CoStar Group, Inc. (CSGP) Q4 2020 Earnings Call Transcript

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CoStar Group, Inc. (CSGP -1.50%)
Q4 2020 Earnings Call
Feb 23, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the CoStar Full Year and Fourth Quarter 2020 Group Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to turn the call over to your speaker today, Mr. Bill Warmington. Please go ahead, sir.

Bill Warmington -- Investor Relations

Thank you, Angela. Good evening and thank you all for joining us to discuss the fourth quarter and year-end 2020 results of the CoStar Group. Before I turn the call over to Andy Florance, CoStar's CEO and Founder, and Scott Wheeler, our CFO, I would like to review our Safe Harbor statement.

Certain portions of the discussion today may contain forward-looking statements, including the Company's outlook and expectations for the first quarter and full year 2021. Forward-looking statements involve many risks, uncertainties, assumptions, estimates, and other factors that can cause actual results to differ materially from such statements. Important factors that can cause actual results to differ include, but are not limited to those stated in CoStar's press release issued earlier today and in our filings with the SEC including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, under the heading Risk Factors. All forward-looking statements are based on information available to CoStar on the date of this call. CoStar assumes no obligation to update these statements, whether as a result of new information, future events or otherwise. Reconciliation to the most directly comparable GAAP measures of the non-GAAP financial measures discussed on this call, including EBITDA, adjusted EBITDA, non-GAAP net income and forward-looking non-GAAP guidance are shown in detail in our press release issued today, along with definitions for those terms. The press release is available on our website located at costargroup.com under Press Room. As a reminder, today's conference call is being webcast and the link is also available on our website under Investors. Please refer to today's press release on how to access the replay of this call.

And with that, I would like to turn the call over to our Founder and CEO, Andy Florance.

Andy Florance -- Founder & Chief Executive Officer

Thank you. Well done. Bill, you really did that preamble beautifully. And I have to say I'm reflecting that in your career you've probably listened to easily 10,000 earning calls and now you're actually reading the preamble. So hang in there, this is a big day for you. Okay. Well, good evening everyone else, and thank you for joining us for CoStar Group's fourth quarter and full year 2020 earnings call. And I just assume all of you are as excited as I am to be here tonight. So, welcome.

Total revenues for the full year 2020 were $1.66 billion which is a 19% year-over-year growth rate, and $9 million ahead of the top end of our guidance range given in late October. Quarterly sales bookings were a solid $49 million, with second half bookings rebounding 24% versus the first half of 2020. Our profit performance was equally strong, delivering full-year 2020 adjusted EBITDA of $553 million, an increase of 9% year-over-year and $23 million above the high end of our guidance given in October. What I believe is even more impressive, despite the severe disruption of our customers and our teams caused by the pandemic in March is that our financial results are either in line with or exceed the initial full-year guidance forecast we provided in February of last year. CoStar Group is absolutely a resilient business. In addition to the strong financial performance of our businesses in 2020, over the course of the year we raised $1.7 billion in equity and launched our initial $1 billion bond offering with an investment grade credit rating.

Our marketplace businesses, particularly Apartments.com network hit record highs across all of our metrics. We also closed 3 important acquisitions in 2020, Ten-X, Emporis and Homesnap. Ten-X positions us with nearly perfectly counter cyclical business and an opportunity to leverage digital marketplaces into greater commercial real estate liquidity. Emporis extends our reach with content on hundreds of thousands of properties around the world. With the addition of Homesnap in December, we expand our addressable market beyond commercial real estate into residential. Overall, 2020 was clearly a transformative year and as we look ahead to 2021, our strong balance sheet and acquisition track record position us to successfully pursue multiple large growth opportunities through organic investment and M&A.

