Zillow Inc's Next Massive Growth Opportunity

Shares of Zillow (NASDAQ: ZG  )  have tripled since the company's IPO in 2011 as the company continues to be the dominant online real estate platform. Now, Zillow is turnings its focus to its next growth area: Rentals. 

Roughly 13 million people use Zillow every month to shop for a rental, making it by far the largest rental audience on the web. In the following video, Motley Fool analyst Brendan Byrnes sits down with Spencer Rascoff, CEO of Zillow, to discuss the huge opportunity and how the company plans to make more money in the long-run by making some features free in the short-run. 

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A transcript follows the video. 


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?


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 a couple of months ago. Now we're charging multi-family — so 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.


Talk about more of that overall size. You said you can do it faster in rentals — and also how StreetEasy 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?


Well, the monetization for multi-family rentals on Zillow and HotPads is paid inclusion, so we charge a couple of 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. 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. So, 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.

So, 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. Then we'll focus on monetization. Full StreetEasy monetization is not a near-term priority. Audience growth is the priority.


How about Zillow overall? Is it fair to say that audience growth is still the number one priority?


Audience growth is the number one, two and three priority for Zillow. Advertisers follow audience — and 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 — so audience primacy is key.

Read/Post Comments (9) | Recommend This Article (6)

Comments from our Foolish Readers

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  • Report this Comment On May 22, 2014, at 8:22 AM, bearsnsox wrote:

    first and foremost THE MOTLEY FOOL OWNS SHARES OF ZILLOW!!!

    biased much? these fluff pieces are pathetic

    ofcourse they are going to try to quickly monetize rentals, housing is cooling off and there is only so much growth Zillow can buy as they have been doing

    reality will soon set in

  • Report this Comment On May 22, 2014, at 9:39 AM, BenGrahamIII wrote:

    ^^^ I agree. This whole series is a fluff piece. I can't really take this CEO seriously given the way he exercises and sells his options (and then misled shareholders about it in the earlier clip). Why would you want to invest in a company whose management is not invested in its outcome, especially at this valuation?

  • Report this Comment On May 22, 2014, at 12:31 PM, Domeyrock wrote:

    what's pathetic is you won't quit bearsnsox, or should I have sold over 40% ago when you said how overblown the company was? Give up already guy, you're not helping anybody. When will your reality set in?

  • Report this Comment On May 22, 2014, at 4:20 PM, bearsnsox wrote:

    Pump and dump. The dump will be epic. It had a good ride due to the housing rebound and just and overall market rebound due to the fed.

    1-2 more quarters of buying revenue or as they call it spending all of their profits to promote their brand and as the markets turn around all of the funds will dump this middle man company

  • Report this Comment On May 22, 2014, at 5:49 PM, Domeyrock wrote:

    Priceline is a middle man company too genius.

  • Report this Comment On May 22, 2014, at 6:01 PM, bearsnsox wrote:

    Middle men companies have their place THAT IS if they can actually control their spend and turn a profit like Priceline. Why don't you check out their annual report before you make that comparison....genius

  • Report this Comment On May 22, 2014, at 6:22 PM, Domeyrock wrote:

    revenue growth +70% y.o.y

    premier agent subscriptions +4,600 ADDED last quarter

    avg revenue per user +10% to $284

    traffic on web and mobile grew +50%yoy

    I still don't see what you're crying about. Maybe because you're not a shareholder for the past year? Give it up guy

  • Report this Comment On May 22, 2014, at 7:13 PM, bearsnsox wrote:

    You must analyze numbers young grasshopper. Easy to show impressive stats when you grow numbers from a couple million. Also easy to grow them when you BUY them. They spend more than they take it. Don't worry it'll catch up with their business model. I'd be worried about that agent turnover ( churn ) number if I were you ;)

  • Report this Comment On May 23, 2014, at 8:05 AM, Domeyrock wrote:

    I've heard Netflix and Amazon both spend way much more money than they take in as well, and while people are STILL crying about the valuations of both of those company's not only are they missing out on hundreds of % gains, but they STILL aren't realizing the potential of these companies. More and more Zillow is showing to be no different.

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