Zillow stock performance during the day of the McMansion Hell threat fallout

Zillow’s asinine threat to McMansion Hell is costing them

You’ve probably heard about the asinine legal threat that Zillow lawyers sent to the architecture criticism blog McMansion Hell (currently offline), a popular blog that provides entertaining and educational commentary and criticism of the scourge of the McMansion. If you’re in the dark, allow me to summarize the events of earlier this week, with some of my own speculation and opinion thrown in (indicated in italics below).

  • Monday morning: The Washington Post publishes a story and video about McMansions, heavily featuring Kate Wagner and her blog McMansion Hell
  • Monday morning: A Zillow employee (or possibly a major Zillow customer) reads the Washington Post story, visits McMansion Hell, and sees the “Copyright Disclaimer” at the bottom of many of the blog’s posts stating that “All photographs in this post are from real estate aggregate Zillow.com.” The employee/customer then notifies Zillow’s legal department.
  • Monday afternoon: Zillow lawyers send a threatening email to Kate, accusing her of copyright infringement and “fraud and interference with Zillow’s business expectations and interests” and demanding she delete all Zillow-sourced content from her site.
  • Monday afternoon: Kate takes McMansion Hell offline while she seeks legal help and archives the site.
  • Monday afternoon: A number of legal experts reach out to Kate, offering support in defending her against Zillow’s spurious claims.
  • Tuesday morning: Zillow’s PR department sends Kate a follow-up letter in a lame attempt at damage control.
  • Tuesday afternoon: Kate announces that the EFF has agreed to represent her should Zillow actually make the incredibly moronic decision to sue.

Since I’m not a lawyer, I’m not going to go into detail about the specific inaccuracies and overall stupidity of Zillow’s arguments against McMansion Hell. If you want to read about that, check out this piece by Techdirt, or their follow-up story, or this (shudder) Buzzfeed piece with quotes from actual attorneys with expertise in copyright law, including the Ken White of Popehat fame.

The main purpose of this post is to simply and publicly state that Seattle Bubble is one hundred percent in support of McMansion Hell in this dispute. Zillow’s threats are wrong, and they fully deserve the universally bad press they are getting for this move.

Speaking of the bad press, Zillow stock fell 4.25 percent on Tuesday (the first news of this fiasco broke after the close of trading on Monday). The Nasdaq was down just 1.59 percent and the S&P 500 fell just 0.79 percent that day.

Zillow stock performance during the day of the McMansion Hell threat fallout
Zillow stock performance during the day of the McMansion Hell threat fallout

There could definitely be another reason for this (correlation is not causation, etc.) but it’s certainly interesting that a loss of $274 million in market value coincided so neatly with all that negative public sentiment.

Here’s hoping that McMansion Hell comes back online and Kate is able to keep doing what she’s been doing. If you’d like to support Kate’s fight with Zillow’s abusive lawyers, she has asked that you donate to the EFF. If you like what Kate is doing with McMansion Hell and want to support that work directly, you can support McMansion Hell on Patreon.


Update: EFF eviscerates Zillow, Zillow promptly backs down

The EFF has posted their official response to Zillow (backup screenshots for broken link). Here’s an excerpt from the letter they sent to Zillow’s lawyer:

Our client has no obligation to, and thus will not, comply with Zillow’s demands. Zillow’s legal threats are not supported and plainly seek to interfere with protected speech.

In our phone call yesterday, you suggested that Zillow’s primary complaint against Wagner is based on Zillow’s Terms of Use, which purports to prohibit any reproduction or modification of images found on Zillow’s website. You stated that Zillow’s agreements with third parties requires it to include such provisions in its Terms of Use and to enforce them. But Wagner is not bound by your Terms of Use and, even if she were, the relevant provisions are unenforceable.

Courts routinely decline to enforce “browsewrap” agreements like Zillow’s Terms of Use, which fail to present terms except via a hyperlink and without a checkbox to signal assent.

Even if an agreement were formed, paragraph 14 of the Terms of Use, asserting Zillow’s right to alter the contract without notice or justification, would render the agreement illusory and void for lack of consideration. … Further, to the extent that Zillow’s Terms of Use purport to undermine Wagner’s freedom to operate the McMansion Hell website, such terms would be unenforceable under contract law doctrines that restrict surprising, unfair, or speech-restrictive terms, particularly in contracts of adhesion like the Terms of Use.