Before we get further into our results, I want to briefly address where we stand with our recently announced offer to acquire CoreLogic. One week ago today, we delivered a letter to the Board of Directors of CoreLogic setting forth the terms of a superior proposal to acquire CoreLogic. Under the terms of the proposal, CoreLogic shareholders would receive 0.1019 shares of CoStar Group common stock in exchange for each share of CoreLogic common stock, representing a value of approximately $95.76 per share based on CoStar Group's closing share price on February 12, 2021. And as I describe the CoreLogic offer, I'll be using that closing share price and all the share prices relative to that day.

The CoStar proposal implies pro forma diluted ownership of approximately 16.2% in the combined entity for current CoreLogic stockholders. CoStar Group's offer is clearly superior to offer to the CoreLogic shareholders in immediate value. Our all-stock merger with CoreLogic improves the value of their pending transaction with Stone Point 20% based on the date of the offer. More importantly, we believe that with hundreds of millions of dollars of identified synergies, which I will discuss in a bit more detail, the implied ownership of our proposal provides substantial value upside, which we believe would deliver value in excess of $105 of per share to CoreLogic stockholders over time. CoStar's Group stock is a solid currency and has performed exceptionally well through the decades, driven by solid fundamentals, such as our compound annual revenue growth of 21% over the past 20 years, similarly, 21% over the last 10 years and 19% over the last 5 years.

With consistent growth and a huge addressable market, CoStar Group's share price has appreciated 496% over the past 5 years, 1491% over the past 10 years, 3640% over the past 20 years and 10,342% since our IPO. CoStar stock has consistently proven equally as valuable as cash. In addition to our all-stock offer, we plan to invest approximately $2 billion to pay down CoreLogic's existing debt and another $500 million to $1 billion to unlock the value of the company's assets. We believe the combination will create long-term growth opportunities that will help support double-digit revenue growth for the combined company for many years to come. This combination would triple CoStar Group's total addressable market by combining the global leader in digitizing commercial property with a global leader in digitizing residential real estate We estimated that globally, commercial properties have an aggregate value of $66 trillion and residential properties have an aggregate value of $114 trillion. Combined, these companies will be very well positioned for growth, meeting the information analysis and marketing needs of the $180 trillion global real estate industry.

The global value of real estate is twice the value of all public companies combined. We believe that we can significantly accelerate CoreLogic's organic growth rate. CoStar Group has a well-established track record of acquiring slow growth companies constrained with single digit organic growth rates and have managed them to become fast growth companies with double-digit organic growth rates.

In the three years prior to CoStar Group acquiring LoopNet revenues on average were negative 2.3% a year. In the past 2 years, LoopNet has grown almost 20% a year, and already we have grown LoopNet's revenue more than fourfold since acquisition. In the three years prior to acquiring Apartments.com, revenue grew at 7.7% a year on average. In the past 3 years, Apartments.com has grown almost 30% a year on average. Already we have grown Apartments.com's revenue by more than 6.5 times. We believe that with product enhancements, new products, more direct selling, cross-selling, selling to new audiences and segments and integrated product offerings, this is a similar opportunity to significantly increase CoreLogic's organic growth rate.

CoStar Group is the perfect strategic partner for CoreLogic, and together we can drive transformative innovation. CoStar Group provides commercial real estate solutions and CoreLogic provides distinct residential real estate solutions to brokerage firms, and real estate agents, banks, lenders local, state and federal agencies, property owners, developers, investors, appraisers and firms selling solutions to the people and companies that use real estate.

A very large percentage of these organizations have an interest in both residential and commercial but today have to purchase different solutions from CoStar Group and CoreLogic to meet their complete real estate needs. Using the spirit point solutions [Phonetic] is inconvenient and reduces the value of the respective offerings. This is a strategic acquisition that will provide our combined clients with integrated solutions across all the relevant real estate sectors. The combined company expects to eliminate the artificial difference between commercial and residential real estate digital solutions. We believe that these integrated solutions will create massive cross-selling opportunities significantly increasing product uptake, sales and hundreds of millions in revenue synergies.

