Your browser doesn't support HTML5 audio
CFO of Zillow Group Kathleen Philips joins Ben and David to cover the show’s first true “merger” versus “acquisition" (only took 22 episodes!), Zillow’s 2015 combination with Trulia to form Zillow Group.
Note: our audio glitches unfortunately continued on this episode, and quality is rough. We recommend listening on speakers vs headphones if you’re able. We apologize and will be back to normal quality next time!
Topics covered include:
- Zillow and Trulia’s beginnings during the “Web 2.0” era in the mid-2000’s
- Zillow, Trulia and other online players’ place within the massive US real estate market
- The lengthy “dance" between Zillow and Trulia and earlier aborted merger talks between the two
- The difficulty of "true mergers” among private companies and why the path is easier for public companies
- Public company shareholders’ influence and role in M&A transactions
- Details of the blazingly fast negotiations (27 days start to finish!) per disclosures in the SEC filings (scroll down to "Background of the Mergers”)
- Structuring the deal and incentivizing Trulia and Zillow mangers to stay and continue growing as separate brands
- Trulia cofounder Sami Inkinen’s whereabouts during the merger negotiations
- The experience going through a lengthy FTC review of the merger, and defining what the relevant “market” is the FTC should be considering
- Introducing our new acquisition category: a “time machine acquisition” ;) (h/t Kathleen)
- Zillow Group’s overall approach to acquisitions, folding into its broader HR strategy
- Zillow founder Rich Barton’s startup thesis of searching for "What piece of marketplace information do people crave and don’t have?"
- Twitter-Disney rumors, according to “people familiar with matter”!
- AppLovin’s journey from bootstrapped startup to $1.4B exit
The Carve Out:
Full Transcript below: (disclaimer: may contain unintentionally confusing, inaccurate and/or amusing transcription errors)
Ben: Hey, Acquired listeners. We hope you enjoy this episode with CFO of Zillow Group, Kathleen Phillips. Just a quick heads-up that the audio quality is a little bit rough this time around and we recommend listening on speakers rather than headphones if you’re able. We’ll get back to our normal standards next episode. Thanks for bearing with us.
Welcome to Episode 22 of Acquired, the podcast about technology acquisitions. I’m Ben Gilbert.
David: I’m David Rosenthal.
Ben: And we are your hosts. We’re on a serious roll here at Acquired and we have an awesome, awesome guest for you today. We’ll be talking about Zillow’s 2015 acquisition of Trulia and their M&A strategy overall. Kathleen Phillips is our guest. She is the CFO of Zillow Group and was formerly Zillow’s COO and general counsel. She has run corporate development for her entire six-year history at the company. She’s also previously been a VP and general counsel for StubHub and Hotwire. Welcome and thanks so much for coming on, Kathleen.
Kathleen: Well, thank you guys very much for having me. I’m super excited about having this conversation with you today.
Ben: So are we.
David: So are we. Thank you.
Ben: All right. Well, I think it's time to dive in.
David: With that.
Ben: Yeah. Normally, Kathleen, David leads us through the acquisition history and facts. I figured the best way to cover it in this episode would be kind of, David, you lead and kind of have a discussion with Kathleen on getting her–
David: Yeah, I’m sure lots and lots of good stuff will come up. As we joke on the show and we were joking with Kathleen before we started recording, we love two things on this show: public company acquisitions where everything about the negotiations comes out in the SEC filings and lawsuits where the same thing happens.
Ben: Fortunately we just have the former.
David: Yes, fortunately just the former in this case, I’m sure for Kathleen’s sanity. So maybe I will do a very quick history and facts on the founding of both Zillow and Trulia, and then we’ll jump into the acquisition process with Kathleen.
So, Zillow was founded in 2005 by Richard Barton and Lloyd Frink, who previously had worked together at Microsoft here in Seattle, and then had founded Expedia in 1996 which probably most of our listeners are familiar with. What a lot of people don’t know these days, it was founded within Microsoft. It was part of a division within Microsoft that they started and then they spun it out for Microsoft and it became a separate public company in 2001. And then in 2005, they left and they started Zillow. Zillow is focused as Trulia on the US housing market, and buying and selling of houses and real estate.
And Zillow’s big innovation that was the big brand that they launched with in 2006 was this concept of the Zestimate. So it was a data driven estimate for every home in their database about what that home would be worth on the market. This was, I believe, the first time that US home owners had any idea of any indication of what the value of their house might be without actually putting it on the market. It was based on a whole bunch of factors, but especially access to comps of houses that were selling in the market around the house. So, this was a big deal, generated a lot of press. Zillow over its private company lifespan raised about $80 million in venture capital from benchmark, TCV and others, ends up going public in July of 2011. And we will press pause and pick up the story in a minute.
Meanwhile, Trulia, unlike Zillow, which was based up here in Seattle, Trulia was founded a year earlier in 2004 in the Bay Area by Pete Flint and Sami Inkinen, who were actually students at a place close to my heart, the Stanford Graduate School of Business. They were MBA students and they founded the company in between their first and second years when they were, according to legend – and I know how difficult this was having lived through it – trying to find housing for their second year at Stanford Business School in Palo Alto and having a very difficult time and thought there’s got to be a better way. So they work on it during their second year. They end up raising over the years, significantly less than venture capital, $33 million from Accel and Sequoia and others. Then Trulia goes public in September of 2012.
That’s where we pick up the story actually a little bit before then when according to the SEC filings of the ultimate acquisition, it was actually before Trulia went public but after Zillow had just gone public, that Zillow approached Trulia the first time about potentially acquiring the company in late 2011.
Ben: So I want to pause and say, Kathleen, number one, is that all right; and then number two, had you been at Zillow yet at this point?
Kathleen: Yes. I joined Zillow in July of 2010, almost exactly a year before we complete our IPO. So 2010 through July of 2011, for me, it was completely focused on getting that deal done. Then the rest of it, you got absolutely right.
David: So, you had just gone public in 2011 and then it must have been very shortly thereafter that you approached Trulia this first time. Were you guys kind of waiting to get public and then sort of approach Trulia from that position of strength there? What was the thought process behind that?
Kathleen: So it was more a factor of us having liquid public currency following the IPO. That was actually one of the primary reasons that we concluded the IPO, and you can see that if you look at our timeline of acquisitions. We had done one small acquisition prior to July 2011. But then as we had stock available that was liquid and publicly traded, that was really our goal, was to give us the flexibility to pursue more acquisitions, and Trulia was a natural choice to start with first.
