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In three years, online real estate marketplace Zillow has transformed its revenue model from a heavy reliance on display advertising to a stronger position as a broker of mortgage deals and a seller of subscriptions. The success of that pivot, apparently, is what positioned the company to go public.
Seattle-based Zillow yesterday filed an S-1 to raise $51.8 million, a figure dwarfed by the company’s total venture backing as well as its total losses: since 2004, it’s raised $87 million from VCs and racked up $78.7 million in red ink.
Zillow’s prospectus shows a clear shift in its revenue mix from one primarily based on advertising to a more mixed model where fees and subscriptions are taking over as the major revenue streams. In 2008 the company began offering Zillow Mortgage Marketplace, a subscription-based product connecting borrowers with lenders. In 2009, Zillow earned 22 percent of its revenues from the marketplace and 78 percent on display advertising. Last year the chunk earned on display dropped to 57 percent; marketplace revenues more than doubled. That ratio is likely to continue to shift away from display.
That’s not to say Zillow’s display ad business is shrinking—the business grew by 27 percent this year. But it certainly shows the company has no plans to exist on display alone. In total, Zillow earned $30.4 million last year, a sum that unfortunately doesn’t outstrip costs. The company came in just this side of unprofitable, a factor that hasn’t hindered the IPO performance of other recent VC-backed IPOs. Zipcar, for example, went public last week to great fanfare; its shares surged 58 percent in first-day trading, despite the company having lost $14.1 million in 2010. Clearly, public market investors are hungry for fresh product. Mix that with a six-year-old venture capital investment, and the motivation behind Zillow’s S-1 is clear.
Zillow’s $87 million in venture backing, spread across three rounds of funding starting in 2005, hasn’t been refreshed since 2007, when Legg Mason wrote the company a $30 million check. Prior investors, who plunked down money when Zillow’s revenue stream was so display dependent, include PAR Capital Management, Benchmark Capital and Technology Crossover Ventures.
Technology Crossover will acquire $5.5 million of the public shares in Zillow’s IPO, according to the S-1.
Trulia just launched another interactive map today, comparing the average home price, duration on the market, and reduction period for sales by zipcode across the US. Using the folks from Trulia's recent acquisition of Movity, they are empowering consumers to find the best deals, or greatest price reductions in the area. See below for the New York City metropolitan area.
See below for the article from the Trulia Blog.
Trulia’s Home Offer Report & Interactive Map Reveals Where Homebuyers Can Find Deep Discounts Across America
Today, Trulia launched its Home Offer Report to help give homebuyers and sellers the upper hand – whether they’re making an offer or putting their home on the market.
This brand new quarterly report and interactive price reductions map offers ZIP-code level insights on when the first price reduction occurs in your neighborhood, where the reductions are happening and how deep the reductions are. Click on the map below to learn about the price reductions happening in your neighborhood:
Check out this slide show for the full Q1 2011 report findings:View more presentations from Trulia
We are partnering with MLS organizations to replace Homes.com listings sourced from services less reliable than the MLS. Through this partnership, all listings sourced from a local MLS are displayed on Homes.com with the new MLS Trusted badge.
This is interesting. Dominion Enterprises, the parent company of Homes.com, ForRent Media Solutions and a glut of other online classified sites is launching "MLS Trusted," a broker verification service.
I wonder if this will have the stated effect of actually refining the quality of property data and listings, or create another pay wall restricting consumers from directly accessing data. The goal seems to be transparency, but a pay-to-play, metaMLS, might result in the exact opposite effect, by letting brokers pay for visibility.