Note from the Author
Zillow is one of my favorite companies. Aside from the idea of Zillow and the promise of Zillow Offers, which I was sad to see fail, I enjoy Zillow as a user. Zillow is culturally important as well because it taught us that People Are Nosy and that they actually care about the value of their neighbor’s home more than they care about the value of theirs. SNL also caught onto this idea.
The Two-Sided Marketplace Model
If you love using Zillow, you are not alone. Zillow has all of our attention. It is the fourth most visited website and is searched more than the word “real estate,” according to their 2023 and 2024 investor presentations.
The idea of Zillow has done a lot to support buyers and sellers alike by reducing information asymmetry, friction, and search costs. What’s more, comparable business models of Zillow are not novel, and one exists in veterinary medicine today, so let’s take a closer look at that after we describe Zillow’s business.
Zillow came into the marketplace with a mission statement:
“Our mission is to build the most trusted and vibrant home-related marketplace to empower consumers with information and tools to make intelligent decisions about homes.”
What Zillow was saying back then was that it was a two-sided marketplace. On one end were people looking to purchase homes, and on the other were people interested in selling their homes. Historically, this transaction was facilitated by third-party brokers, who exchanged information between buyers and sellers while representing the seller and generating a hefty commission for the sale.
What’s important to note about the third-party broker is that their whole business existed to remove friction from buyers and sellers. Buyers have a lot of options to buy, while sellers only have one home to sell, so they tend to bear the cost of delay and the opportunity cost of not finding the buyer with the highest willingness to pay. The broker sees many homes and has sold many homes, so they are a welcome third party to the transaction as they help speed up the process (good for both parties) and remove some information asymmetries, e.g., the seller may know more about the home they are selling than the buyer and the buyer may know about more opportunities for purchase than the seller.
Enter Zillow, who greatly reduced information asymmetries for the buyer, which allowed them to gather many potential buyers to the platform. Even better, because this product was technology-driven, it took low to no marginal cost to service additional buyers on the platform.
What Are Search Costs?
With so many buyers on the platform, potential sellers and their brokers are willing to pay in order to reach that market of potential buyers and join the platform, which only makes the platform more attractive to potential buyers (as there are now more listings). These impacts are called same-side and cross-side network effects.
Today, much of Zillow’s revenue comes from those brokers and taking a share of their commission for facilitating advertising, marketing, and lead management. Though at its core, Zillow’s success came from the reduction of friction in a market that is full of information asymmetry. To make things simple, we call these frictions “search costs.”
Search costs are the costs, whether hard costs ($) or opportunity costs (time), involved in searching for the best (in terms of value) product or service. These costs are aggravated through information asymmetries between the seller and the buyer.
Reflect for one moment, and you should be able to think of a handful of search costs in veterinary medicine. The one we will focus on today, and its solution, is veterinary purchasing inventory and Vetcove.
How Vetcove Solves Veterinary Purchasing Frictions
Many of the same factors that led to Zillow’s success are true for Vetcove. You have sellers of inventory/pharmacy and buyers who have a handful of different options to complete their purchase, but there exist information asymmetries between the parties as to the best value for their particular wants and needs. This leads to search costs in the trade-off between the search for best value and the purchase cost.
Vetcove initially built its platform for buyers to greatly reduce the time spent searching for medication and time spent ordering while increasing transparency so that buyers could find the best price. Supporting additional buyers on the platform comes at a low marginal cost. Vetcove services over 50% of veterinary practices across the country with a very small sales/marketing team relative to that reach.
Value for Buyers and Sellers on Vetcove
So certainly, buyers of inventory/pharmacy at veterinary clinics should use Vetcove. It is free for them to do so, and it greatly reduces the search costs of managing inventory. They also have some good tools to use for budgeting and purchasing data.
Sellers, of course, want to access that vast network of buyers, and so Vetcove also has had little trouble attracting major suppliers and distributors to the platform, which again makes it more attractive to the buyer.
Vetcove is a private company, so its financials and management commentary on its finances are not publicly available. Vetcove does publish where it makes its revenue on its website.
Like Zillow, Vetcove has moved into advertising, leveraging its massive audience to gather additional fees from sellers. Also like Zillow, it has become more connected to the entire veterinary inventory purchasing experience through a technology offering in online pharmacy.
Understanding friction, information asymmetry, and search costs is a useful primer to understanding not just Vetcove but how buying groups function in the veterinary purchasing market, which has large implications for practice finances. Vetcelerator covers that here.
Conclusion
Understanding and minimizing veterinary search costs is a strategic advantage for any clinic. Platforms like Vetcove redefine veterinary purchasing by giving clinics more control, better prices, and faster decisions. As veterinary medicine evolves, leveraging technology like Vetcove is very useful for staying competitive and financially sound. If you want to learn more about how to manage search costs at your vet clinic, contact Vetcelerator for a consultation.