CoreLogic has approximately 150 professionals in its sales organization and CoStar Group has 1,060 I'm sorry. There is 1,060 in CoStar Group, 150 in CoreLogic.

In combination, when you put these companies together, we have the resources necessary to realize the potential cross-selling opportunity. We believe that many of the solutions CoStar Group so successfully offers today, which are only delivered to commercial real estate, can be extended into residential real estate. Marketplaces like Apartments.com and LoopNet are just 2 examples of these sorts of opportunities. Conversely, many of the products CoreLogic only offers to residential audiences today could also be offered to commercial real estate audiences. Property tax solutions, appraisal management, [indecipherable] day of solutions and building cost data are just a few are good examples of these sorts of opportunities. We believe that by leveraging existing technology assets into new segments of real estate, the combined company can create additional significant new cross-selling revenue synergies.

Further, we believe that we can achieve all these synergies, while significantly reducing the volatility of CoreLogic's revenue, which has historically experienced exposure to market cycles. Much of CoreLogic's revenues are reoccurring, but that's very different from being subscription revenue. Reoccurring revenue is volatile, while subscription revenue is much less so and has greater visibility, which allows CFOs to sleep better at night.

CoStar Group has a track record of acquiring businesses with seasonal or cyclical revenue variances associated with reoccurring revenue and converting these businesses to predictable and stable subscription revenue. 80% of CoStar's revenue is subscription based, up from 67% 5 years ago. LoopNet, Apartments.com, ForRent, Apartment Finder were all businesses with only reoccurring revenue. In aggregate, we have now converted the vast majority of the revenue in those products to predictable subscription revenue. We sell our information services to banks for commercial loans, origination and surveillance on a subscription basis, while CoreLogic sells an on-demand basis or on a reoccurring revenue basis. We believe there is a clear opportunity to convert that revenue and other CoreLogic revenue into more predictable subscription revenue. Since CoStar Group and CoreLogic's serve very different industry segments with cycles that are generally not correlated, combining the companies will further diversify the revenue sources and create a more stable combined revenue stream. In addition to these attractive growth in revenue synergies, there are significant cost synergies in this combination, because there are probably hundreds of millions of dollars in duplicative costs.

CoStar Group provides commercial real estate solutions and CoreLogic provides residential solutions. And while the solutions that CoStar Group and CoreLogic provide are completely different, both companies invest heavily in very similar underlying technology processes that collect and create real estate information including property data photographs, drone imagery, maps, aerials, market analytics and analytic models. The basic technology required to search for listings and display data and photos in a map are the same, whether the properties office buildings for houses for sale. CoStar Group and CoreLogic combined will have nearly 10,000 personnel software developers, researchers and photographers all collecting similarly structured distinct but related real estate content.

In combination, there's vast potential to duplicate processes and achieve significant cost synergies. Considering both, revenue growth and cost synergies, a combination of existing CoStar business with CoreLogic would result in $150 million to $250 million annual run rate EBITDA synergies. These synergies alone are worth over several billion dollars of value for our stockholders. Throughout this process, CoreLogic's Advisors, our advisors, analysts' reports and major CoreLogic shareholders who've done the analysis, have agreed that there is little antitrust risk in this combination. CoStar Group provides commercial property listings and analytics to commercial real estate brokers and owners, and Internet marketplaces for lead generation for commercial properties for lease and sale. CoreLogic on the other hand aggregates publicly available property tax assessment data, publicly reported sales and mortgage transactions to provide various solutions needed in residential real estate. In addition, CoreLogic provides multiple listing services and the software and hosting services they need to manage residential listings.