The EFF’s takedown of the legal trash from Zillow was extreme and thorough. It took less than a day for Zillow to back down. Via GeekWire: Zillow drops complaint against ‘McMansion Hell’ blog after backlash over copyright claim

“We have decided not to pursue any legal action against Kate Wagner and McMansion Hell,” a statement from the company said Thursday. “We’ve had a lot of conversations about this, including with attorneys from the EFF, whose advocacy and work we respect. EFF has stated that McMansion Hell won’t use photos from Zillow moving forward. It was never our intent for McMansion Hell to shut down, or for this to appear as an attack on Kate’s freedom of expression. We acted out of an abundance of caution to protect our partners — the agents and brokers who entrust us to display photos of their clients’ homes.”

Good.


About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

28 comments:

  1. 1

    Okay, I suspect I’m probably the last person people here would suspect would come to Zillow’s defense, given what I’ve said about them in the past, but this is knee-jerk BS which has become so common in 2017.

    It is not a copyright issue. It is violation of Terms of Service. The letter, if you read it, makes that clear, but for some unexplained reason Zillow also mentions the copyright interest of other parties and does an analysis of that issue. I have no idea why they did that. Maybe they should have also covered the income tax consequences of taking photographs for money, and whether to depreciate camera equipment or take a 179 expense. /sarc

    I would also point out that McM H. sort of brought this on themselves by only getting photos from one place and then stating where they got them. I have no idea what the person behind that site thought that would accomplish, other than a cease and desist letter.

    Anyway, the coverage on this has been horrible. A website called The Verge covered as if Zillow was only complaining about copyright issues on photos it didn’t own.

  2. 2
    The Tim says:

    RE: Kary L. Krismer @ 1

    I was going to be disappointed if you weren’t the first comment on this post, Kary :)

    It is not a copyright issue. It is violation of Terms of Service. The letter, if you read it, makes that clear, but for some unexplained reason Zillow also mentions the copyright interest of other parties and does an analysis of that issue. I have no idea why they did that. Maybe they should have also covered the income tax consequenses of taking photographs for money, and whether to depreciate camera equipment or take a 179 expense. /sarc

    My guess is that they included the copyright issue in their letter for the same reason they accused her of “fraud and interference with Zillow’s business expectations and interests.” The lawyer was just throwing in everything that they could think of in order to scare her into compliance.

    I would also point out that McM H. sort of brought this on themselves by only getting photos from one place and then stating where they got them. I have no idea what the person behind that site thought that would accomplish, other than a cease and desist letter.

    Yes, that was definitely a mistake on her part. Given that she’s only 23, I can see why she would make an error like that out of ignorance.

    Anyway, the coverage on this has been horrible. A website called The Verge covered as if Zillow was only complaining about copyright issues on photos it didn’t own.

    I agree that the article on The Verge missed the mark. That’s why I didn’t include it here. Usually I like their stuff, but they went off in the weeds on this one.

    In my opinion, Zillow could have addressed their terms of service issue and avoided all this bad press by simply sending a friendly letter requesting that she remove the references to Zillow on her site and stop downloading images from them in the future.

  3. 3
    The Tim says:

    …and, Zillow has backed down. See the update at the bottom of the post.

  4. 4
    Brian says:

    The future doesn’t look bright for Zillow anyway. Redfin has better results, better search filtering, integrated agents, integrated offers, and apparently efforts toward integrated loans.

    I started out on Zillow, then used Redfin and realized how much of a headache Zillow was creating for me.

  5. 5
    uwp says:

    And Zillow stock was up on Wednesday in the midst of all this bad press!
    And down today, when they back off the suit!

    Why, it’s almost as if none of this has to do with the story at all!

    I do know that the stock is up over 300% since this illuminating conversation about Zillow:
    http://seattlebubble.com/blog/2011/07/15/so-whos-going-to-buy-zillow-stock/

  6. 6

    By Brian @ 4:

    The future doesn’t look bright for Zillow anyway. Redfin has better results, better search filtering, integrated agents, integrated offers, and apparently efforts toward integrated loans.

    Seriously, assuming you’re local to the Seattle area, why would you use Zillow at all? Other than the “gee whiz I wonder what it says” aspect of the Zestimates, there’s no real reason to use Zillow for anything.

    On the topic though, they did recently stop letting individual brokers upload their listings to Zillow. I wonder if that’s improved their stale listing problem, and if it had any meaningful effect on their not having all the listings?