David: Yeah. And as we know, being on the VC side and working with many private companies, some of which at various times are either approached by or thinking about approaching other private companies to talk about merging, and it is so difficult to agree on value when nobody has any idea what either company’s stock is worth.
Kathleen: That’s absolutely true. And it’s also a complex endeavor to think about an acquisition of this scale that it would have been between Zillow and Trulia, followed by an IPO and having to construct that story is far more complicated than knowing our own business as we did and being able to tell a great story to the street.
David: Yeah. And not to mention having, you know, when public companies acquire one another, all their financial data available to the public whereas when you’re private, it’s not.
David: So, in this round of talks, in 2011 Trulia does end up hiring an investment bank as an advisor. They hire Catalyst. The talks break down in early 2012, and then in August 2012, so a few months later, Trulia is preparing their own IPO, and Kathleen and Zillow are approached again and try a second time. Did you guys know that Trulia was on the path to going public at that point?
Kathleen: Oh definitely. I mean, it was such a natural thing for them to be doing. We had forged a path ahead for them. They had a very similar story. We knew that that was something they aspired to do. So, we expected that that would happen.
Ben: Did you ever consider waiting the IPO for them to IPO first and give investors confidence in this sort of business?
Kathleen: You know, we never really thought about it with respect to them. We were always a much larger player. So, you know, we were charting our own course. So, we didn’t really think about our timing relative to theirs.
Ben: Got it.
David: So talks break down again for the second time, and in September of 2012, Trulia completes their IPO and continues executing as a public company for a while, as is Zillow at this point. And I believe during the first couple of years, I didn’t look up the exact number but I remember super well when Zillow went public, it was one of the first Seattle tech companies to go public in a long time. Zillow’s market cap I believe was right around $600-700 million at IPO.
Kathleen: Yeah, I think that’s about right. It’s been a while. The thing that I remember very well is that our revenue I think was something around 40 million, which the reason I note that is because when we look at our group of emerging businesses now, they’re larger than we were when we went public. So, we’ve made a lot of progress in the last 5 years, it’s pretty terrific.
David: Yeah. I mean, the growth was just incredible, and still is, but in those early years as a public company. And by this point, you know, after Trulia’s IPO and a couple years later, again, I don’t have the information in front of me, but your market cap was multiples higher of what it had been at the IPO, I believe.
Kathleen: Yes, yes.
David: And so a couple of years go by, finally, Spring of 2014, so not quite 2 years after Trulia’s IPO and the last time Zillow and Trulia had danced the acquisition “dance,” Zillow is still thinking about this, and it’s a natural fit that these two companies would come together. And so you guys take an interesting step and you go out and you talk to public shareholders of both Zillow and Trulia under NDA with major shareholders to talk about, according to the SEC filings, “potential strategic opportunities including the acquisition of Trulia.” How did you guys think about taking that step?
Kathleen: So there’s an important clarification here, which is they were the same shareholders. So, our major shareholders also held a stake in Trulia, so this was not a matter of us approaching Trulia shareholders who we did not have in common. So, it makes a little bit more sense when you think about it from that perspective. And part of our investors all along who were invested in both, was that ultimately there would be a transaction. You know, they had no ability to predict when or to direct that, but it was such a natural industrial logic that that was part of what they’re vetting on.
David: That makes sense. And at this point in time, and I’m sure still the thesis of a lot of public company investors or public markets investors that hold Zillow Group stock is, you know, real estate is this enormous, enormous market and it’s coming online for the first time and, you know, the market share of online players in real estate is still tiny compared to the whole market and we just want to invest in that wave that’s coming.
Kathleen: That’s absolutely right. One of the stats that bears that out is that we think that notwithstanding our category leadership, you know, we have about 2/3 of the traffic on the web overall and 3/4 on mobile on Zillow brand properties. And yet, we only touch about 4% of real estate transactions in the US. So, there’s a massive green field still there for us to take advantage of and we see this huge opportunity ahead of us still.
David: Yeah, it’s incredible. It still boggles my mind, you know, having followed this market closely for several years, how little of the real estate market is, as you said, being touched by any online player whether it’s you guys, Redfin or other folks, you know, and having shopped for houses myself online, I can’t imagine doing the old way through newspapers or just working with offline agents.
Kathleen: Yeah. It is remarkable and obviously it’s a key reason why we continue to invest in the business because we think it's really the long-term opportunity many years down the road when this is going to be a mature market. So, it’s pretty exciting, and honestly, it keeps us disciplined. We get asked all the time how come we haven’t expanded internationally, for example. The reason is because the opportunity right in front of us is so huge that we try to stay focused on that. So, it's a pretty exciting time and with the Trulia acquisition, we dramatically accelerated the expansion of our scale.
Ben: I would bet this is one of those things where there are a lot of different sectors right now that have a large generation gap as with any adoption of new technology. But real estate in particular, it seems like– I’m 27 myself and my whole peer group kind of live on Zillow for entertainment value. I mean, it’s amazing how–
David: And you’re not a home owner.
Ben: Right, right. I rent. And it’s amazing how often Zillow links get centered out.
David: Just wait until you own a home and then you want to track its value.
Kathleen: Right. Well, we hope so. I mean, that’s –
Ben: I would imagine you have massively– It’s significantly more than 4% of millennials buying homes, right? It has to be many multiples of that but significantly less than older generations. Do you guys track that and look at that and try to specifically target younger folks buying homes for the first time or anything like that?
Kathleen: Well, I think it sort of happens naturally, right? Because the millennials are used to doing everything online, so yes, we keep them in mind when we’re designing our products. The cool thing about that is we’ve just recently taken a look at buyer activity in the market and for the first time about 50% of home transactions are actually involving millennials, so they’re starting to buy, which wasn’t happening a handful of years ago. So, it’s great because it’s a great opportunity for our product because it really resonates with them. So it’s an exciting time as that market starts to develop and as you know, sort of the generational focus of the real estate market shifts.
David: Yeah. We see it every day in our peer group. I mean, I’m 31 and it’s kind of like that when you get to the end of your 20’s, early 30’s, it’s amazing how much your conversation starts shifting to like, “Oh, what’s the real estate market like?” and like “Oh, yeah, I’ve been home shopping and I’ve put in three offers. It’s like a switch flips.