Our respective companies are in completely different markets. CoStar and CoreLogic do not compete with one another in any way. No client or prospect ever chooses between buying a CoreLogic solution versus buying a CoStar Group solution. They cannot because our products are completely different. Given the presence of multiple providers of the publicly available data CoreLogic resells, there are simply no meaningful antitrust concerns in our view. We believe that our February 16th proposal to CoreLogic would provide great value to the stockholders of both companies. We are very excited and we believe that the staff of both companies are very excited to have the opportunity to unlock the amazing possibilities this potential combination could create.

The next step involves CoreLogic's Board making the determination that CoStar's offer is the superior offer. After that, Stone Point, I believe we'll have the opportunity to improve their offer. We sincerely hope we can move forward without delay. As I am confident that we could complete a deal rapidly, and we expect the transaction could close within 4 to 12 months.

At the end of this call, we look forward to taking your questions on our results that we're announcing today, but we will not be taking any questions on CoreLogic, the offer or the possible transaction. I hope you can understand that the process we're engaged at this point is very sensitive. An open Q&A is not appropriate at this time in this forum. Thank you for your understanding on that.

Now let's get on to the rest of our earnings call. Despite all the dislocation and anguish of the pandemic, 2020 was a record year for our marketplaces and especially for Apartments.com. People need a home in a pandemic more than ever. Virtual shopping on Apartments.com provide a safe alternative to touring apartments in person. More renters than ever are looking for a new apartment and more research is taking place from home, with renters taking advantage of the innovative virtual search tools available on Apartments.com and our network of websites.

Renters took a breath-taking 170 million virtual tours on our site in 2020, twice as many as the year before. As you're aware, Apartments.com has turned in strong performance several years in a row. And in 2020, we significantly increased our marketing spend to a record $221 million, up 44% versus 2019. We'll not be increasing it again this year, in fact, it's down a touch. The increased spend was clearly exceptionally effective, resulting in record site traffic of 1 billion network visits according to Google Analytics, a 20% year-on-year. This extraordinary milestone reflects the Company's unmatched growth in investment garnering over 160 million more visits than last year, strengthening our position as the nation's leading network with more visitors than all other competitors. In total, visits to Apartments.com viewed nearly 10 billion property pages in 2020.

When we look at the comp score stats, which allow us to compare against peers, the Apartments.com network had annual site traffic growth of 17%. In comparison, RentPath grew its total network site visits by 9%. I've heard others quote stronger growth, but those must be internal numbers, let's say, because we are not able to collaborate them externally. For Apartments.com, our record traffic translated to record annual net new sales that was up 35% versus 2019, and a full-year record 2020 revenue of $599 million, a gain of 22% year-on-year and in addition of $120 million on a Q4 run rate basis. And we expand the number of advertising properties by 10% year-over-year, adding over 5,000 new advertisers.

Clearly, all of our initiatives are paying off from our expanded sales force of the mid-market to our efforts to better serve the independent owner market. Just one year after launching our online rental tools, Apartments.com is processing nearly $18 million in monthly new rental payments and over $355 million in monthly rent in combination with our cozy platform rental payments, which we are migrating into Apartments.com in the near future. That is $5.4 billion in annual rent payments now which is a great start to build from in the years ahead. We were disappointed that we were not able to close our proposed acquisition of RentPath, but believe our time and money was ultimately very well spent in the process. We and RentPath recognize going into the proposed acquisition that antitrust hurdle could be significant since we were clearly competitors. The fact the RentPath was bankrupt made the failing firm defense a possible viable path.

The inflection point for us came down to our learning of a non-public rumor that a household name Internet giant shared their plans to launch a marketing solution that would be more directly competitive with both us and RentPath. While the giant intended to partner with us, they would clearly provide a potential competitive alternative. We felt in the face of the giant entering this space, it was unlikely that the FCC would find that RentPath stand-alone represented any material or significant competitive impact, hence we felt the deal was likely to clear. However, during the process, the giant drew significant antitrust scrutiny of their own. And we have reason to believe that in conversations with the government, the giant pledged not to enter our space. As a result, three things happened. One, the giant did not enter our space, which is really good news. Secondly, the antitrust analysis and acquisition of RentPath shifted out of our favor which was bad news. Third, in the FCC's opinion, they stated that their investigation concluded that Zillow was not an effective competitor to Apartments.com which we enjoyed.

