What Went Wrong With Zillow? A Real-Estate Algorithm Derailed Its Big Bet

The first quarter delivered home-sale profits that were more than twice as high as anticipated, the company said. Zillow expected to make money primarily from transaction fees and from services such as title insurance--not from making a killing on the flip. The company's algorithm, which was supposed to predict housing prices, didn't seem to understand the market. Zillow was also behind on its target for home purchases. By the summer, it had the opposite problem, the company later acknowledged.