Zillow vs. Houzz: The battle of platform-mediated networks

In our paper, we chose the companies ‘Zillow’ and ‘Houzz’ as platform-mediated networks, who both act as intermediaries in the real-estate and home remodeling business. Zillow is the leading online real estate marketplace in the United States. The company assists its users throughout the entire process of finding, purchasing or renting, financing, remodeling and furnishing their home by connecting them to local and dedicated professionals. Houzz is an online platform for home remodeling and design connecting homeowners to home professionals and product vendors. The following table gives an overview of the oppennes and participants of the network:

Screen Shot 2015-10-11 at 13.57.00

Platform-mediated networks face different challenges in formulating and executing a strategy compared to traditional offerings, due to the balance-act necessary between the demand and supply participants. The different sides of users in the networks require a new approach to strategy. The article ‘Strategies for Two-Sided Markets’, by Eisenmann et al, provides a strategic framework for platform-mediated networks by addressing three major challenges; pricing strategies, winner-take-all competition and avoiding envelopment.

First of all, both firms clearly opt to subsidize quality- and price-sensitive users; the demand-side consisting of homeowners and people looking to redesign their homes. Professionals offering their are for both firms selected to serve as the money-side and, due to the effect of cross-side network effects, the money-side for both firms is willing to pay handsomely to reach the demand-side. Secondly, while Zillow has been actively involved in acquiring other firms in order to become significant in other, relevant markets, Houzz just commenced using vertical integration in order to increase value of its network. Lastly, where Zillow owes its main source of income to envelopment, Zillow has not exhibited this and rather flourished due to vertical integration. Interestingly, Zillow has the potential to envelop Houzz by means of Zillow Digs and, when successful, make Zillow into a gigantic successful one-stop-shop for buying, selling and remodelling houses

Both Zillow and Houzz fit the description of market networks creating and maintain a many-to-many transaction market. This characteristic forms the number one competitive advantage for both firms and although both operate in different industries, their market network identity equally helps them to grow and maintain their respective user base. While Zillow relies on its large database of homes and use of Zestimates and Zillow Digs, Houzz builds upon its inspirational content, ‘click-to-buy’ functionality and ‘one-stop- shop. Therefore, Although operating in different industries, both companies recognize the vital role of their platform as a facilitating intermediary allowing transparent, quick and extensive exchanges.

The following table gives an impression of the SWOT analysis:

Screen Shot 2015-10-11 at 13.57.56

In conclusion, both the analysis and comparison leave room for four strategic moves, which can be implemented in order to stay ahead in the market: Winner-takes-all, envelopment, effects of Word of Mouth (WOM) and Observational Learning (OL) and the role of platform exclusivity agreements.

Please comment if you have any questions regarding the theories or want to know more about specific aspects of Houzz and Zillow as well as their role in the battle of platform-mediated networks.

(Group 45: Florianne Griffioen 355919 , Christian de Wit 356443, Roeland Diks 357272, Carlo Bruno 353381 and Lennart Schwung 355210)

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