We are spending more and more time consuming information online. Logically, since time is finite online advertising spend should follow a similar trajectory with marketers allocating their ad budgets in proportion to where people are spending their time.
November 2007 Archives
Wired: Not everyone has been thrilled with their Zestimate. Tell us how it's done.
Barton: Our algorithm is a complex piece of AI that pores through a ton of data, looks for patterns, and creates predictive models. Then it goes through by zip code and identifies which models work best in each neighborhood. We're going to take that all the way down to the house level eventually. It's an interesting computer science and stats problem. A fun one.
Wired: Why wait until now to upgrade your algorithm?
Barton: Zestimates are based on history; we plot house prices like stock prices. We are careful about major updates to the algorithm because we are literally rewriting history.
Wired: So how does your users' data fit into the formula?
Barton: The Zestimate is only going to be as good as the information we have going in, and there are lots of holes and inaccuracies. We opened up Zillow so owners could correct facts about their homes, publish their own estimate of their house's value, and upload pictures. We can feed some of that information back into the algorithm. If you say, "No, there are four bathrooms, not three," we take that as reality. It makes the Zestimate significantly better.
Wired: Can sellers really be trusted to give honest appraisals?
Barton: It's kind of like a warts-and-all corporate blog — stuff is going to come out that you wouldn't want, but everybody ends up better. It's a very modern concept. Smart homeowners get it: If there was a flood in the basement two years ago, it's going to be found out. So let's talk about the fact that it happened and what we did about it.
In April, 2005, Sam Zell travelled to Abu Dhabi to meet Crown Prince Sheikh Mohammed bin Zayed al-Nahyan. Zell is best known as a real-estate magnate, whose reputation has been enhanced by the sale, last February, for thirty-nine billion dollars, of Equity Office Properties Trust, the largest collection of office buildings in the country. Zell, who is sixty-six, delights in claiming that at the time the sale—to Blackstone, the private-equity firm—was “the largest single transaction that has ever been done.” But for decades his appetite for economic opportunity has lured him beyond real estate into investments in oil and gas, barges, insurance, wineries, cruise ships, department stores, waste-to-energy power projects, and radio stations. In April, he signed an $8.2-billion deal that would effectively give him control of Tribune Company, the giant media conglomerate, whose assets include the Chicago Tribune and the Los Angeles Times. For about a dozen years, he has also invested aggressively abroad, most recently in the Middle East. He spends about twelve hundred hours a year on his plane—the equivalent of flying from New York to London every few days. “I want to see everybody in their habitat,” he told me, in a low, rasping voice. “When these people see me come halfway around the world to meet them and spend time with them, it creates a level of confidence that translates into other things”—by which he means, he says, “successful business.”
- Housing prices may not be falling by as much as some economists say they are.
- Although the inventory of homes for sale has risen, housing construction activity has fallen substantially [which will support future prices].
- The shock to the availability of credit has been concentrated primarily in securitisations rather than in credit markets defined more broadly.
Should executives make decisions based on what their “gut” tells them? Lately that idea has lost some favor, as technology’s ability to accumulate and analyze data has rapidly increased — supplanting, according to some accounts, the high-level manager’s need to draw heavily on intuition. But intuition needs some rescuing from its detractors, and the place to start is by clarifying what it really is, and how it should be developed.
Intuition is not a magical sixth sense or a paranormal process; nor does it signify the opposite of reason or random and whimsical decision making. Rather, intuition is a highly complex and highly developed form of reasoning that is based on years of experience and learning, and on facts, patterns, concepts, procedures and abstractions stored in one’s head.
In this article, the authors draw on examples from the worlds of chess, neuroscience and business — especially Austria’s KTM Sportmotorcycle AG — to show that intuitive decision making should not be prematurely buried. They point out that although the study of intuition has not been extensively explored as a part of management science, studies reveal that several ingredients are critical to intuition’s development: years of domain-specific experience; the cultivation of personal and professional networks; the development of emotional intelligence; a tolerance for mistakes; a healthy sense of curiosity; and a sense of intuition’s limits.
By 2002, everyone in my family had become an Internet convert. For the technophobic older generation, signing up for an e-mail account was a concession to us youngsters—if the kids don't call home, they thought, we'll just reach them through the computer. Everyone was especially eager to send messages to my niece, a kid who wasn't all that chatty on the phone but was almost always glued to her PC. But while the rest of us happily exchanged forwards and life updates, she almost never piped up. Eventually, I sussed out the truth: She was too busy sending IMs and text messages to bother with e-mail. That's when I realized that my agility with e-mail no longer marked me as a tech-savvy young adult. It made me a lame old fogey.
