Zillow's CEO on the Company's Future Growth

Zillow's CEO looks forward to rapid growth in rentals and describes audience growth across the site as the company’s top priority.

Apr 10, 2014 at 12:30PM

Recently, we sat down with Zillow (NASDAQ:ZG) CEO Spencer Rascoff to get an update on the company's current strategy and learn more about how Rascoff sees Zillow's future opportunity. Joining Zillow as one of the founding employees in 2005 and at the helm since 2010, Rascoff brought Zillow through its IPO and has overseen the strategy that has led its stock to more than triple over the past 18 months. 

In the video segment below, Rascoff says investors should benchmark growth on Zillow's rentals side relative to the early growth of its mortgage business, which took about three years to hit $10 million. He anticipates even faster growth in rentals. He also shares why he views audience growth as Zillow's top priority. 

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Brendan Byrnes: How about rentals? I know when we spoke last time you guys had just started to monetize rentals. Could you give us a sense of how that's going and the overall strategy there?

Spencer Rascoff: Rentals is a huge opportunity for us. We have about 13 million people that use Zillow every month to shop for a rental, so we're by far the largest rental audience on the web and we just started to monetize it, just a couple months ago.

Now we're charging multi-family -- people that operate large apartment buildings -- we're charging them to list on Zillow and HotPads. It's very early.

We've told investors to benchmark the growth of our rentals business relative to the growth of our mortgage business, which took about three years to get to a $10 million revenue run rate, and we think we can do it faster in rentals.

Byrnes: Talk about more of that overall size -- you said you can do it faster in rentals -- and also how StreeEasy fits into that, because StreetEasy has the rental aspect as well. What does it look like, as far as monetizing it? Is it the same type model?

Rascoff: The monetization for multi-family rentals on Zillow and HotPads is paid inclusion. We charge a couple hundred dollars per building, per month, to be listed on Zillow and HotPads.

StreetEasy is a slightly different animal. We acquired StreetEasy in the late summer of 2013. We have so much potential at StreetEasy, and actually we took a step backwards in terms of monetization recently -- we made it free. We removed the paywall.

We did that because we're following the Zillow playbook with StreetEasy, which is to say we're making it free. We've got a great product, and now we're taking it to mobile. StreetEasy has so much potential on mobile -- only about one-third of StreetEasy's usage is mobile, whereas about two-thirds of Zillow's usage is mobile.

We're building out dedicated StreetEasy apps across all major mobile platforms. We're improving email marketing and search engine optimization, as well as making it free. We think that by following those tenets of the Zillow playbook, we can grow the StreetEasy audience quite significantly -- and then we'll focus on monetization.

For StreetEasy, monetization is not a near-term priority. Audience growth is the priority.

Byrnes: How about Zillow overall? Is it fair to say that audience growth is still the No. 1 priority?

Rascoff: Audience growth is the No. 1, 2, and 3 priority for Zillow. Advertisers follow audience. If you look at any other media category, online or offline, eventually ad dollars flock to where the audience is.

Take the real estate category, for example. In two-newspaper towns, whichever newspaper had 60%-70% circulation ended up with 80%-90% of the newspaper classified revenue. We think the same thing is going to happen in real estate -- audience primacy is key.

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As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal "The Motley Fool's 3 Stocks to Own Forever." These picks are free today! Just click here now to uncover the three companies we love. 

Brendan Byrnes has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Zillow. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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