, engaged consumer base first,” Curnutte says. “Over time, we’ll figure out the revenue model.”

For now, Digs looks mostly like a potential improvement on the analog process of gathering ideas for a home remodel from books and magazines, stuffing clippings into a folder and scrawling notes in the margins. Several companies are trying something similar. Bay Area startup Houzz, for example, just raised $35 million and already claims substantial user and professional communities.

Zillow brings the advantage of a big existing audience of home shoppers: the site racked up 35 million unique users in December. The company cites an Ipsos survey indicating that three-quarters of homebuyers complete a remodeling project in their first year of ownership.

Benjamin Romano is editor of Xconomy Seattle. Email him at bromano [at] xconomy.com. Follow @bromano

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