Kathleen: Right, right. I think that’s much more true in Seattle. In San Francisco, unfortunately, it’s still pretty challenging for young people, but I think in Seattle, you know, folks in their early 30’s are really thinking about settling down and suddenly it’s not uncool to be a home owner anymore.
David: Yeah. And with the market such as it is and how competitive, like I can’t imagine not having these online tools to help navigate it.
Kathleen: Oh, for sure.
David: So, getting back to the drama of the deal. So you've spoken to shareholders, and obviously, if they were already holding those stocks, their thesis was I would imagine quite supportive of a combination.
In early June, you guys end up hiring Goldman Sachs as an advisor, before you approach Trulia again. And then this is where the day-by-day – we’ll link to this in the show notes – the day-by-day negotiations in the filing just start to play out and it’s so much fun to read.
So apparently on June 3, Rich Barton contacts Pete Flint. At that point, was Rich still the CEO of Zillow? Or had he moved at that point?
Kathleen: No. Spencer became CEO prior to our IPO. And Rich was chairman throughout that time and still is.
David: Got it. So he’s chairman and he contacts Pete Flint who’s CEO and cofounder of Trulia and attempts to schedule a dinner on June 3. “Mr. Flint indicated that his near-term schedule would not accommodate a dinner.” Little did he know what was coming.
Ben: It happens to me all the time, so I totally understand.
Kathleen: Right. Well, I would say, you know, not to put any words in Pete’s mouth, but I think he knew very well what was coming. But keep in mind the backdrop of this, which is we were pretty fierce competitors for a long time, we each admired what the other was doing, but we were playing in the same sandbox, we had been around and around that valuation a couple of times. And I think both companies when through a long period of believing we should just go with our own. And shifting course from that is challenging when you’re looking at a company that you've grown from the ground up.
David: Yeah. Not to mention the psychology here. I mean, it’s a little bit of a prisoner’s dilemma, right? I can only imagine the amount of posturing, like you want to show strength even though both sides might feel and obviously did in the end feel that a combination was the best outcome for both. I’m sure you’re very focused on how you were going to do in that negotiation.
Kathleen: Absolutely, absolutely. We owe nothing less to our shareholders, right?
Kathleen: So, both parties are interested in getting the best terms possible.
David: As did Pete and the Trulia board for their shareholders.
So, on June 5, two days later, Rich contacts Pete again and this time is more overt, and says the Zillow board fully supports a merger proposal, and mentions and spoken to the shareholders that you have in common and that they’re supportive of the merger as well, and then a couple days later Rich does send the letter to Pete and take Greg Waldorf, who was Trulia’s lead director. In the previous negotiations, had things gotten to that point before? Had you guys put a deal on the table so to speak or was this a new tactic you were taking?
Kathleen: We had not directly put anything before the Trulia board. We had had, I recall, one meeting with more representatives of management on both sides. I expect and I’m sure that Pete and team were to have conveyed the substance of our discussions to the board, but we had never directly approached the board. I mean, this was a way of kind of turning up the urgency of the offer a little bit.
David: Indeed. I mean, the process must have been a whirlwind. It was less than 6 weeks later, I think, the merger ends up getting announced. So even though you had the stalled talks in the past over the couple of years, but to go from zero to fully negotiating and announcing a merger, that’s a tight timeline.
Kathleen: Yes. I actually was going to bring that up as I was looking over this. I was getting tired just reading it because I remember this time so well. But the really critical time period that you’re looking at is from July 1 when we start diligence to July 28 when we announced the merger, we did full diligence and negotiation of the acquisition agreement. So, 27 days is pretty quick. We have a terrific internal finance and legal team, and they were working around the clock. We all were. But it’s part of how we do deals at Zillow. We try to move them through really quickly so that we can get back to our day jobs. I can’t think of an acquisition that we’ve done that we took more than about 20 days. This one took a little bit longer because it was a little more complex. But we try to get them kicked off and done to avoid distraction, to avoid risk of us losing the deal, and like I said, to get back to business as usual.
David: Which as we were talking about before the show, one of the things that I really admire about getting to know some of the folks at Zillow over the last couple of years, and it’s important for our audience to know, Kathleen, it’s not like your only job was to be head of corp dev, right?
David: You had quite a lot of other operational responsibilities at the company at the same time, right?
Kathleen: That is absolutely true. At the time, I was still chief operating officer of Zillow. So in addition to having legal under my umbrella and corporate development, I had the whole people organization. And people are our most valuable assets, so I couldn’t just ignore them while we were busy on this deal. And that didn’t end with the signing of the acquisition agreement, we’ll get to the FTC review and all of that later. But for me, it was about 8 months that I was pretty fully consumed on this.
Kathleen: Which was great, fun, don’t get me wrong.
David: Yeah, yeah. So what’s pretty interesting here to me is especially not having lived through this with public company merger side, but on the private company side, you guys converged on a number pretty quickly. I mean, there’s a range there from 30 of your first offer to Pete coming back after a few rounds with 37. But, like, that’s not a lot of difference compared to, you know, I’m used to, well, we think 10 percent and we think 60 percent. How did you guys structure things? Like, I’m sure this helped it move along much faster. Were there specific things that you did that got that range tight very quickly?
Kathleen: I mean, I wish I could say we’re some kind of financial geniuses and we had some model that dictated this, but it really was as simple as we had side by side nearly 10 years of operating history and we were always kind of 2/3 and they were 1/3. So, it was a pretty natural way to think about the valuation. And interestingly, even now, a year post closing in terms of lead volume, it still is about 2/3 to 1/3. So, we really were quibbling at the margin there because we have all the public company data out there, it was very obvious to us what the correct proportion was, given how similar the businesses were.
David: Which is interesting because two days later, on July 5, Rich and Pete talk again, and on that conversation, they basically agree like yup, 33 percent is what makes sense here. And then they move on to start discussing some of the non-price related terms which I want to get into, which I’m sure were fascinating and at least according to the filings, that’s when they first start discussing retention packages for the Trulia management team and employees. Especially for you, given that you were in charge of people at the time too, like how did you guys start to think about that? I mean, the final package – we’ll get to it in the end – but I believe ends up being $33 million in equity retention for Trulia management. How did you even get to set a framework for thinking about that?
Kathleen: It was super complicated, I will say, as you might guess, and it really involved an exercise of kind of putting ourselves in the shoes of the Trulia management and thinking about who did we need to keep for various time periods. We were cognizant of preserving their culture and preserving their team, and keeping folks interested. And, you know, we never lost sight of the psychology of this deal which is being acquired by your primary competitor who you have competed with ferociously for 10 years. So, we felt like we needed to keep folks energized and make everybody feel like this was a winning deal.
