How Macro Trends Work to Zillow's Advantage

The Fool recently explored Seattle. In the video below, CEO Spencer Rascoff introduces us to Zillow (NASDAQ: Z  ) , telling us how the online home and real estate marketplace works, what he considers its greatest strengths, and what investors should know about it.

Spencer discusses how Zillow's different revenue streams are affected by macro trends such as ongoing appreciation in the housing market and consumer migration to mobile platforms. He also offers some tips on improving your home's Zestimate.

To view the full interview, click here.

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Austin Smith: One of the things that's made analyzing Zillow difficult for investors has been the multiple revenue streams that are affected by different forces, but also maybe the lack of release of information that would be more commonly associated with the industry. ARPU, a metric you guys have only recently started to present; churn, still a big question mark. Any intention of opening up the gates a little bit?

Spencer Rascoff: We've been public now for six or seven quarters, I think, and pretty much every quarter we've given a little bit more disclosure, a little bit more information. What we disclose today, for example, as compared with a year or two ago, helps investors and research analysts model the business with a lot more granularity, in particular breaking out our mortgage revenue from our Premier Agent revenue, for example.

We have kept some things quiet, especially that we think are competitive data points that we'd rather others not know, and I think we'll continue to do that. I certainly think there's enough information about Zillow for investors to make a well-informed decision about whether they want to be shareholders.

Austin: Real estate, obviously a huge industry, there's going to be many facets of it that impact Zillow. What sort of 30,000-foot level forces are going to positively or negatively impact Zillow in the real estate space? Interest rates, home ownership, things like that; if we're to understand those positive or negative impacts on you guys?

Spencer: A couple big macro trends that impact us; one is of course the overall housing climate. We've had 17 months in a row now of home value appreciation, which is great. It means home shoppers are getting off the fence and they're buying houses. When they buy houses, agents collect commissions. When agents collect commissions they become more bullish about their business, they turn around and buy more advertising from us.

That is a virtuous cycle which we're the beneficiaries of right now. Other big macro trend is the migration of consumer usage -- consumption of real estate information -- from desktop to mobile, where we have a huge advantage, competitively speaking.

On the web, there are a lot of great local real estate websites that we compete with. On mobile, it's a much better competitive environment for us. Because it's so complicated to write mobile software across all these different mobile platforms, really there are only a very small number of technology companies like Zillow that can truly compete on mobile.

We love that audience shift. That's a macro trend that we definitely benefit from.

Austin: Any tips for improving my Zestimate?

Spencer: You can claim your home and edit your home facts. Typically, when we have Zestimates that are too low, it's because the county has information, and therefore Zillow has information, that's outdated.

For example, on my home, on an investment property that I own, it had 3,000 square feet in country records and I updated it to 4,000 square feet and it improved the Zestimate.

Austin: Got it. So you don't think the county has my rock wall or trampoline fully incorporated in there?

Spencer: They may not know about that, and if you want your Zestimate to be fully accurate, then you've got to put that in.


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  • Report this Comment On July 26, 2013, at 2:17 PM, bearsnsox wrote:

    do you guys get paid to pump out biased interview articles from the Zillow CEO?? this is like the 10th one in a week, horrible

  • Report this Comment On July 30, 2013, at 7:47 PM, bearsnsox wrote:

    according to insidercow.com the CRO of Zillow just sold 78k worth of stock on 7/29

    now the totals 0 buying and the following for selling from insiders since 4/1/2013:

    Zillow: 37.5 MILLLION!!

    Trulia: 6.3 Million

    Move: 3.9 Million

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