DISRUPTIVE INNOVATIONA process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves ‘up market’, eventually displacing established competitors.

An innovation that is disruptive allows a whole new population of consumers access to a product or service.

VS

VS

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$12 Billion $16 Million

$93 Billion $655 Million

$362 Billion ?

DISRUPTOR & DISRUPTEE

DISRUPTIVE INNOVATION&

CONSUMER DYNAMIC

Airbnb.com – Air mattresses and donutsListings worldwide from a room to a homeImplications for hotels and real estate?

Rent nightly from real people in 19,716 cities in 196 countries.

CURRENT DISRUPTIVE INNOVATIONS

• Mobile• Social• Ratings & Reviews• Videos

• Mobile – Disrupts traditional websites• Now more minutes are spent searching the web on apps

than browsers

Google Android – 150,000 apps – 2 Billion downloadsApple – 425,000 apps – 15 Billion downloads

• 1/2 of all searches will be via mobile devices within a year

MOBILE

Real Estate Apps - National Search

AppStore – Local App Search

Android Market – Local App Search

Apps for Consumers & MLS Subscribers

800 Million Users

3 Billion videos are viewed a day

200 Million Users

SOCIAL MEDIA

HAR Powers 800+ Agent’s

Facebook Business Pages

with their Listings

HAR Tweets Your Listings

87,000 Tweets

HAR Promotes Members Social Presence

HAR Promotes

Your Social Presence

Agent Videos by HAR TV140,000 Views - Agent/HAR Videos88,000 Views - Listings Videos

HAR Promotes Your Video Profile

& Listings on YouTube

70,000 Ratings

3,556 Agents have Surveyed Clients 4.93/5.00Total Surveys Sent to Clients 102,448 (49% Response)

DISRUPTIVE INNOVATIONAND HAR

HAR.COM WAS DISRUPTIVE IN 1997

Chicago Quarterly Market Ranking - 12 weeks ending 8/27/11

Column1 Websites Visits

1 Realtor.com 7.95%

2 Yahoo! Real Estate 7.69%

3 Zillow 5.89%

4 Trulia.com 5.35%

5 Homes.com 2.67%

6 Rent.com 2.62%

7 Redfin 2.18%

8 AOL Real Estate 2.00%

9 Midwest Real Estate Data LLC 1.78%

10 ZipRealty 1.72%

11 Apartment Guide 1.68%

12 Apartments.com 1.60%

13 RE/MAX Northern Illinois 1.56%

14 MSN Real Estate 1.48%

15 MyNewPlace 1.43%

Houston Quarterly Market Ranking 4 weeks ending 8/27/11

Column1 Websites Visits

1 HAR.com 26.74%

2 Yahoo! Real Estate 6.84%

3 Trulia.com 4.10%

4 Realtor.com 3.49%

5 Zillow 3.15%

6 Homes.com 2.69%

7 Apartment Guide 1.90%

8 Rent.com 1.87%

9 ZipRealty 1.64%

10 Apartments.com 1.54%

11 MSN Real Estate 1.50%

12 LoopNet 1.33%

13 ApartmentRatings.com 1.32%

14 AOL Real Estate 1.25%

15 MyNewPlace 1.01%

MLS Consumer Websites:It’s Not Just HAR.com Anymore

779,450 Agents Belongs to MLSs w/Public Websites

2010 – Broker/Agent Listings Viewed 145,881,434 Times

2010 – 438,782 Email Leads to Brokers/Agents

2010– Broker Phone# was Clicked 419,222 times

2010– Click-Thrus from HAR.com to Broker/Agent Websites

2,724,954 Times

2010– Click-Thrus from HAR.com to Broker/Agent Websites

2,724,954 Times$3.00 x 2,724,954 = $8.18 Million

$5.01

Key Characteristic of an Innovative Disruptor is Providing

Consumers What They Want

DISRUPTIVE INNOVATION

Not Listing Agent

Uber app-town cars, taxi Assn tried to stop it, 10 seconds for driver to accept, passenger rates driver &

driver rates passenger, $10 fee if passenger is a no show

Disruptive Innovation

• Top 1, 2 or 3 sites according to Hitwise and ComScore in almost every market in the US except Houston

• Ratings of agentso Over 70,000 agent reviews by consumers

• Source for housing articles in Wall Street Journal and USA Today

• Achieved $1 Billion market cap • 1/2 of agent leads may not be responded to• Zillow gives consumers what they want• Zillow is Innovative

Well, your average realtor (we interviewed several as part of our research for this report) doesn’t quite “hate” Zillow, but the realtor-Zillow relationship is complicated. Realtors generally admire Zillow’s web site and its ability to efficiently (and prettily) provide a wealth of real estate information. However, realtors loath Zillow’s price estimates, invariably describing them as wrong and bemoaning the friction they cause when prospective clients cite them, only to have the realtor "set them straight" with local knowledge Zillow never catches.

Internet Information provider that we call “Desired Monopolies.”

But the biggest thing realtors hate about Zillow is that ... they don’t own

it.

We can’t resist Zillow’s free, voyeuristic window into our neighbors’ homes, what they paid for them, and what they’re worth now. Zillow’s official business model calls for signing up more subscribing real estate agents, facilitating more mortgage originations, and selling more of its highly targeted advertising.

Overlaid graphically data on the classic Zillow aerial presentation :

Crime statistics Health statisticsImmunization rates at schoolsSewage treatment plants overlaid with arrows representing the predominant wind direction

If Facebook charts our social graph, then Zillow clearly has the lead in charting our environmental graph. And as a Desired Monopoly, Zillow can be the trusted middleman, aggregating nice-to-have information into a must-have whole.

By only pursuing “sustaining innovations” that perpetuate what has historically helped them succeed, companies unwittingly open the door to “disruptive innovations”.

DISRUPTIVE INNOVATION

Providing Consumers What They Want

Sold Prices & DatesListing History(Price Reductions)

Days on MarketNearby Homes for Sale

Nearby Homes SoldPrice Estimates & TrendsContact a Buyer’s Agent

Post Homes for SaleCompilation of Features from Above Websites