David: And this is a good spot, I think, too to jump off into one of the really interesting things about this deal. The plan was never or at least at the beginning, not immediately, to combine the two products. I mean they’re still very much separate brands, separate products, separate sites with separate customer bases. So of course you needed Trulia management to stay involved and motivated, and they were obviously very good at running Trulia. How did you guys at Zillow sort of evaluate from that spectrum of completely independent Trulia within the Zillow group umbrella, to merging Trulia directly with Zillow.com? What was that evaluation process like?
Kathleen: Well, we always knew that we wanted to keep both brands. It’s easy when you’re looking at Zillow in a vacuum to kind of forget about what a strong business and strong brand Trulia was on its own. So, there was a lot of brain equity there, very strong team doing different things than we were doing, even though our ultimate consumer missions were very well aligned. And we knew that there were consumers out in the marketplace who strongly preferred one over the other. So, there never was any question about just folding the Trulia brand into Zillow. But what we did recognize was there were a lot of other things that we could fold into one. For example, our ingestion of real estate listings, we run from a central source now, so there’s efficiency there. Which unlike in, you know, more industrial-type mergers of competitors, rather than us shedding part of development resources because of these efficiencies, instead it let us deploy a bunch of very talented people to new products and new projects that we never would have had time to do on our own.
A perfect example of that is there’s a substantial development team in San Francisco that were former Trulia people who now work for Zillow Group broadly and they developed our Premier Agent app, which is one of our most successful product launches of this year and is really the foundation for a lot of the developments that we’ve been seeing in our ad products. So, you know, it was a gold mine of talent that we could deploy to things that were far more interesting in the end for both our consumers and our advertisers.
Ben: You mentioned the Premier Agent, I guess, product or business line. Can you talk a little bit more about that and what the strategy is behind that for Zillow Group all up?
Kathleen: Sure. So, you know, fundamentally what it is, is a subscription-based advertising product where agents pay to be promoted next to “for sale” listings to be potential buyers’ agents for consumers. With the acquisition of Trulia, that advertising is purchased by agents across both properties, so the agents are advertising on both Zillow and Trulia. And it is the workforce of our revenue, definitely the focus of our efforts, our sale efforts as well as our development efforts. It’s been hugely successful.
More recently, what we’ve been seeing is really innovative and entrepreneurial agents who are forming agent teams and buying advertising in large quantities and really building big businesses from which to operate.
David: One of the things that we talk a lot about on this show is – we joke about it – Ben Thompson. We’re just huge fans of his writing and his thinking. And he talks about aggregation theory and one of the consequences, aggregation theory being that in kind of the information economy as opposed to the industrial economy, aggregating customers and having the best customer experience and ability to do that, is the winning strategy versus in an industrial economy where distribution is costly and has friction, you want to aggregate distribution and think about customer second.
One of the things I love about the Zillow Group business and this merger in particular is it’s such a pure play example of that, like there are these levers in distribution that by being internet-based, you have, and by combining these businesses whether it’s acquiring the data feeds about data on homes and home sales – which we’ll get into in a minute because there’s more drama to come there – or advertising sales or what-have-you, your website back ends, it doesn’t make sense for any of that to be separate. But what does make sense to put the combined effort of the companies into is exactly what you’re saying, is developing these great customer experiences whether it’s the advertising customer or the home owner/home buyer customer. It’s cool to watch.
And so when you guys were thinking about the rationale for this merger, as you’re identifying kind of the key levers for this, like was that at the front of your mind?
Kathleen: Oh, absolutely. I would say it has unfolded in a way that was even far more beneficial than we could have imagined. You know, we were most focused on the acceleration of our audience growth, which is, you know, natural when you’re running an internet media business. We thought that there would be some other benefits of scale, but those have far exceeded our expectations and real estate listings is a perfect example of that. I mean, we struggled, and I think we’re going to get this a little bit later about the listings drama. You know, we struggled in acquiring listings over the years. There were parties who just didn’t want to provide them to us.
Now, it’s pretty difficult for listings providers to look at the dominant real estate brand on the web and say “It’s not in our seller’s interest to have their listings on Zillow or Trulia.” It’s unfathomable to make that argument. So, our ability to attract direct listings was certainly strengthened by this acquisition because of the scale.
Ben: And that perfectly follows the same framework that you can apply to Facebook or Google that if it’s what the users want and it’s what the people and their app or the website, the best user experience they can flock to, it gives you enormous power in getting the content to get in front of them, and then run whatever business you want on top of that. In Zillow and Trulia’s case, it’s selling advertisements to the real estate agents who want to list next to those properties.
David: Yeah. Ben, you’re bleeding into my tech theme. But all right, let’s get through the acquisition drama, which there’s still more juice to come, and then we’ll get into the also fun stuff on tech themes.
Trulia’s board comes back with a counter offer at 34.5%. Then also includes official terms on some of the non-price stuff, so, includes a go-shop clause which for our listeners who aren’t familiar with that, basically mean that if this clause were in the merger agreement after it was signed and announced, Trulia could still entertain other offers from other potential acquirers. They also wanted a fairly large breakup fee in case the merger didn’t happen that Zillow would have to pay.
Ben: And to give people kind of a sense of how taxing this is on an organization, the breakup fee ended up being $150 million. So that’s effectively the kind of opportunity cost that the two parties believed that Trulia could be spending, focusing on their own operations instead of being distracted by a deal that didn’t go through. Just imagine how many people and how much time it would take to justify $150 million of value.
David: Yeah. And interestingly, not even a day goes by the Zillow board basically says right off the bat like “no, not going to fly, no way. 33%, final offer, and no-go shop” in the agreement. What was that like when you guys received that counter offer?
Kathleen: Oh, gosh. I’d have to mine my memory on that one. I mean, this is a dance, so throughout this process, I try to avoid placing too much weight on any specific sub-terms that somebody is coming back with because we know where we’re going to end up because we know what we're willing to tolerate and you kind of push each other around. So, I don’t recall that there was any particular shop. With an acquisition of a competitor like this, there was just no way we were going to entertain a go-shop. It wouldn’t have made sense. And honestly, I’m not sure it would have made sense for either of us because it just would have created some frenzy in the market that wasn’t going to benefit either of us in the end. So, you know, I don't recall any particular drama associated with that. We knew what we were marching toward and what we would tolerate.
