$30M Zillow infusion may go to home-improvement tab

Excerpts from the blog

Here's my Zestimate: Zillow will use some of the $30 million it just raised to push into the home improvement and décor market.

The nearly 2-year-old online real-estate site was already the best funded Seattle Web startup in the cycle, with $57 million raised.

Today, it's announcing a third and probably final round of financing, this time led by Legg Mason Capital Management in Baltimore. Bill Miller, Legg Mason's chief investment officer, said in a news release: "We believe Zillow is well on its way toward becoming a market-leader in a huge, and untapped online category of online tools and information for homeowners."

The word "homeowners" is interesting.

Zillow's initial focus was homebuyers and sellers. It made its splash with Zestimates, a tool for estimating the value of property. Zillow has also been adding tools for home sellers, enabling people to post "make me move" prices and giving agents and brokers more tools to edit listings and advertise on the site.

Meanwhile, the real-estate market has chilled.

Zillow Chief Executive Rich Barton has said over and over that Zillow won't suffer from the market downturn, but the time is ripe for the company to broaden its reach beyond home-listing and market information.

If people aren't buying and selling homes, they're staying put and working on the place they have. That may be an opportunity for Zillow, especially if it can develop zingy online tools to make it stand out in the crowd chasing "nesting" ad dollars.

Earlier this year Zillow added features that allow referrals to home-service providers and created more opportunities for those providers to advertise on the site.

Comments Barton made during an interview made me think that home improvement may be the next tab to appear on the site's subject menu. Talking about the latest funding, he said this: "Raising this money enables us a great degree of strategic freedom and lots of flexibility to go after what we think is a unique opportunity. We're kind of pioneering a category here that's not just what's on the market but all things that are home-related and building a community around that."

Home-improvement subjects are frequently discussed on the site's community forums. Barton said that's among the areas Zillow will explore in its next phase: "That's part of our product plans — to continue to invest in expanding the community aspects of Zillow and new home-related categories and just do research. We're trying to figure out where to go."

The additional funding will be used to develop new products, build the engineering team in Seattle and expand a sales team that now has 20 people based in New York and five other cities.

The company has 155 employees, up from 80 at its launch in February 2006. It says more than a million U.S. homeowners and agents have "claimed" homes listed on its site.

Barton said it hadn't burned through the $57 million in a year. "We had a lot of that left so we didn't really need it per se, but the best time to raise capital is when you don't really need it," he said.

Zillow investor and board member Bill Gurley, of Benchmark Capital, isn't worried about the downturn hurting the startup, either. During an interview, he said he's pleased with Zillow's revenue growth, brand building and ambition to become "the best real-estate site on the Web, flat out:"

Gurley said Zillow may expand into new categories, irrespective of the real-estate market situation: "I think the company has some very strong amibitons to be a bigger and bigger player in terms of helping consumers have the information they need to make great decisions about their home."

After seeing Barton in sandals and cutoffs at a recent luncheon, I have a hard time visualizing him becoming the next Martha Stewart. But he might be able to pull off the Norm Abrams look.

Zuning in

So, was the Zune news leaked or announced via a gadget blog? Either way, tidbits are spilling out.

Enthusiast blog Zunescene started the ball rolling when a tipster dropped the basics: Being prepped for an Oct. 16 launch are flash memory models (code named "draco") with 4 gigabyte and 8 gig capacities and an 80 gig hard-drive model (code named "scorpio").

Images show a smoother, less chunky device with a new control interface switch/wheel called the "squircle." Here's how the source described it to the blog: "It doesn't have a center button, but it has a dome underneath so you can push it from any side, it's really cool."

Also new is an olive drab color. I wonder if it's the same color as the special edition Halo 3 Xbox.

Next week Microsoft is participating in DigitalLife, a big event in New York where computer and electronics companies show off their holiday offerings. Maybe we're seeing buzz-building ahead of a Zune unveiling at the show.

But the big question is pricing. Will the new Zunes be cheaper than the new iPods with comparable storage?

First-generation Zunes seem to be selling well since the prices came down. Amazon.com has them for $149, where they've been the top-selling hard-drive based media player and top of the portable media player category.

This material has been edited for print publication.

Brier Dudley's blog appears Thursdays. Reach him at 206-515-5687 or bdudley@seattletimes.com.