Zillow.com – now with 25% less employees

It hasn’t been a good week for real estate startups in Seattle. Three days after Redfin laid of 20% of their staff, Zillow’s CEO Rich Barton announced today that he made the difficult decision to reduce their workforce by 25% (40 people). This is becoming quite the theme in the startup community as smart entrepreneurs securely batten down the hatches before venturing into a major economic storm.

The unprecedented economic events that are playing out on a global stage began in our own industry and have made a prolonged recession likely, in our judgment. We are a young company that is not yet making a profit. Despite having sizeable cash reserves, we deemed the responsible course was to meaningfully reduce expenses, so that Zillow emerges from the other side of the recession in a very strong position, even if the recession lasts many years.

Saying goodbye to dedicated colleagues, who we have worked with side by side, is miserable. This is a group of incredibly smart and talented people who helped build and support a product they can be proud of. I want to thank these folks for their service and contributions and offer my apology for the having to make this decision. I wish the circumstances would allow us to continue having them contribute to Zillow’s success.

What makes Zillow’s decison (and Redfin’s last week) so difficult is that the online real estate business continues to flourish. Zillow.com saw 5.4 million unique visitors in September – a 42% increase in traffic over this time last year.

As Dan Gibbons pointed out in his comment to the Redfin news earlier this week, “it makes sense that people will look for the most cost-effective way to conduct real estate transactions in tough economic times.” Fear, value-shopping, and curiosity should continue to drive traffic to Zillow.com as the uncertainty continues.

The only question that remains is whether real esate agents can maintain their monopoly on an industry that no longer needs them. Gibbons went on to say what a lot of home buyers and sellers are thinking:

I’d really love it if realtors could be completely eliminated from the buying/selling process. For years they’ve done nothing but foster bureaucracy and complexity in order to maintain their position as middle men, and in my experience there are about 100 utterly mediocre agents to every one great agent.