David: There was no way that, at least you guys were going to have that. So July 28, finally, the merger gets announced and you start working towards close.
Kathleen: And I should mention here because when we walked through it like this, it makes it feel like all that was happening was the price negotiation. You have to picture 50 people or so at Zillow working on the merger agreement and all the diligence because we needed to announce it right away.
So, it was a pretty nerve-racking period of time where we were still waiting to reach agreement on key terms but meanwhile, we're negotiating, the whole host of other things that you negotiate in the merger agreement.
David: Which gets me to what I think is certainly the most amusing part of this deal, that I was going to bring up after you close on announced on July 28, and news comes out, the market reacts, but news also comes out then that Trulia’s co-founder, not Pete but Sami Inkinen was literally in a rowboat in a crew scull rowing across the Pacific Ocean for the entire time that this negotiation was going on.
Kathleen: That is right. I don’t know what it was like in that boat, but we probably would jockey to say he was feeling a little bit more miserable at the time, right?
David: So he and his wife, the two of them, in a rowboat in a crew scull rowing thousands of miles across the Pacific Ocean.
Ben: Yeah, to Hawaii. From California to Hawaii.
David: Were you able to reach him by satellite phone? What was that like?
Kathleen: You know, I honestly don’t remember whether he had given someone his proxy before he left. I don’t believe he was in any kind of substantive contact beyond making sure they were safe out on the boat. But I really just don’t remember.
David: Well, presumably he’d given proxy to somebody because I would imagine you would need to vote his shares for the deal.
Ben: That’s a first here on Acquired.
David: Yeah, that is a first.
David: And we have never had a story like that. It’s pretty awesome. He seems like quite a cool guy in character as you would imagine from that. So, that was sort of all the pre-close challenges, well, the pre-announce challenges. Then the post-announcement challenges start. So, this deal underwent a serious amount of FTC and government regulatory scrutiny, right? There were two requests for information which is uncommon. Typically the FTC will make one request for information in reviewing coming to decision which they ultimately decided that Trulia and Zillow was not, but whether this merger would create a monopoly in the market, which obviously would be illegal. So typically they’ll do one request but in this case, they did two and that’s usually taken as a bad sign by the market and indeed when that happened, the share prices reacted negatively. What was all that drama like? I mean, you guys must have been on knife’s edge.
Kathleen: Yeah. It was a pretty nerve-racking period for all of us. I essentially spent four months in DC full-time trying to get the deal pushed through. For those out there who aren’t familiar with the FTC approach in this kind of case, what they’re trying to determine is what is the correct definition of a market and once they have defined that market, then whether there is monopoly of pricing power in the market based upon the combination. The FTC was having fits and starts about is the online real estate portal market in market onto itself? Our view was no, I mean most of the activity that takes place in this market takes place way outside of where we are. You know, one stat about that is what I mentioned at the beginning of this conversation which is we think we touch about 4% of transactions and we think we have a small percentage of advertising spend by real estate agents.
That being said, if you look solely at consumer transaction to real estate portals only, we're pretty big. So, tons of back and forth and economic analysis, hours and hours and hours of depositions, and ultimately we think they reached the right decision, but I had a lot of sleepless nights, I can tell you that. And for me personally, I felt like the weight of the deal was on me running this process that we had.
David: Not only corp dev but also general counsel, right?
Kathleen: Right. Well, we have a general counsel, Brad Owens, who runs most of this but for this, I’m still chief legal officer and I was on point for the deal. So I was the one in the pick of it while he was holding down all the things that needed to be done in Seattle. So yeah, it was quite a ton. I think I aged a few extra years in that 6 months.
Ben: I bet. How does the FTC decide what the market is? Is it like a number of transactions or is it a dollar amount? How do they determine? Because you can imagine two people hanging out on the street, one guy wants to sell something to the other, that right there is a market.
Kathleen: Yeah. So they look at it through many, many different lenses. We had multiple economic experts, many, many antitrust lawyers who work on these kinds of cases every day. What they’re looking for is any characterization of the market that can give someone additional pricing power simply by virtue of the combination is what they’re concerned with. It’s an interesting thought process in our transaction because the pricing power they were thinking about – of course, our products are all free to consumers – was, will the price of online real estate advertising be impactedby this combination for real estate agents? So, does it become more expensive for real estate agents to advertise simply by virtue of this combination?
David: Yeah. How deep did they go? I imagine it was a six-month review and as you said, you practically lived in Washington for four months. I mean, were they subpoenaing or the equivalent thereof in this process information? I mean, were they looking back at the Series A pitch decks of both companies?
Kathleen: Oh, yeah. All of our email. Everything. Yeah, to see our own characterization of the transaction. Right? And given the long history of this acquisition dance, there was a lot there. They were talking to other market participants. They were talking to individual real estate agents. We didn’t have full visibility into all of their activities, but we would hear anecdotally from people in the industry who would say they had had calls or have been deposed or provided documents, and they had their own economic experts. So, it was an incredibly in-depth and detailed process.
David: Yeah. It's a good reminder for those of us in the broader, defined Silicon Valley ecosystem, it's so easy to be like blasé about. “Oh, I’m starting a startup. We’re going to take over this market.” So you actually need to be really careful about how you characterize things because you can end up in this nightmare scenario.
Kathleen: Absolutely. Yeah. Even with perfectly innocent characterizations of market dynamics can be taken out of context or paired with other information, and can cause real questions about your intentions and the potential outcome.
Ben: Well, hey, I want to talk a little bit about the MLS’s and data feeds, but maybe let’s do that quick, and then I really want to talk about Zillow Group’s overall acquisition strategy and sort of how it fits in the landscape for the next few years and kind, Kathleen, give you a chance to talk about that. So, let’s talk about kind of what happened in those –
David: Well, real quick and then we’ll wrap up the history. The final twist in the story here is right before– So the FTC finally approves the merger in February and then it goes through and you close the deal. But right before that happens, both Trulia and Zillow were getting, I believe, if a not a majority, a significant amount of your real estate listings from a company called ListHub which is a data provider, which is actually owned by a third competitor in the market, Move.com, which had I believe just been acquired by News Corp. And ListHub actually cuts off both Trulia and Zillow from these data feeds which are the lifeblood of your business. And so you had this other wrinkle of like now you have to go rebuild your supply essentially from the ground up by signing direct data deals with all the MLS or your multiple listing service. For people who aren’t familiar with the market, these are local organizations that aggregate real estate listings as they come on the market. You need each city, each geography kind of within the country and there are hundreds, if not thousands, of them and so all of a sudden now you guys have to go do these dev deals with all these folks directly. Wow.
