Startups of all stripes have been readying war plans to deal with the down economy. If your focus is on online real estate, that makes it even tougher. Seattle-based Redfin has been something of a phenom for its service that cuts out the realtor middleman, reducing transaction costs for buyers and sellers of homes. Last year it even broke through onto 60 Minutes, in a special on how furious it was making traditional brokers. But alas the party may coming to an end, for now. The company announced that it was laying off 20 per cent of its staff, amid a severe slump in activity:
Even a month ago, we were raising 2009 revenue projections. All our markets, now including Chicago, contributed profits.
But the past few weeks have seen a major reversal. As the stock market wiped out prospective down-payments, tours and offers dropped 30%. Transactions that were done came undone. October will still be pretty good, then we’re headed for a big dip.
Hence the layoff.
So what’s changed?
A Large Market…
That means we have plenty of room to grow. But we won’t grow without taking big chunks of market-share, which also means we’ll have to keep tinkering with our offering so it appeals to the mass market. We’ve been planning a change to our service for months, which we’ll launch in November.
When your business proposition is to cut costs, you can grow in a down market just by taking share from traditional players. Many internet optimists make the same argument: Sure the market’s down, but we’re benefitting from a macro shift to online. And that’s true. But eventually market share gains taper out, and your stuck dealing with the same slowdown as everyone else.