So as a reward for the nearly a year we spent on RentPaths, we had four of the five best-selling quarters in the history of Apartments.com. Sold an all-time high of $37.5 million of new sales in the second quarter of 2020, and added over 5,000 new advertisers to our platform to the year-end at 57,828. And had over one-third of the properties that began the year advertising exclusively on RentPath decide to switch their marketing to Apartments.com. So I think you'll agree that all-in-all, including with the break fee, it was not such a bad outcome for the process. CoStar Suite, enjoyed a strong finish to the year, recovering nicely after a brief pause earlier this year when we entered the pandemic. From a low base in Q2, CoStar Suite has doubled its net new sales for the second quarter in a row, demonstrating the resilience and mission critical nature of the product.

A number of important CoStar price enhancements we invested in during 2020 are coming to fruition, and we're just now beginning to roll out some ground-breaking new functionalities. We just launched the integration of a wealth of commercial mortgage-backed security CMBS information into CoStar. This continually late updated CMBS information provides valuable insights into more than $1 trillion of outstanding commercial loans made to 100,000 commercial properties. This adds very valuable information on 90,000 of some of the largest commercial leases or tenants. It enables our customers to gain additional visibility into lease expirations and actual rental rates. Clients can use this information to attract new clients and influence their pricing or leasing decisions. The new information also prevents regularly updated detailed building operating cost statements on 40,000 large properties. This information is very valuable to investors, tenants, brokers and developers who need to understand what like operating costs might be in a new property or as a performance cost comparison for properties they already own, lease or manage.

Another important new value we're now bringing to our clients is new visibility into the distress in thousands of properties. This visibility gives brokers, investors and even our own Ten-X sales people insights into who may be pushed into the vesting of property soon or who may not have the ability to fund necessary tenant improvements or who might be able to pay leasing commissions in deal. This information is enhanced by the high frequency market data CoStar provides on new leases and vacancies that are leading indicators as to whether or not the credit on certain loans is improving or deteriorating. This newly integrated CMBS data gives our lender and mortgage banking clients' great data on maturing loans revealing opportunities for them to originate new loans. All this information adds additional value to our market economic analysis tools. With future releases, clients available to monitor over time geography and property type, overall new origination trends, default trends, expense trends, rental rate trends and a lot more. I'd like to give a big shout out to John Vecchione and his team for the great work they've done here.

Another 2020 development initiative has been to integrate the STR data into CoStar Suite. We've moved very quickly on that acquisition. Before I describe that, let me just say that in the year which has brought the hospitality industry to a complete standstill, the performance of STR has been nothing sort of short of miraculous. Client retention was 97%, and the subscription revenue in Q4 actually grew 5% year-over-year. Despite hotels seeing occupancy rates fall about 80% during the dark days of the first half of 2020. So again STR, like the rest of CoStar Group, is resilient and appears to be almost countercyclical but certainly downwardly resistant. In the first quarter of 2021, we'll be launching in the hospitality data embedded into CoStar Suite, which we believe will be a significant interest to the 4,000 customers and 11,000 prospects we have that are exposed to the hospitality industry. Combined the CMBS tool with best year data also creates a powerful tool for distressed assets, so the timing of our product launches is ideal. Our significant product enhancements include 250 new hospitality-specific fields such as occupancy, average daily rate and RevPAR, 90,000 new and enhanced hospitality property records, 50,000 new hotel sales comps enhanced with relevant data including brand, parent company and operator, and 22,000 new architectural quality hotel photos.