Ben: Can you just talk about that process, what that was like?
Kathleen: Sure. So let me just tie that back to the FTC for a second because of course, one of our arguments to the FTC is how can we be a monopoly when our oil, which is our listings, are controlled by a competitor, who’s sponsored by the National Association of Realtors. It kind of boggles the mind to think we could be the monopoly when they provide us all these listings.
So, the cutoff of the listings actually came as a result of a natural termination of our contract. And we had engaged in negotiations to try and renew. So, it wasn’t overnight. We knew this could happen. So we had been gearing up for a substantial amount of time to try and cover this because, of course, you never want to run your business at the mercy of one of your competitors, which is essentially what that was.
Now, that’s sort of a plain way to put it. One thing that people don’t focus on is there was actually a pretty symbiotic relationship between Zillow and Trulia and ListHub because ListHub’s primary business is not syndication of listings, it’s the sale of listing reports to agents that say things like “your listing on 123 Main Street was viewed 50 times on Zillow.” So, it’s not as straightforward as to say we’re at their mercy because actually, we were a key ingredient to their business as well. It’s just that once they were acquired by Move and then subsequently, Move was acquired by News Corp, they were thinking about that business differently from a strategic perspective.
So we had already engaged in a ton of effort knowing that this could happen and not wanting to have this relationship with a competitor. But, you know, we certainly had to try pretty hard at that and as I said at the very beginning of this conversation, one of the unforeseen benefits of the combination was that our increased scale sure made it a lot easier to get those listings, not that it was easy and it’s an ongoing process, but it was a lot easier to go as #1 and #2 in the market to try and acquire these listings than it had been when we were on our own.
David: Let’s move on. I think, Ben, the right frame to discuss where you were talking about in Zillow’s M&A strategy generally is that, let’s quickly do acquisition category. To me, this is pretty clearly a business line acquisition of– Well, I don’t know, maybe you think differently.
Ben: Yeah, it’s funny the way I was going to categorize it as– So Kathleen and for our new listeners, we have several different categories: people, technology, product, business line, asset (which was newly added), or other. In this scenario, you know, what I really think was, the way I look at this deal is it’s a rapid way to expand the kind of core marketplace that Zillow offers. So, on the supply side of the marketplace, you have people who are looking at pages that display homes, and on the demand side of the marketplace, you have real estate agents that want to advertise their services. So to me, this is just providing, it’s buying more supply and more demand, and kind of putting the two together and there’s all sorts of interesting ways –
David: Yeah, it's a good point. I totally agree with you. Like it’s a business line acquisition, but not a new business line. It’s the same business line.
Ben: It’s buying more supply and demand of the same business line and kind of having multiple marketplaces, but having ways to, for example, the combined portal for real estate agents to put their ads on both, the ability to funnel to both of those marketplaces simultaneously.
I almost want to say asset in that case, but it’s like an asset generating–
David: Well, I don’t want to create another new category. That’s why I stuffed it into business line.
Kathleen: Yeah. I mean, you know, another way to say it is, it was sort of honestly kind of a “time machine acquisition,” right? Just accelerating what each of us was doing already by putting it together. So, you’re exactly right. It’s both sides of supply and demand, and we each combined got where we were going a lot faster.
Ben: Very cool. Well, how does this fit into, you know, what’s the Zillow Group strategy for the next couple of years and why have you been doing the acquisitions you’re doing? How does this fit into that picture?
Kathleen: So, this one is pretty different than our other acquisitions because it really was just an acceleration of our scale. In terms of overall strategy, we continue to invest in a number of different things. Dotloop is a good example of a product that is designed to help real estate agents become more efficient and close more transactions more quickly, which in the end we believe will make our advertising more valuable to them. It’s also kind of doubling down on having agents embrace technology by closing transactions online versus on paper. So, that’s an extension of the products and services that we provide agents that really enhances the value of the advertising they buy from us.
The other branded acquisitions – Naked Apartments, HotPads, and StreetEasy –are just continuing to build out our portfolio of brands so that we have something for everybody, for whatever they’re looking for. HotPads tends to focus on younger urban renters. StreetEasy is focused only on New York, primarily was focused on purchase and sale, but always had a rentals product and now with the addition of Naked Apartments, has open rentals which are something that StreetEasy had not focused on before.
As we look at each of these candidates, we look literally, like last year I think we went back and counted, we looked at about 125 potential deals. We think about, you know, will this accelerate something that we are already doing and get us there faster? Is it something we haven’t figured out yet is another way of going. But fundamental in every acquisition, what we start with is we look at the people and decide whether they are people who we could work well with within our existing Zillow Group portfolio because ultimately, we are acquiring the people who have built these brilliant products and we want them to stay and we want them to be successful with us.
Ben: How do you think about when you acquire Naked Apartments or HotPads, those properties aren’t being combined, they’re different websites with their own ability to acquire traffic. Do you combine the backend real estate agent services? I hate using the word, but, how do you achieve synergies and why is it advantageous for Zillow Group to own those businesses?
Kathleen: So HotPads is a great example. One of the things that it's pretty cool is we look at teams that are really good at certain things. And when HotPads joined us, we realized, for example, that they were really good at ingesting rentals feeds and normalizing them to present them in a way that was useful to consumers.
So now, a segment of the HotPads team is responsible for all rentals listings syndication through our entire platform. So we tend to kind of pick and choose where there are strengths within each of the teams. StreetEasy, for example, because they’re a New York City brand, very focused on vertical living. And while they don’t work directly on vertical living products for other brands, they certainly inform and educate our teams about how to present a condo building versus a single family home.
Ben: Very cool. So it’s almost like a reverse acquisition of knowledge there to get that DNA up into the rest of the Zillow Group products.
Kathleen: Sure, yeah.
David: Let’s move quickly into tech themes then which is one of our favorite parts of the show. I had a tech theme written down that I’m going to mention them and we’ll link to this in the show notes. There was a great, great interview with Rich Barton in the New York Times a couple years ago. The interview was focusing on, like, “you’re like this hit maker. You have Expedia, you have Zillow.” Rich was intimately involved in the origins of Glassdoor, and Avvo, and many other marketplace-based, really important marketplace-based businesses. “What’s your secret?” and Rich said, the thing that I think about is: “What piece of marketplace information do people crave and don’t have?” I think that’s really interesting. Zillow’s like a perfect example of that. Like I want to know what my home’s worth, you know, and I don’t have that. Once you give that to me, I’m like a mouse in a lab turning the wheel to get the cheese. I want to know every week what’s my home worth. I think that was a really good example.
