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Zillow believes the evolution of the industry will only help it grow


In light of the jury verdict in the Sitzer/Burnett suit and the terms of the National Association of Realtor’s nationwide settlement agreement of the commission lawsuits, several prominent industry analysts believe Zillow will struggle with its financial performance.

On Wednesday evening, during the firm’s Q1 2024 earnings call with investor and analysts, CEO Rich Barton took a contrary view: Zillow is just beginning to unlock its revenue generating potential.

“In a hostile housing market and a noisy industry environment, why is Zillow outperforming?” he posited. “The simple answer is that Zillow is wholly focused on solving real consumer problems with software. In a giant industry that has historically had very little R&D investment, digitally re-platforming and integrating a huge disparate local industry where transactions are relatively infrequent is an audacious undertaking. We are advantaged primarily because we are a product and technology company first.”

While Zillow’s net loss of $23 million for the quarter, which was up from its net loss of $22 million in Q1 2023, did not necessarily reflect Barton’s confidence, the firm’s 13% annual increase in revenue to $529 million did. During the first quarter of 2024, Zillow recorded revenue growth across all sectors of its business, including a 31% annual jump in its rentals revenue to $97 million and a 19% year-over-year increase in its mortgage revenue to $31 million.

Zillow’s residential revenue, which still makes up the vast majority of the company’s revenue, also posted an increase, rising 9% on a yearly basis to $393 million.

On the call, Barton said that Zillow’s technology has helped it earn consumer trust, putting it “in the enviable position of having a large enough audience” that comes organically.

“The product led organic marketing growth story is rare, but it is common for the great ones. Those are the products and brands we admire the most,” Barton said. “Those who have followed us for a long time know how aggressive and innovative we have been, methodically converting our sticky audience into revenue. We have built a substantial, growing, diverse, EBITDA profitable business, yet we still monetize only a small share of our audience. Our massive unconverted audience will drive years of growth ahead for Zillow.”

Barton also touched upon the terms of NAR’s settlement agreement. According to Barton, the “substance of the settlement” is a “very reasonable middle path forward for the industry, where commissions are communicated between sellers and buyers and both parties are better educated.”

“This is a positive evolutionary step for the industry,” Barton added.

However, Barton noted that he and the team at Zillow do not see the changes outlined in NAR’s settlement agreement as revolutionary.

“Clear and negotiable compensation fits quite well with our published consumer advocacy marketplace principles of free access to listings, independent representation and negotiable compensation,” Barton said.

As such, Barton said he is confident that Zillow will benefit from this evolution.

“We have the most and highest intent customers in real estate, we work with the most productive agents and we provide them with exceptional technology to make their lives more efficient,” Barton said.

In particular, Barton highlighted Zillow’s Premier Agent program, which sells buy-side leads to agents who are part of the Premier Agent network. Due to this program’s heavy reliance on homebuyers using real estate agents in their homebuying journey, some analysts have become critical of this model in light of the commission lawsuits.

“Of the approximately 1.5 million real estate license holders, many handle only one or two transactions a year. These are not our Premier Agent partners,” Barton said. “Eighty-percent of all real estate transactions across the U.S. are done by the top 20% of agents and team and today, nearly four out of five Zillow Premier Agent partners fall into that top tier.”

Barton added that since 2015, Zillow has shrunk its Premier Agent partner base by roughly 60%, while increased its Premier Agent revenue by more than 2.5 times.

Zillow executives also discussed its newly launched “Touring Contract,” noting that prospective homebuyers would not be required by Zillow to sign its touring contract in order book a home tour.

“Such agreement can help educated buyers about what services they are paying for, which is a good thing, and they have the added benefit of helping identify high intent buyers,” Jeremy Wacksman, the chief operating officer at Zillow, said of buyer representation agreements.

Looking ahead, Zillow executives said they are continuing to focus on the firm’s five growth pillars of touring, financing, seller solutions, enhancing its partner network and rentals.

“It is noisy out there and there is a lot of confusion and there is a lot of distraction, but I’ll tell you that we are calm,” Barton said. “We are driving forward, we are putting up numbers, the product is bettering better and better and we have a long road ahead of us because of all of this incredible kind of pent up potential transaction energy that lives inside our wonderful marketplace.”



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