Zillow’s latest momentum reflects its strategy to diversify revenue through transactions as it transitions from a lead generation platform to a housing “super app.”
why this is important: As Zillow expands new revenue streams, including Zillow Home Loans, Rentals, ShowingTime+ and Seller Solutions, it is sowing important seeds for its next phase of growth.
context: Zillow’s overall revenue is down and has remained flat since 2021, following a pandemic that has marked one of the worst housing markets ever.
In two challenging yearsZillow’s residential and mortgage businesses have shrunk (in line with the declining market), while its rental business has grown due to strong organic growth.
Even if income remains flatZillow has significantly outperformed the market during this period, by a margin that depends on whether you consider Zillow a lead generation platform or a housing “super app.”
- While leading platform Zillow’s revenue grew slightly faster than the market, housing super app Zillow’s revenue grew at a much higher rate than the market.
- This is the result of new products and services generating additional revenue from more transactions.
you deeper: Over the years, I have used the following framework to think about real estate portal growth strategies.
- Zillow’s evolving strategy brings it closer to real estate transactions (Zillow Flex and Zillow Home Loans) and into more parts of the transaction (mortgages, leasing, seller services, agent tools).
- Typically, services closer to the transaction generate higher revenue, while services further away from the transaction are more profitable and more scalable.
Zillow claims its strategy Increasing transaction and revenue share is making a difference.
- In its early strengthening market, the drivers of this growth appear to be growing Zillow Home Loans, phasing out the underperforming Flex team, and launching new seller solutions (Listing Showcase and Opendoor partnerships).
Zillow’s mortgage business is growing, but counterintuitively, revenue is growing fall Purchases nearly doubled.
- This is the result of a changing product mix—Zillow is moving its mortgage marketplace leads to Zillow Home Loans for fulfillment.
- It is moving from asset-light markets to asset-heavy mortgage brokerage, a lot of Higher earning potential.
last year i claimed Listing Showcase is Zillow’s most interesting product, and now it might be Zillow’s funniest slideshow in its investor presentation.
- Based on my previous calculations, the mid-term revenue potential is accurate and represents a significant revenue opportunity for a new seller product.
- But the most interesting opportunity is longer-term, with go-to-market displays available as a mass-market product for all agents.
What to see: Zillow’s future growth aspirations depend on several key factors.
- Expansion to 40 markets – As early “enhanced markets,” Atlanta and Phoenix are useful data points, but not necessarily representative of all 40 markets.
- Last Mile Issues – Zillow remains entirely reliant on its local team of real estate agents to drive adoption of its new product.
- Zillow Home Loans are driving revenue growth, but it’s unprofitable, lower-quality revenue — the business needs to demonstrate the ability to grow revenue faster than expenses.
bottom line: Zillow is diversifying revenue through trading (which it calls a super app) and outperforming a depressed market.
- Zillow will almost certainly miss its goal of $5 billion in revenue by 2025, but like many plans made in early 2022, things have changed.
- While the early signs in some key markets are promising, the path forward depends on the stubborn realities of conversion rates, profitability and, as always, working with agencies.
Mike Delprete is strategic advisor Global experts in real estate technology, including iBuyer offer aggregator Zavvie.contact him LinkedIn.