The other one I want to throw out quickly, Kathleen, that you've talked about a bit on this show, isn’t so much at the normal level of technology themes for us on this show, but we talk – being a VC and working with management teams and entrepreneurs and founders – hiring and building your organization from a people perspective takes as much as time as anything else in the business, if not more time. We always talk about like, “Oh, it’s so important to hire athletes.” Like, not literally athletes, although literally athletes can be great too. And people talk like, “Well, what does that really mean?”
I think Zillow and your M&A strategy is a great example of that, of people who are very smart, very flexible in their thinking and can adapt and over time play multiple roles, because that’s what you need in a startup. You can’t predict exactly where the market is going to go, where your product is going to go, your organization. And I think you guys have done a really good job both in your hiring obviously of your management team, but also your acquisitions of looking for these types of people who can evolve their thinking and evolve their abilities as a company does, because that’s going to be the constant in a high growth industry.
Kathleen: Right, that’s absolutely true. I can give you a couple of specific examples from that acquisition. Susan Daimler who now runs StreetEasy here in New York City, which is why I’m standing right now, she came to us by way of acquisition of the company bifolio that she and her husband Matt started. And as we needed a new leader for StreetEasy, Susan and Matt stepped in and now they play a key role in the StreetEasy business. So they went from running a very small company that was focused on sharing of information among co-shoppers to now running StreetEasy. So, a perfect example of that.
Justin LaJoie who was the founder of Diverse Solutions, we’ve recently divested Diverse Solutions, but Justin is still with us running an entirely different product line. So, we definitely look. We look for culture fit and a broad ability. Subject matter expertise is important but it’s not the critical piece and you will see that throughout our management team as we all move around in different roles and expand our skill sets.
Ben: Very interesting. And totally, totally validates the tech theme. Mine, so what we do here at Pioneer Square Labs is come up with new business ideas and then work on them and try to spin them as their own startup companies. So we're always thinking about how do we apply a framework from some business or a theme that’s been successful in the recent years to new businesses. And one thing that Zillow and Trulia totally nailed is this idea that real world objects are also media, and then traditional media companies, you can sell advertisements against content, against articles people make or photos. And something that Zillow has done is – I’ve touched on this earlier – they’ve made it a form of entertainment and a thing that people do together to share these listings, a lot because it’s so aspirational. And Airbnb capitalizes on this too where a lot of traffic is there, not to buy but just to participate in that experience.
David: We used to joke when I worked at The Wall Street Journal that this was house porn.
Kathleen: Yeah. And something that folks miss a lot is we didn’t have any real estate listings on Zillow for the first 3 years. We only had the Zestimates.
David: Oh, wow.
David: I didn’t know that. Was there a business model then or was it kind of in construction?
Kathleen: I was not around. I’m sure that people had in mind all kinds of different ways that we were going to monetize, and we tried lots of different things, different kinds of ads for homes. But ultimately, the initial thought was, build your audience first and advertisers will come. We still believe that, and that’s also central to the investment thesis for Trulia is, you know, advertisers follow audience, so if you can increase your audience by a third over the span of six months, you’re going to be in a pretty good spot.
David: Should we move to rendering a conclusion on that note?
Ben: I think so. So, for me, this one is obviously, it’s very recent. So, some of the acquisitions we do and we’re looking back at Bungee or companies that are 10+ years old, in previous episodes we have a lot of information and to be able to render a conclusion on. In this case, I think it's pretty new but, Kathleen, like you were saying, you look at the financials from each of the companies over the entire existence of the companies and it looks like kind of 1/3 and 2/3. So the way that we generally grade this acquisition is from the perspective of the acquirer. So, from Zillow Group’s perspective, was this an A, B, C, D, and you know, to me this is a solid B+. It is sort of obvious. It’s amazing that you guys did the leg work to really get the deal done. It’s an accelerant to the business. It has all kinds of returns. But, you know, our A’s – and we said this on our other episodes – are four of these like ridiculous multiple, you know, 10x things.
David: The Instagram’s.
Ben: Yeah. The Instagram’s, the Android’s, the things that changed the course or saved a business. And to me, I think, like we’ve been talking about earlier, I feel like a B+ with some variance here and there to see where it goes in the next few years is what I –
David: One of the things for me, I was super impressed doing the research for this episode, reading the filings and then talking to you now. You guys did such like a professional and elegant job valuing this deal, negotiating it, making it happen, dealing with all these roadblocks along the way. Actually this will come up in my carve-out in a minute, but with the FTC review and the ListHub situation, even though you knew that would have been coming anyway, really impeccable job, like this is like just an A+ execution deal.
David: Overall, I agree with you, Ben. It’s a fantastic deal but when Instagram is our benchmark, that’s just a different class of acquisition and you guys might ultimately have Instagram-type acquisitions that way surprise you on the upside but, you know, you knew exactly that this would boost your traffic by about a third, you paid about a third of the combined company market cap for it. Made total sense. So I’m going to go also with B and then the +; B for the deal and + for the execution.
Kathleen: Excellent. Well, I will humbly accept your compliments on the execution. I often said during the time that everything was happening that I felt like I was living in a textbook and that the opportunity to participate in a deal like this in the way it played out really only comes along once in a lifetime. So, it was a fantastic experience for our whole team.
You know, I think B+ is fair because I think we’re early days still in reaping the benefits of this combination and as I said earlier, there are all kinds of ways in which we’ve benefited that we haven’t foreseen.
David: All right, let’s move quickly into the tail end of our show. We have three quick sections: followups on episodes we’ve done in the past where new news has come out, hot takes on deals that are relevant in the moment in the press, and then carve outs (my favorite) at the end.
First, followups, Ben. Snap Inc.
Ben: Yeah. Well, I’ll be buying some Spectacles, I can tell you that.
David: Snapchat is releasing basically like the cool version of Google Glass, and changing their name to Snap Inc., had an Apple moment.
Ben: They are. You know, when we talk about Apple moment, I haven’t been this excited about kind of like following a company, like, since the early days of Apple’s renaissance.
