Thread by @kevinakwok

New essay up. On Making Uncommon Knowledge Common + the Rich Barton Playbook

kwokchain.com/2019/04/09/mak…

Rich Barton isn't known well in SV. But has strong claim to best consumer founder

Magnitude of success probably isn't best metric. Repeatable success is the key. And Rich Barton may be only consumer founder with three billion plus outcomes

Founded
- Expedia
- Zillow
- Glassdoor

Had written about him in memo on Zillow's pivot to Opendoor's model and his return as CEO. So wanted to split out section on Rich Barton's Playbook and Zillow's origin to share

Repeatability in the dark forest of consumer implies non-arbitraged insights. And is worth discussing

What's the Rich Barton Playbook?

1. Create Data Content Loops
2. Use them to disintermediate incumbents and dominate search
3. Take this traction and use it to own demand in the industry

Or as he puts it "Power to the People"

Barton's companies' data content loops
- Prices for flights and hotels: travel agent --> Expedia
- Value of home: broker --> Zillow
- Reviews of companies: Recruiter --> Glassdoor

Use these to own search and have strong free user acq. Bootstrap demand until other loops kick in

Like his mantra Power to the People, Barton’s companies take power from incumbents and give it to consumers

Instead of hoarding info they make the data transparent

Take whispered conversations and make them public

Glassdoor: how employees really feel about company
Zillow: How much house is worth
Expedia: Prices and availability of flights

Few topics adults gossip about more than work, real estate, and travel. Or as core to their net worth

Before incumbents had credibility through obscurity

- Brokers had more access to MLS data than sellers. Which gave them leverage and entrenched their importance in process
- Few people interviewing had access to compensation research or knew unvarnished truth about company

Incumbents intermediated their markets and gained an edge from people’s lack of knowledge

Very hard to break out of this. Job applicant is unlikely to know current employee. And need to know them very well for them to feel comfortable saying negative things about company too

This sparse commons is a classic case of market failure

Some incumbents take advantage of the information asymmetry

But for most, better to have third party that
- finds, adds, and curates third party data into commons
- verifies information
- aligns incentives of contributors

Rich Barton's companies became public Schelling Points

They create common knowledge that only middlemen had prior. And push it to the public

The more people use and trust Glassdoor. The more others are confident they can add reviews anonymously. And so on. This compounds

Barton's companies use these data content loops to own search

Search is a great low-cost acq channel. But few generate enough high volume AND high quality web pages about their industries to fully capitalize on it

The data content loops make Barton's companies the authoritative source on their industries

By having super relevant information about every hotel, home, or company someone might be interested in Expedia, Zillow, and Glassdoor become the ideal destination for consumers

There have been refinements to this model
- Expedia (and its competitors) used acquisitions to own not just top search slots, but entire page
- Zillow made page for almost every home in US
- Glassdoor did this for companies but with user generated data, which is more defensible

And the results speak for themselves

Majority of traffic for all of Barton’s companies come from search or direct

This makes their acquisition far cheaper than any company focused on paid acquisition. And makes building company in low frequency market possible

The ultimate purpose of using these data content loops and SEO is to own demand side of industry and become a trusted brand

Each wants to be first place visited when planning
- Expedia: travel
- Glassdoor: companies to work for
- Zillow: selling your home or buying one

Saturation and Sequencing

Barton's playbook is strong because it wedges into new markets *and* transitions that to durable long term advantage at scale

Data content loops, like underutilized fixed assets, are very effective for hitting minimum viable scope

Zillow is great example of this playbook

The data for estimating the price of houses had existed, and many brokers used the MLS systems to estimate it, but nobody had made that available to the masses

Zillow changed that with their Zestimate

Zillow's Zestimate let anyone look up their home and see its value

Even better they could look up their friends' homes

Within a day of launch, Zillow had a million people checking out their Zestimate

Envy is the best rocket fuel

Artist's impression of even better representation of Zestimate's appeal

Zillow has a Zestimate for 100M+ homes in the US

It became the kernel used to create a webpage for every home. Letting Zillow become dominant at Search

Try searching for your house on Google. Zillow's probably the top result

Nobody had indexed all the homes in the US and brought that data online until Zillow and Trulia

This was fertile search real estate to grab--and they used the Zestimate to claim it

The Zestimate became common knowledge. It wasn't always perfectly accurate, but it forced realtors to justify when their valuations deviated

Zillow became for homes what the Kelley Blue Book is for cars

And the more people used it, the more powerful it became as an anchor

The tech industry is a process by which we collectively push forward our understanding of industries and new business models

Enterprise and SaaS have become far better understood. And playbooks like Barton's are a sign of the patterns and contours for consumer repeatability too

Core to building a scaled consumer business is the unpredictable path of bootstrapping initial demand

And as world increasingly shifts from supply constrained to demand driven, strategies that empower consumers like data content loops are likely to continue to be very effective

Endnote 1

While focus here was on data content loops and Power to the People. It should be noted those aren't the only areas he's been loud and early proponent of.

Two other big ones are:
- Unconstraining talent in society
- Raising the bar on ambition in companies

Endnote 2
Of course Zillow's story didn't end there. It’s now the incumbent with a new startup, Opendoor, fast on its heels

To understand why Zillow pivoted to match them, need to look at original Barton Playbook and how new competitors’ map to them

But that's for another essay

Finally, thanks to @keilafong @tangaciousD @onecaseman @samhinkie @eugenewei for many discussions on these as well as help cleaning this up for public sharing