Those of us older than 25 can't imagine a life without e-mail. For the Facebook generation, it's hard to imagine a life of only e-mail, much less a life before it. I can still remember the proud moment in 1996 when I sent my first e-mail from the college computer lab. It felt like sending a postcard from the future. I was getting a glimpse of how the Internet would change everything—nothing could be faster and easier than e-mail.
From the very beginning, this American dream meant putting into practice what the Old World had merely dreamed of building.
The American dream. From the very beginning, from its origins, this American dream meant proving to all mankind that freedom, justice, human rights and democracy were no utopia but rather the most realistic policy there is and the most likely to improve the fate of each and every person.
America did not tell the millions of men and women who came from every country in the world and who -- with their hands, their intelligence and their hearts -- built the greatest nation in the world: "Come, and everything will be given to you." She said: "Come, and the only limits to what you'll be able to achieve will be your own courage and your own talent." The America we love throughout the world is the country that has this extraordinary ability to grant each and every person a second chance, since in America, failure is never definitive.
Here, in your country, in this land, the humblest and most illustrious citizens alike know that nothing is owed to them and that everything has to be earned. This is what constitutes the moral value of America. America did not teach men the idea of freedom. America taught them how to practice it. And she fought for this freedom whenever she felt it threatened. It was by watching America grow that men and women understood that freedom was possible. And this is what gives you a special responsibility.
It is now clear that the delusional hope that the severe credit and liquidity crunch that hit US and global financial markets would ease has been shattered by the events of the last few weeks. This credit crunch is getting much worse and its financial and real fallout will be severe.
The amount of losses that financial institutions have already recognized - $20 billion – is just the very tip of the iceberg of much larger losses that will end up in the hundreds of billions of dollars. At stake – in subprime alone – is about a trillion of sub-prime related RMBS and hundreds of billions of mortgage related CDOs. But calling this crisis a sub-prime meltdown is ludicrous as by now the contagion has seriously spread to near prime and prime mortgages. And it is spreading to subprime and near prime credit cards and auto loans where deliquencies are rising and will sharply rise further in the year ahead. And it is spreading to every corner of the securitized financial system that is either frozen or on the way to freeze: CDOs issuance is near dead; the LBO market – and the related leveraged loans market – is piling deals that have been postponed, restructured or cancelled; the liquidity squeeze in the interbank market – especially at the one month to three months maturities - is continuing; the losses that banks and investment banks will experience in the next few quarters will erode their Tier 1 capital ratio; the ABCP and related SIV sectors are near dead and unraveling; and since the Super-conduit will flop the only options are those of bringing those SIV assets on balance sheet (with significant capital and liquidity effects) or sell them at a large loss; similar problems and crunches are emerging in the CLO, CMO and CMBS markets; junk bonds spreads are widening and corporate default rates will soon start to rise. Every corner of the securitization world is now under severe stress, including so called highly rated and “safe” (AAA and AA) securities.
HouseValues.com has agreed to pay $51,000 in costs and attorney fees and revamp some of its business practices in order to settle a case that alleged that the Kirkland company's real estate lead generation services violated the state's consumer protection laws.
As part of the settlement -- in which HouseValues did not admit wrongdoing -- the company will be prevented from misrepresenting the quality of leads its provides to real estate agents as well as the subscription term. It also will not be permitted to charge an early termination fee unless it is clearly disclosed to the subscriber. The Attorney General's Office, which brought the case, had argued that the leads provided by HouseValues were not of a high quality and the company locked real estate agents into restrictive agreements.
The founder of Long & Foster, the Washington region's largest residential real estate brokerage, struck a nerve last week when he urged his thousands of agents to recommend the company's in-house mortgage lender more often and stop working with outside lenders such as Bank of America.
In an e-mail to all Long & Foster agents and managers, P. Wesley Foster Jr. chastised his workers for funding mortgages through Bank of America more than 2,200 times last year and through Wells Fargo instead of using Long & Foster's affiliate, Prosperity Mortgage. This comes at a time when home sales have slowed significantly.
Standard & Poor's (NYSE:MHP) Ratings Services said it has lowered Realogy Corp's corporate credit rating to 'B' from 'B+' to reflect its expectation that the company will experience lower than previously expected cash flow generation and weakening credit measures over the intermediate-term resulting from a lengthening downturn in the US residential real estate market.Realogy issued $875M of 12.375% (!) eight year notes earliers this year. Much more on Realogy and its parent Apollo Management.
