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1Q2024AnalysisCommentaryCoStarMTTR

Why CoStar planned acquisition of Matterport is Good News for Competitors19791

WGAN Forum
Founder &
WGAN-TV Podcast
Host
Atlanta, Georgia
DanSmigrod private msg quote post Address this user

Screen Grab from CoStar Group First Quarter 2024 Investor Presentation | Page 7


Screen Grab from CoStar Group First Quarter 2024 Investor Presentation | Page 21


Screen Grab from CoStar Group First Quarter 2024 Investor Presentation | Page 24

Video: Homes.com | A goldmine of local intel | Video courtesy of Homes.com | 11 February 2024

Video: Why CoStar planned acquisition of Matterport is Good News for Competitors | Video courtesy of WGAN-TV YouTube Channel | 1 May 2024

WGAN Forum Podcast | Episode #289

Why CoStar planned acquisition of Matterport is Good News for Competitors

Commentary and Analysis by
Dan Smigrod
Founder and Managing Editor
We Get Around Network | WGAN-TV

CoStar’s planned acquisition of Matterport this year is great news for all 3D/360 digital twin/virtual Tour platforms and software. (And, by extension, real estate photographers that offer virtual tours.)

This may seem counterintuitive. CoStar Founder and CEO Andy Florance said during the CoStar earnings call Tuesday (23 April 2024) that he intends to make Matterport ubiquitous among all CoStar marketplace brands including: CoStar, LoopNet, Apartments.com, Homes.com and Ten-X.

So, if Matterport becomes ubiquitous among all CoStar brands, how does this help competitors?

The ways Matterport becoming ubiquitous, is key to understanding why Matterport competitors will also succeed faster too.

For example:

1. CoStar Competitors Will Not Advertise CoStar: In its 10+ years, Matterport has always required its logo in each tour. While CoStar should offer a white-label version of Matterport (no Matterport branding) to show competitors that it welcomes their use of Matterport, it is more likely that the Matterport branding will morph into “Matterport - a CoStar Company” … That’s what big companies do. Google box of Oreo cookies to see examples of what’s likely coming soon to Matterport digital twins.

If that happens, CoStar competitors will likely block Matterport digital twins from being used on their marketplace and encourage the use of all other 3D/360 digital twin platforms.

Can you imagine Zillow allowing CoStar branding on its platform? Even if it did, Zillow likely would “move-up” other listings in Zillow search. Zillow already does this with its Zillow 3D Home tours.

2. More Free Matterport Digital Twin Captures: CoStar will likely include more Matterport digital twins captured for free in their top tier agent/broker marketing packages – if not all packages.

For example, presently, Apartments.com, a CoStar company, includes Matterport digital twin capture in 3 of 4 of the Apartments.com ad packages. (LoopNet has similar style agent/broker advertising packages.)

CoStar will likely add more Matterport capture services because it can make more money from agents and brokers buying its ad packages than selling Matterport digital twins as a standalone product to its various CoStar marketplace brands’ clients. (That’s Phase 1).

CoStar can make more money by increasing the number of listing views and the time spent viewing a listing. Integrating Matterport Capture Services and VHT Studios (a Subsidiary of Matterport) Digital Pro package into all CoStar brands’ marketing packages will take time. That’s Phase 2.

“We intend to make a much greater commitment to capturing 3D digital twins,” said Florance during the CoStar first quarter 2024 earnings call.

Additionally, CoStar likely has hundreds of employees – not independent contractors – that do Matterport scanning (and other digital property marketing listing services).

CoStar competitors will need to offer a similar 3D/360 digital twin option. It’s likely they will seek out other 3D/360 platforms to either buy or develop a co-marketing strategy. For example, Zillow’s ShowingTime+ Listing Showcase offers a Zillow 3D Home tour in its packages.

According to a marketing video on the ShowingTime+ website:

“Listing Showcase can flex with your business needs like per-listing purchase options and the choice to use your own photographer or book one through ShowingTime+ Listing Media Services for a turnkey media experience. Your AI powered Showcase listing will feature high res photography, room-by-room organization, a virtual tour and an interactive floor plan that connects the photography to the location in the home.”

In December 2022, Zillow acquired VRX Media to create a national photographer network, elevating listing media through ShowingTime+ brand. In August 2023, Zillow acquired Aryeo for its network of real estate photographers, robust digital marketing services and content management platform.

3. Super Bowl 2025: The CoStar vision is to “establish Homes.com as the #1 residential real estate marketplace,” according to a slide in the CoStar First Quarter 2024 Investor Presentation (Page 24). CoStar will aggressively advertise Matterport + Homes.com to take on Zillow: the leader in the space.

A quick review of a graph titled Portal Traffic Wars Average Monthly Unique Users dated February 29, 2024 by industry thought-leader Mike DelPrete shows the CoStar challenge.

Zillow has three times the number of monthly unique users.

I anticipate 2025 Super Bowl ads (as I discussed in a We Get Around Network Forum post) as just one of the consumer marketing tactics.