The most valuable aspect of this integration of unique high frequency STR fully anonymized hospitality performance benchmarking data is the trend in market analysis value we'll bring to our clients. For the first time anywhere ever, our clients will be able to see aggregated hospitality performance by geography and profit class through time. This daily reliable trend information on occupancy and occupancy and rental rates and all that stuff s super valuable to investors, lenders and operators who need to understand the risks and opportunities in these asset classes. There will be another major STR upgrade integration to CoStar later this year that will allow our benchmarking clients to access their information in CoStar in a dramatically more powerful and valuable way. We think that our new hospitality clients will value seeing their performance in a much broader context of a wealth of hotel inventory sales, comps, market analysis and forecasts. And also, the new product will have portfolio level analysis for our clients. I feel our STR team is doing some very inspired work in this area and I'm confident that our STR clients will feel that we have delivered beyond expectations on our promise to enhance the STR technology platforms.

Finally, an update on the launch of our international product. Later this quarter, we expect to launch a new international [indecipherable] multi-currency and imperial metric version of CoStar. We plan to open up the commercial real estate information our clients see from being domestic only to international. A client who has to now has only seen London data, will now look to CoStar and news, information and analytics in the US, Canada, Europe and the rest of the world. Much of institutional capital flow in commercial real estate is cross border. In fact, the majority of it. But till now, the information systems have been largely local. We think this change to our product will have a profound impact long-term on the value we can deliver to investors, tenants and brokers that work across borders.

As the pandemic travel restrictions ease in the future, we intend to initially further expand the breadth of information we provide on 15 additional European markets. The integration of the global Emporis data is going very well, with 195,000 properties now loaded into CoStar Suite. The international data sets and a number of our enhanced features are only available to our CoStar Suite customers and are not available to those customers that only subscribe to our CoStar comps, tenant and property modules.

Over the course of the next 12 to 18 months, we're going to focus intently on reaching out to the thousands of firms that only subscribe to a subset of the CoStar product and upsell them to the full capabilities of the full CoStar Suite product. We believe this upsell effort will be a significant revenue accelerator for CoStar. Ultimately, because we can provide our clients more value more cost effectively by only producing the one Suite product, we intend to sunset selling the individual modules of CoStar. All of these new features and future releases we're currently working on give tens of thousands of perspective CoStar clients one more reason why they really should subscribe to CoStar. Strong Q4 performance capped a breakout year for LoopNet that demonstrated the business' growing traction in counter cyclical characteristics. I believe the single most effective way to market commercial real estate today is online using the LoopNet marketplace and its massive audience of millions of engaged tenants and investors. In 2020, we saw strong growth across all levels of our LoopNet advertising solutions. We have achieved strong success and high penetration with our standard advertising levels and we are increasingly focused on driving revenue by selling differentiated as to our clients that deliver more reach, frequency and branding benefit than our standard ad levels.

On average, our top level, a Diamond ad, receives 170 times more exposure than does a standard ad. In addition, it receives nearly twice the frequency or repeat exposure of a standard listing. With our new investments in retargeting, we identify the most engaged prospects viewing Diamond ads and we on average achieve a remarkable repeat frequency with them of 172 times of the monthly basis. That's excellent marketing saturation for our clients. Our top-tier ads Diamonds, Platinums and Golds provide unrivalled benefits such as professional photo shoots, 3D virtual tours, drone photography and individualized retargeting. Revenue for our higher tier Diamond, Platinum and Gold advertising products grew 48% from $24 million in 2019 to $36 million in 2020, and net sales bookings of higher to your advertising levels doubled. In comparison, premium listers which are bundles of Silver ads, the basic level or standard level, which are our original advertising option grew 17% year-over-year from $120 million in 2019 to $140 million in 2020. Property owners saw increasing value in our higher tier advertising solutions, with Q4 average revenue per listings up 94% from $481 to $936 per month per ad with some of them moving into $5000, $6000, $7000 a month.