Ben: I can’t help but feel like what Snapchat is doing right now is it’s like smart and super ambitious and so unexpected. I tweeted this when they dropped ‘chat’ and they just became Snap Inc. It reminds me a lot of Apple dropping ‘computer’ from their name. And they have ambitions far beyond being constrained to exactly the form that they’re in now. And I’ve been thinking like “oh, they’re this new form of communication” but this kind of changes it outside the software world. And I think where Snap is going right, where Google went wrong with glasses, they’re not starting with these ridiculous grand plans of like you can do anything on this thing. The comp for me is, you know, you look at Postmates and they said “you can order anything.” And Uber said “you can literally just order me to drive you from here to there.” And people immediately latched on to that “Oh, I get it. Uber is for taking me places.”
So I think with Google Glass being who knows what it will do for you, what the Spectacles does is here, it’s just for this little thing, we’ll see if we expand from there. But right now, it’s a toy, it’s almost flamboyant. It’s crazy, it’s ridiculous.
David: My favorite take on this was I saw Bill Gurley retweeted a tweet from one of the Collison Brothers, the founders of Stripe, saying something to the effect of Snapchat– With this move, like with just following Snapchat in general, they are just so astonishingly original in what they do. I think that’s like why they’ve kind of captured this zeitgeist to, you know, they’re not like X for Y, even though this is Google Glass done right. It’s like who ever would have thought that Snapchat would release sunglasses to take video. Super cool. Kathleen, are you going to buy a pair?
Kathleen: I’m on my way now. No, I thought they were pretty cool and I have to say, I like the blue lipstick too. I was actually seeing lots of comments about that.
David: Hot takes. Moving on from one social media empire on the rise to one potentially on the decline. Twitter, oh, we talked about this with Alex from Bloomberg on our last show, but, also heating up.
Ben: Yeah. It’s super interesting that the most incredible that the most credible rumor yet is the potential Disney offer coming in. And awesome having Alex on the last show. Alex actually broke the story that people familiar with matter, both from Disney and from Twitter –
David: People, Ben. People. Not person.
Ben: People. That’s right. Or sources in kind of confirming that the two are in talks. So, it seems to be a little out of the woodwork but makes a lot of sense when you think about Disney’s other acquisitions of late. It’s not just Mickey Mouse. It’s really a media empire. And if Disney owns ESPN, why couldn’t they own Twitter?
David: Disney’s made some great acquisitions that we’ve talked about on the show – Pixar, LucasFilm. But, you know, I mean like so many companies these days, they face, as successful as they are, they’re an industrial company and what is Disney’s future in the information age, and they’ve done great things organically. You know, MagicBands are an incredible experience if you haven’t gotten to do it yet at the parks.
Ben: That’s the thing you wear on your wrist at the Disney theme parks.
David: But yeah, well, I don’t know. Who knows what will happen with this? There will be an episode coming, I'm sure.
Next, real quick hot take. We got some requests for this in the Slack channel. This is pretty amazing. A company called AppLovin that is a mobile app marketing, broad-based marketing firm, you know, customer acquisition, advertising, and analytics was just acquired by a Chinese private equity firm for $1.4 billion. They’re basically bootstrapped. They had raised about $4 million in kind of seed money that they didn’t really need, they’re profitable the whole time. Pretty incredible story.
Ben: Yeah. And pretty unprecedented to have a bootstrapped company turn into that. I mean, they almost always have institutional backing. And my only comment on this one is it’s interesting to see how history repeats itself. I think 10 years ago we were in the same place with email marketing and the start of sort of the digital marketing hub.
David: That we talked about with Scott on ExactTarget.
Ben: Exactly. Exactly now seeing it in the mobile era.
David: Yeah. Okay. That’s what we got. Carve outs. Ben?
Ben: Yeah. So for any new listeners, this is a thing that is unrelated to the episode or really the theme of the show in general. But it’s just something we’ve enjoyed over the past few weeks. There is a great video floating around called The Marvel Symphonic Universe, and it’s on YouTube and it looks at why is it that we can on command, hum the theme of Star Wars, James Bond when asked. How about any of the Marvel movies? Despite being the highest grossing franchise ever in Hollywood, none of us can hum a Marvel franchise theme.
David: I have no idea what the…
Ben: Yeah, when you start feeling that part there, one of the really interesting things they bring up is temp music. And it’s so cool to watch what music the director used as temporary music like “oh yeah, grab that one song from that other movie and throw it in until the real music is written and composed for this movie.” And it’s a super interesting 10-minute watch. So, highly recommended.
David: That’s fascinating. Mine is a book I just finished reading that lots of people recommended to me, is Phil Knight, the founder of Nike’s memoir, Shoe Dog. And had some personal significance for me because Phil actually, I went to Stanford Business School or I studied on the night management center campus that Phil donated to Stanford - an incredible, incredible new campus for the business school that was constructed a few years ago. And then Phil grave the graduation speech at my graduation and it was in many ways, although we didn’t know at the time, kind of an outline of this book and I went back and rewatched it. The book is fantastic. I mean, it’s I guess broadly you’d call it a business book but it’s really just the story of Nike and it’s pretty incredible. My favorite thing from it is in the introduction, Phil talks about going for a run in 1962. He just graduated from Stanford, had this crazy idea to start a shoe company, and he’s just thinking like “I have no idea where this is going to go, but I’m just running, I’m going to keep running and I’m not going to stop. Don’t stop. I’ve made so many mistakes, so many things I regret along the way, but I just kept going and I didn’t stop.” And that’s where he is today. A great book.
Ben: Very cool. Kathleen, do you have a carve out?
Kathleen: Sure. Mine’s a little more frivolous. My husband and I spend our free time traveling to music festivals and thought I would recommend the band of the summer, which for us was The Struts. So, if you’re in need of a dose of glam rock, I would say check them out.
David: Nice. Love it.
Ben: Awesome. Well, I think that’s all we’ve got for today. So, Kathleen, where can our listeners find you on Twitter?
Kathleen: You can find me @KathleenPhilips on Twitter with one L in Philips.
David: On Disney-Twitter.
Kathleen: That’s right.
David: Thank you again, Kathleen. This has been super fun and also, always great to have a hometown Seattle company on the show.
Ben: That’s right.
Kathleen: It was my pleasure. Thank you, guys, very much.
Ben: Yeah. Well, for new listeners, if this is your first episode and you like to hear more, subscribe through your favorite podcasting client and if you enjoyed it, feel free to share it with your friends or leave us a review on iTunes. Thanks so much for listening.