They were for a long time the de facto neutral party everyone used to look at houses. Great. Then they got into doing contracts apparently, still OK.
Then they started competing against people and overbidding everyone, at the height of what appears to be the biggest housing boom of my lifetime. This was not only apparently financially dangerous, but an act that puts them in a bad light, publicity wise.
I cannot think of how anyone thought this was an OK idea.
It's crazy to think an institution like this would get FOMO, but I think what happened is in 2020 they saw housing prices go through the roof, thought to themselves "hey we have all of this data, we can make a quick buck here" and piled in only to now get burned.
So yes it was FOMO, but not based on quickly appreciating real estate.
I guess they assumed flipping houses would have more revenue and profits.
I imagine they felt the only way to prove how good their Zestimates are was to start acting on them.
And it's entirely possible that the problem is they have spent the last 10 years tweaking their Zestimate algos to make listing agents happy, increasing prices. Like, nobody sues you when your estimate is too high, but when you get it too low, get your legal counsel prepped: https://www.marketwatch.com/story/do-zillow-zestimates-misle...