'While there is nothing stable about current transaction and pricing trends in the U.S. residential real estate market, we believe Realogy has available liquidity sources adequate to withstand the current downturn in the cycle. As a result, we are unlikely to lower the rating further over the intermediate term,' the rating agency said.
Score one for the law of unintended consequences.
In past periods of economic turbulence, American households were able to escape mountains of bad debt—and keep their homes—by declaring bankruptcy. During the weak growth years from 2001 to 2003, for example, nonbusiness bankruptcy petitions averaged roughly 1.5 million per year. Lenders complained bitterly that bankruptcy was too easy, but because financially stressed Americans could write off their credit card and other consumer debt, they had more money available to pay their mortgages.
But today's growing problem in the housing market is different—foreclosures are soaring, while bankruptcies, though clearly on the upswing, are running roughly at half the 2001-2003 pace. The reason: A new bankruptcy law, approved by Congress in 2005 after years of debate, makes it much harder for households to get out from under their consumer debt. The result: More people being forced to walk away from their homes, leaving lenders holding the bag. Perversely, a law intended to help the financial industry may be damaging the housing sector, creditors and borrowers alike. "It doesn't matter what you think of the purpose of the new bankruptcy law. The timing is bad," says Susan M. Wachter, professor of real estate at the Wharton School of Business.
The old bankruptcy law, in effect since 1978, was considered extremely housing-friendly. Most distressed borrowers favored filing under Chapter 7, essentially cheap, quick debt liquidation. In practice, most got to keep their homes, while the rest of their property and assets were sold off to pay a portion of unsecured debts such as credit-card and medical bills. When the assets ran out, the remaining loans were cancelled—although some debts were off limits, like student loans and child support. Future paychecks could go to mortgage payments.
IAC (Nasdaq: IACI) announced today that its Board of Directors has approved a plan to separate IAC into five publicly traded companies:
•LendingTree, which will also include RealEstate.com, Domania, GetSmart, Home Loan Center and iNest.
"We’ve been a complex enterprise almost from the very beginning 12 years ago, with hundreds of transactions over those years. And while we’ve created a lot of value, I’ve always believed our complexity and many mouthfuls of sentences to explain who we are and what our strategy is have hampered clarity and understanding with all our constituencies, particularly investors,” said Barry Diller, Chairman and Chief Executive Officer of IAC. “One of the reasons we’ve stayed with some of our more transactional businesses is that we needed their earnings to allow us to invest in emerging Internet businesses. Now that we have real scale in the pure Internet units, it makes nothing but sense to me to reorganize the whole. Each of these spun-off businesses is in fact a distinct business sector, and each will benefit from standing on its own, with its own capital structure, its own currency which will enhance its ability to attract and retain superior talent and make acquisitions, and a focused story investors can clearly understand and buy into:
Reposted, for the benefit of Dallas Morning News readers: Here's an interesting followup to my Atlantic column (free link good for three days), discussed below: a chart comparing the number of building permits per 1,000 population in different metropolitan areas. It demonstrates the same phenomenon I discussed. The cities toward the bottom of the list, those with the fewest permits issued, fall into two categories: those with low demand and low prices (Detroit, Buffalo, Rochester, etc.) and those with high demand and high prices (LA, San Francisco, Boston, etc.). The fast-growing Sunbelt cities where housing is cheap are at the top of the list. Compared to the economic research I cited, this is a fairly crude way of cutting the data. But it did help reassure my Pasadena-based fact-checker that, despite the new construction she sees around her, it really is hard to get a permit in our area.
Even Realtors can lose faith in the housing market.
Speaking to a gathering of industry professionals today, longtime California real estate titan Fred C. Sands called the housing market "pathetic" and said some agents needed to start looking for other work.
"If you've been in it for five or six years and are barely making a living, you might want to think about what you were doing before and get back into it -- you can come back in a couple of years," Sands told members of the California Assn. of Realtors meeting in Universal City.
In the short term, the local real estate market "is not going to get better," Sands said.
He added that he could speak with candor because he was no longer in the home-selling business. Sands now leads Vintage Capital Group, an investment firm that focuses on commercial real estate development.
Such frank remarks are rare at gatherings of famously upbeat real estate agents, but Sands said those in the business needed to remember the last downturn and realize that "the last five or six years were not normal."