Overall, LoopNet marketplace revenue grew 20% year-over-year in 4Q. Traffic showed strong growth with 37% year-over-year growth in monthly unique visitors, reaching a record average of approximately 8.9 million unique monthly visitors. We believe that the evidence shows that we're picking up speed with our LoopNet strategy and the total addressable market is in the billions of dollars. We can interpolate revenue results on a relative GDP basis from a similar marketplace to LoopNet based in Australia and see clear evidence of a multi-billion dollar TAM opportunity.

The current commercial real estate market economics are also ideal for LoopNet. The sharply rising availabilities across almost every US market, there is more demand than normal for advertising solutions to generate prospects to help owners and brokers convert their vacancies back into revenue. When we accelerated our marketing investment to Apartments.com-based on its outperformance, we believe that we are able to look back and demonstrate a very attractive ROI on that investment. Because we believe we have a similar excellent investment opportunity to invest in LoopNet growth, we intend to significantly increase our sales force headcount, SEM investment, digital and broad-based media investments going into 2021.

As we've discussed previously, we're building a dedicated LoopNet sales force alongside our CoStar sales team. In Q4, we added 40 new dedicated LoopNet salespeople. These new dedicated reps in the CoStar Suite sales force continue to aggressively market and sell LoopNet products. To complement our investments in product and sales, this year we're increasing our marketing program for LoopNet targeting all of our constituent networks, property owners, brokers, tenants and investors.

We're launching our first media campaign this quarter across digital channels. This Are You in the Loop campaign, which launches this week, is focused on elevating the LoopNet brand to brokers, owners across digital channels, specifically in larger metropolitan areas. These marketing efforts will supplement our growing sales force by increasing both awareness and our best-in-class marketing solutions. We plan to release a broader media campaign a little bit later this spring announcing LoopNet as the Place for All Spaces. This campaign will be broadcast across TV and other broad based media outlets in an effort to generate mainstream awareness of the LoopNet brand. By reaching tenants and investors and becoming a more colloquial brand, LoopNet plans to replicate some of the successes Apartments.com has seen over the past few years. In addition, we continue to intelligently invest in search engine marketing for relevant keywords.

LoopNet already enjoys a considerable advantage for both organic and paid search rankings. I'm proud to say that LoopNet now ranks number 1 for 125,000 relevant commercial keywords on Google, and our SEM spend is supporting that, winning a fourfold increase in investment since 2019. We will combine investments in SEM, and with retargeting programs for increased reach and frequency, LoopNet's retargeting strategy taps into our extensive database of broker, owner, investor, tenant contacts and matches it with hyper relevant property ads that match their search criteria increasing the reach of our property ads and placing our ads across the web on high quality sites including [indecipherable] Yahoo, Business Now, etcetera, etcetera.

We also take into account unique data regarding which market tenants tend to relocate to or from to ensure we match them with the properties that have a higher likelihood that they're going to lease into. Keep in mind, these investments made in LoopNet also will benefit Ten-X given the cross-pollination of traffic between those sister properties. And we view this rising tide as lifting both of these sites. Our LoopNet marketing investment in the first half of 2020 was $10 million, and we expect that investment to triple to $31 million in the first half of 2021. Overall, our LoopNet marketing investment is expected to be around $66 million for the year, which is double the $32 million invested in 2020. While we're still in the early stages, we're excited about the progress we're seeing at LoopNet and think this is the time to increase investment in sales and marketing to help accelerate the conversion of that TAM into CoStar revenue. And we're nearing the end my brief remarks, just about 20 minutes to go.

I'm very happy with the initial results we're seeing as we combine the strengths of CoStar, LoopNet and Ten-X. The Ten-X revenue grew 14% in Q4 2020 over Q4 2019, well ahead of our expectations, and Ten-X even generated a small profit in the quarter, the first time that's happened in many years. We've already made a number of improvements and investments in the business since we closed the acquisition in June and those improvements are already delivering results. We're focused on driving a series of improvements to both the demand side and the supply side of Ten-X. We need to drive improvement in both areas in order to drive meaningful adoption and revenue growth. And for the demand side, we need to improve the number of qualified bidders that show up at our online auction events ready to bid. Improving the supply side means increase in the number of owners bringing valuable properties to the site with realistic pricing expectations.

