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Invaluable Data Science Lessons To Learn From The Failure of Zillow’s Flipping Business
What went wrong?
Introduction
Zillow is an online real estate company founded in 2006. It generated a revenue of $2.7 Billion in 2019. They have been doing so many things better for a very long time. This article is not about the things that went well. We would focus on the recent mistakes. That has led the company to stop its flipping business and cut its workforce by 25%.
First, What is a flipping business in real estate? When someone purchases a property with the intention of re-selling for a profit in the future. The company generally purchases a property for a comparatively lower value. Spend money on renovations and other improvements. Then sell the property for a higher price. It has been a popular technique used to make some quick money.
As you can understand the most important factor here is to predict the price of a property accurately. So that the property could be bought for a lower price and sold for a profit.
As per the article here, Zillow had about 43 million homes in their database in 2006 and they were able to predict the price of a property at 14% median absolute percent error. By 2017, they had about 110 million homes in their database. The error rate had…