While I do not believe CoStar would box-out competitors from using Matterport, it’s more likely that competitors will not want to wait to find out. Perception equals reality. CoStar competitors will need to offer a similar 3D/360 digital twin option and seek out other 3D/360 platforms to either buy or develop a co-marketing strategy.

4. CoStar Guarantee: While I provided examples of CoStar including Matterport tour capture services in its top tier agent packages (Apartments.com ad packages and LoopNet ad packages for examples), I could imagine CoStar offering this guarantee:

“CoStar Guarantees more referrals and more time spent on your listings when you include a Matterport digital twin.”

CoStar could make this claim because as CoStar revealed during its earnings call, CoStar research shows:

In March of this year, there were over 7.4 million views of Matterport 3D tours on Apartments.com. Visitors who interact with the Matterport on Apartments.com spend 16.6 minutes on the site, which is 134% more than the 7.1 minutes time on site if they do not interact with a Matterport.

Properties with a Matterport generated 74 leads, which is 10x the seven leads generated for property without Matterport.

According to Florance:

“We intend to add Matterport as one of the benefits of Homes.com membership. We believe adding 3D digital twins for Homes.com members will increase the leads we deliver, increased customer satisfaction, increased renewal rates, increased sales and increased site traffic further.”

5. Matterport and Photos Become Table Stakes: In the same earnings call, Florance also said he will make the inclusion of Matterport table stakes for all its marketplaces: just as photos are table stakes now.

While that still may be many years away, CoStar competitors will need to offer a similar 3D/360 digital twin option and seek out other 3D/360 platforms to either buy or develop a co-marketing strategy so that they are not left behind: particularly if usage of Matterport digital twins growth rate is exponential rather than linear.

Florance said:

“I believe we're standing on the verge of a potential exponential acceleration in the technology surrounding 3D digital twins, which will create transformative value for real estate.”

6. Technology Roadmap to Favor CoStar: “CoStar Group was one of the first adapters of Matterport's technology and currently has almost 300,000 Matterport digital twins available in the CoStar information product and online property marketplaces," said Florance during the earnings call. "We intend to go all in on 3D digital twins adding more digital twins to Apartments.com, LoopNet, Homes.com, CoStar, Land.com, BizBuySell, Real Estate Manager, STR, Belbex on the market and others.’

Florance also said, “We see the acquisition is giving us increased ability to influence the product roadmap for Matterport to best serve our clients needs."

If CoStar competitors are to keep-up with CoStar, they too will need to speedup the technology roadmap to stay competitive. This means CoStar competitors will also need to become major clients of Matterport competitors or buy a Matterport competitor.

7. Matterport Matterpeeps: CoStar plans to add more Matterport sales and marketing people. Those on the receiving end of those pitches will research Matterport competitors.

8. Artificial Intelligence (AI) Meets Spatial Data: AI applied to spatial data and capture automation (think robots and drones) will further accelerate the adoption curve of digital twins/virtual tours by driving capture costs down.

Matterport calls its AI powered offering Property Intelligence that it has started rolling out this year. Matterport competitors have also announced AI applied to their digital twins. CoStar competitors that need to offer a similar AI option will seek out other digital twin platforms that offer this capability to either buy or develop a co-marketing strategy.

A Rising Tide Lifts All Boats

The CoStar planned acquisition of Matterport by the end of 2024 is likely a rising tide event that lifts all 3D/360 virtual tour/digital twin boats.

At one time, I thought of Matterport as the 800 pound gorilla in the digital twins for residential real estate space. Soon there will be a new, much bigger gorilla.

Matterport competitors should be elated that Matterport is being acquired by CoStar — a company that did 16 times gross revenue ($2.46 billion) versus Matterport’s gross revenue ($157.7 million) in 2023.

CoStar will expand the market for digital twins/virtual tours: not kill Matterport competitors.

As a result of CoStar gorilla-size advertising, I could imagine home sellers selecting a real estate agent that includes virtual tours to help get more offers sooner for more money with the least amount of stress.

Agents will (finally) get it that they can win more and bigger premium listings by offering virtual tours in their listing marketing plan. (And, home sellers will be smart enough to say to a potential real estate agent that a slideshow is not a virtual tour.)

I would not be surprised to see at least one Matterport competitor running a marquee banner ad in the We Get Around Network Forum with headlines such as:

-- Does your company compete with CoStar?
-- Are you seeking an Alternative to Matterport?
-- Partner With a Matterport Competitor!


What are your thoughts? Should Matterport competitors be concerned or elated (and why) about CoStar’s planned acquisition of Matterport this year?

Are you a real estate photographer?

Google:

What CoStar's Acquisition of Matterport Means for Real Estate Photographers.

You’ll find my commentary and analysis on that topic.

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CoStar Group First Quarter 2024 Investor Presentation
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Shakoure private msg quote post Address this user
@DanSmigrod ...Thanks for the extended analysis Dan. Insightful as always.
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