  7. 7

    By The Tim @ 3:

    …and, Zillow has backed down. See the update at the bottom of the post.

    And basically the solution you suggested, assuming they also got references to Zillow removed.

  8. 8
    jon says:

    “EFF has stated that McMansion Hell won’t use photos from Zillow moving forward.”

    In what way is that Zillow backing down?

  9. 9
    Weasel says:

    By jon @ 8:

    “EFF has stated that McMansion Hell won’t use photos from Zillow moving forward.”

    In what way is that Zillow backing down?

    An amicable parting of ways, Zillow will drop the silliness and McM Hell stops using photos from their sh*tty website :-)

  10. 10
    The Tim says:

    By jon @ 8:

    In what way is that Zillow backing down?

    From Zillow’s original threatening letter:

    Zillow demands that You immediately: …delete all images and derivatives thereof, in Your possession and on Your Site … and confirm that You have … destroyed all Images, and derivatives thereof, in Your possession and from Your Site.

    She flatly refused to acquiesce to any of those demands. Existing content will remain on her site exactly as it was. Rather than press the issue, Zillow dropped it.

  11. 11

    My main reaction to this was the reaction of the non-parties (the press, commentators, etc.), but I really do have to wonder what mentality goes into writing a cease and desist letter that is so over the top. I used to write demand letters on bankruptcy preferences with some frequency. It’s hard to write a letter which people will respond to when you’re asking people to return thousands of dollars that they were paid. I never saw being overly threatening to be part of the process. Obviously I would have to threaten suit, but I wouldn’t bring up or threaten things I had no intention or ability to do. I don’t see how Zillow thinks that helps the process at all. And it certainly doesn’t make them look good.

    So basically what we had here was a situation where a real estate website posted information that they really shouldn’t have and didn’t need to post (all photos from Zillow) and another real estate website reacting by writing a letter asserting topics and causes of action it shouldn’t have and didn’t need to. Rather obviously Tim needs to get in the game and needlessly threaten someone with something he has no right to assert. That will probably increase his web traffic and ad revenues (assuming any ads are per view).

    Here’s all the products on Amazon that have the word “Bubble” in it somehow. I’d suggest Tim contact each company and insist that they remove the word “bubble” because it violates his trademark.

    https://www.amazon.com/s/ref=nb_sb_noss_2?url=search-alias%3Daps&field-keywords=bubble

  12. 12
    Brian says:

    Was it just a bunch of bored lawyers at Zillow that were looking for something to do or something to prove they’re worth retaining…?

  13. 13
    Brian says:

    On another note, looks like the new state budget approves a property tax rate increase of $0.81 per thousand of valuation. That’s $400 for a $500k home. With the consistently-rising valuations and new ST3 taxes, those property taxes are probably starting to hurt for some people.

  14. 14

    RE: Brian @ 13 – I haven’t looked at that yet, but if that’s correct the total number would be much higher–that’s probably just the state’s portion. It’s hard to break it down the way King County shows it, but it looks like the local portion of the tax is roughly 25-30% of the tax bill. But it’s possible that with this part of the school portion will go down.

  15. 15
    The Tim says:

    By Kary L. Krismer @ 11:

    Rather obviously Tim needs to get in the game and needlessly threaten someone with something he has no right to assert.

    I don’t understand what this is referring to. Who did I threaten?

  16. 16
    Cap''n says:

    RE: The Tim @ 15

    I think it was just a suggestion on how you can make some money

  17. 17
    S Sounder says:

    I bought a new house and trying to decide whether to sell or rent the old one. The rent should be about equal to my 15 mortgage payment. I think I can handle being landlord. The house is 5 mins away from the new one. Thoughts?

  18. 18

    By Cap”n @ 16:

    RE: The Tim @ 15

    I think it was just a suggestion on how you can make some money

    Exactly. Using the theory that there’s no such thing as bad publicity, both Zillow and McM From H benefited from this nonsense. The (sarcastic) idea is that Tim should jump in and try to create another situation that would generate some press. The more asinine the threat the better!

    This assumes though a per view or per click system for advertising on SB. If just per month it wouldn’t matter.

  19. 19
    The Tim says:

    RE: Kary L. Krismer @ 18 – Ahh, okay thanks, I didn’t get it, I do now though. That would be funny.

