How to Play the Online Real Estate Market

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

The Internet has become the first place to look for real estate. In 2007, more than 80% of home buyers actively used the Internet as part of their research process before buying real estate and before contacting an agent. This proportion keeps increasing, making online real estate a very attractive market. However, competition in this space is very fierce. Most real estate agents and companies have already built their own sites, and invest heavily in online marketing. 

Companies that provide a differentiated online service may have a chance to win this huge market. Online real estate company Trulia (UNKNOWN: TRLA.DL  )  uses interactive maps and strategic acquisitions to capture market share. Competitor Zillow (NASDAQ: ZG  ) , on the other hand, emphasizes its "hidden inventory." The company has rich information regarding pre-foreclosures and homes under construction. Then there's Move (UNKNOWN: MOVE.DL  ) , owner of, a huge database-driven website with more than 94 million properties. Which of these three companies has a bigger chance to win the promising real estate online market?

Z Revenue TTM Chart

Source: YCharts

Trulia's graphically rich environment may be its best competitive advantage
Founded by Stanford University graduate student, Pete Flint, in 2005, Trulia offers sellers, owners, and real estate professionals valuable information regarding properties, prices, neighborhoods, schools, commute times, and crime rates. Trulia tries to differentiate its service by constantly adding new features such as Trulia Local Maps, which can help users identify median sales prices and price-per-square-foot in a given area, using easy-to-understand maps.

Source: Trulia Corporate Blog

Because submitting a listing is free, Trulia makes money from selling data and tools to real estate professionals, and from premium advertising. However, while Trulia has one of the best user interfaces, and a rich database, it may need to search for additional revenue sources in the future. Despite amazing traffic growth, the company is not profitable. In the second quarter of 2013, it had record revenue of $29.7 million, and lost $1.5 million.

Although Trulia isn't profitable yet, management decided to acquire Market Place, a company that specializes in software as as a service for real estate agents. Market Place experienced operating losses of $2.8 million on $13 million in revenue in the first quarter of 2013. The acquisition will likely bring long-term synergies. However, Trulia's short-term profitability remains worrisome.

Zillow's mobile emphasis is paying off
Like Trulia, Zillow also makes money from real estate agents, who register to Zillow's Premier Agent program to gain more mobile and web presence on Zillow's platform. The company became famous thanks to its Zestimate statistic, which estimates the value for a home based on a range of publicly available information. 

Zillow used Zestimate to create a strong user base. Later, the company expanded its portfolio by creating several complementary sites, from Zillow Mortgage Marketplace, a meeting point for borrowers and lenders, to Zillow Digs, a new home improvement marketplace. The company also created Zillow Mobile, the largest and most popular real estate mobile suite, with five applications that can be downloaded for either Android or iOS systems.

Zillow's emphasis in mobile and portfolio diversification are starting to pay off. The company is the fastest-growing online real estate application. Last year, Zillow added the equivalent in unique users of almost two-thirds of Trulia, or all of Move.

More recently, in the second quarter of 2013, the company posted record revenue of $46.9 million, up 69% over the second quarter of 2012. In terms of user metrics, the company experienced 51 million unique users during a single month last quarter, representing a 66% increase from the previous quarter. The best part is that Zillow still has plenty of revenue and traffic growth catalysts left: mobile monetization, international expansion, acquisitions, and strengthening its Premier Agent business.

Move is profitable, but needs more traffic
Move has been around since 1996 and currently owns,, and several other real estate websites, capturing more than 20 million monthly visitors. The company is actually profitable, earning $0.12 per share last quarter, representing an 82% gross profit margin.

However, despite being a new application, Zillow's skyrocketing success has already surpassed's traffic numbers. This suggests Move's applications may have little economic moat. A stronger emphasis on mobile, social mechanics, and more entertainment could help stop losing market share.

Final foolish thoughts
The war for the online real estate market will be fierce. The key to success is an emphasis on differentiation and permanent innovation, both from a technological and business perspective. Zillow is a great example of a company that permanently innovates. It has a rich and diverse portfolio of sites that are truly complementary, several mobile applications, and an interesting revenue diversification strategy  -- selling not only ads, but also premium accounts and professional tools. This company is a giant in the making.

Another growth story investors should be aware of
This incredible tech stock is growing twice as fast as Google and Facebook, and more than three times as fast as and Apple. Watch our jaw-dropping investor alert video today to find out why The Motley Fool's chief technology officer is putting $117,238 of his own money on the table, and why he's so confident this will be a huge winner in 2013 and beyond. Just click here to watch!

Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 23, 2013, at 9:55 AM, bearsnsox wrote:

    so one negative that the Citron report made on Zillow is the insane insider trading

    and AGAIN this month before earnings come out ZILLOW INSIDERS, dumped 1.6 million dollars worth of shares

    they are printing shares and selling them, this is a big bubble that will burst very soon

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2691065, ~/Articles/ArticleHandler.aspx, 9/28/2016 1:22:56 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,202.28 -26.02 -0.14%
S&P 500 2,155.89 -4.04 -0.19%
NASD 5,295.32 -10.39 -0.20%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/28/2016 1:07 PM
AAPL $113.69 Up +0.60 +0.53%
Apple CAPS Rating: ****
AMZN $827.34 Up +11.23 +1.38% CAPS Rating: ****
FB $129.00 Up +0.31 +0.24%
Facebook CAPS Rating: ***
GOOGL $807.27 Down -3.46 -0.43%
Alphabet (A shares… CAPS Rating: *****
MOVE.DL $0.00 Down +0.00 +0.00%
Move CAPS Rating: *
TRLA.DL $0.00 Down +0.00 +0.00%
Trulia CAPS Rating: *
ZG $35.63 Up +0.10 +0.28%
Zillow Group (A sh… CAPS Rating: ***