- The struggles at Open Door Technologies Inc. are giving a boost to its less-recent rival Zillow Group Inc.
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Shares in the companies moved in opposite directions on Monday: Opendoor plunged on the news that it is pumping the brakes on buying new homes for the rest of the year, while Zillow s stock jumped after saying it was open for business. Beyond investors, the general interest in Opendoor, run by Chief Executive Eric Wu, is also spiking, with Google searches surging for the company.
Opendoor offers an economic path for prospective investors in real estate.
Keith Rabois started Opendoor in 2014 with a group that included venture capitalist Wu to simplify the notoriously complex process of buying a hone, especially for people who were trying to sell their old property.
The company s model relied on number-crunching algorithms and financial capital to buy and sell homes. When it closed a purchase, it made light repairs and put the property back on the market, seeking to profit by charging a fee to the seller.
The business looked risky to outsiders but it was soon copied by Offerpad Solutions Inc. Redfin Corp. and later Zillow, which launched its iBuying business, Zillow Offers, in 2018:
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Opendoor, which went public through merger with one of Chamath Palihapitiya's blank-check companies last year, maintained the lead on its competition. It bought approximately 8,500 homes in the second quarter, more than double the total of Zillow homes purchased by it. It also piled billions of dollars in debt facilities to fund growth.
There are good reasons for Zillow's name recognition -- and in most cases the disadvantage is that it gives it inherent advantages. The online property developers'apps and websites draw more than 2 billion page views a quarter, giving the company a source of free advertising for its iBuying service. Opendoor, by contrast, has had to spend money on advertising to make potential customers aware of its service.
This year shares of Zillow were down 31% following the close of Friday's close after nearly tripling in 2020 Opendoor has gained 3.1% this year through Friday.
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