    Alas though, I don’t charge for ads on a pay-per-view or click system. I don’t make much money from ads at all, actually.

  20. 20
    Erik says:

    RE: The Tim @ 19
    Bring back the thumbs up/thumbs down feature for the commenters, and you may get more traffic and therefore you could charge more for your advertisements. We don’t want to rate your posts, we want to let other commenters know what we think of their comments. I’ll drop it if it’s a definite “no”, but it made things more fun.

  21. 21
    Erik says:

    RE: S Sounder @ 17
    Look at the data. If you can’t figure it out, you should invest in the stock market.

  22. 22
    Jon says:

    By S Sounder @ 17:

    I bought a new house and trying to decide whether to sell or rent the old one. The rent should be about equal to my 15 mortgage payment. I think I can handle being landlord. The house is 5 mins away from the new one. Thoughts?

    You also have to pay taxes and upkeep. Real estate is a good inflation hedge. It all depends on your attitude towards risk and what your overall portfolio and life stage and plans are.

  23. 23

    By S Sounder @ 17:

    I bought a new house and trying to decide whether to sell or rent the old one. The rent should be about equal to my 15 mortgage payment. I think I can handle being landlord. The house is 5 mins away from the new one. Thoughts?

    My first advice would be to not look at advice over the Internet. ;-)

    And totally ignoring the prior sentence, my second advice would be to at least consider what your tax basis is in the property relative to the net proceeds you could receive if you sold the property. If the difference in that number is relatively large, or if even determining your basis is difficult (it’s connected to remodel costs or the purchase of prior residences), then I’d look at whether you can take that gain tax free as the sale of a residence. The ability to sell a residence tax free is one of the best tax deals there is, and if the potential gain is large you should think long and hard before giving that up.

  24. 24

    RE: S Sounder @ 17

    Usually sell vs rent. The answer lies in the question, If you were going to buy an investment property would that property you just happen to own be the best investment to buy? Usually the answer to that is no. Not always; but often.

    Many of my clients have kept their first condo and/or townhomes as rentals because the answer to the question was yes and they had no mortgage at all. The rent they could collect compared to the carrying costs was very favorable. Also some people never sell when they buy and over a lifetime they have collected any property they ever purchased and that was their retirement vs focusing on annual cash flow.

    It’s a personal decision but going into the tail end of a long appreciation run you have to ask yourself…almost went into Clint Eastwood and Dirty Harry there…but seriously, you have a 50/50 chance that selling later will produce less of a return than now.

    If you do rent it, try to get a lease that doesn’t end in August every year, or when you do decide to sell you will be coming on market in 4th quarter when the market is weakest. Try to get a lease that runs Feb to Feb or so. Maybe a 15th month lease that then goes to a 12 month after that. Watch your timing.

  25. 25

    Redfin is going public, and that apparently gives us the first real glimpse into the company’s finances. Apparently they’ve never made an annual profit and have lost over $600M over the years. But revenues are up! That would lead to a really high stock price if only Redfin were a tech company.

    http://www.seattletimes.com/business/technology/redfin-files-to-go-public/

  26. 26
    Erik says:

    RE: Kary L. Krismer @ 23
    S sounder can live in it 2 years, rent it 2 years, then sell and pay no capital gains. Residency is 2 of the last 5 years. I think it would be foolish to not rent it out 2 years and make an extra $100k in appreciation. You get the same tax benefits if you stayed there the entire time. This Seattle market is raging and probably will still be raging in 2 years. I’m going to live in my rentals for 2 years, rent them 2 additional years if the market is as it is today and sell them and pay no capital gains. I’ll probably make a lot more money that way.

  27. 27

    By Erik @ 26:

    RE: Kary L. Krismer @ 23
    S sounder can live in it 2 years, rent it 2 years, then sell and pay no capital gains. Residency is 2 of the last 5 years..

    Yes residency is 2 of the last 5 years (I believe), but I believe you will have some capital gains if you do that, and some recapture too, which is even worse. There are also situations where if you rented it out years ago you can still end up paying tax even though you’ve lived in it recently for the requisite period of time. Consult a tax adviser.

    But yes, IF values keep going up that could work out net of the extra taxes.

    BTW, having taken a home office deduction can also mess things up. The 2 of 5 years is not the only test. Again, consult a tax adviser.

  28. 28
    Cap''n says:

    RE: Erik @ 20

    👎

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