When you increase the demand side dramatically, it makes it much easier to attract more sellers for the supply side. Our first efforts are therefore focused on the demand side and I'm very happy with the results, and more importantly, I think and know our clients are very happy with those results. We're leveraging the massive audience of CoStar and LoopNet and promoting the Ten-X auction properties where the most prominent advertising placements on both of these sites. These internal ads are bringing thousands of new bidders to Ten-X.

Properties for auction are now visible at both CoStar and LoopNet with rolling counters appearing on the properties for auction counting down at the time of sale. In addition, we've dramatically increased our investment in Ten-X related keyword marketing on Google. We've also used our massive database of an active investment sales brokers, buyers and owners and have begun aggressively recharting it with them with display advertising across the Internet for specific relevant Ten-X auction properties. As a result, the exposure of auction properties on the Ten-X site has increased significantly, with unique visitors doubling from Q3 to Q4 which was quite amazing.

Our efforts and investments are paying off and we can see clear improvements on the demand side. The average number of fully approved bidders on an auction increased 153% from 4.2 in Q4 of 2019 to 10.7 in Q4 2020. The number of those watching bidders that engaged and placed a bid increased 66% from 2.2 in Q4 2019 to 3.6 in Q4 2020 on a per property basis. This increase in demand had the result we wanted, which is the percentage of properties that came to auction and successfully sold increased 42.6% going from 43.8% in Q4 2019 to 63% in Q4 2020. This is the so-called trade rate and it's now approaching double the industry average offline trade rate. Since we're only paid when the property trades, this increase in trade rate resulted in an increase in our revenue.

Moving forward to 2021, we're planning to continue focusing on best increase in the demand side, but we'll begin to make significant investments increase in the supply side. Success on both sides could have a very positive revenue growth impact. The original pricing strategy for Ten-X was just a port from the offline auction world online auction world. I do not think it really made a whole lot of sense to do that, but moving on. The dynamics now are completely different. If NASDAQ had simply stuck with the OTC pricing model, none of us would probably have ever heard of NASDAQ. The Ten-X has historically charged the buyer a 5% fee. On the larger properties, that's more than the broker's commission. Ten-X has historically offered consistent rebates and discounts, which means they're sticker's price could scare people off, but their effective price was much less.

Looking at the gross margin per sale, there's plenty of room to reduce price with an eye to increasing volume and more than making up for the reductions in the volume of a vibrant marketplace we believe it will create. We expect this pricing simplification will create a modest near-term revenue headwind, but ultimately will increase total platform volume, especially volume from first users of the platform. We're expanding the sales force. Ten-X currently has only 25 salespeople, and we plan to grow that number of significant 2021. In addition, we plan to leverage our team of over 1,000 CoStar market researchers whose daily contact with property owners and managers provides a great opportunity to source new properties for sale for Ten-X.

We're making a very significant investment in marketing in 2021 to drive demand-supply to Ten-X. We have developed a broad campaign for TV digital media retargeting increased SEM. The tag line these campaigns will use is Don't Just Sell It, Ten-X it. This tag line focuses our prospects on the fact that a property is much more likely to sell in line with Ten-X than it is offline and is much likely to sell faster as well. We plan to use a battle of the bid vacation campaign to drive visibility, traffic and traction with the broader real estate community in 2021. Hundreds of thousands of CRE investors, owners and brokers will be invited to a number of Ten-X options. We'll be able to guess what 10 properties will ultimately sell for in the auction, the more accurate the guess, the more likely they are to win, be a lot of fun, a lot of prizes, a lot of money. We think a lot of folks will show up and play.

So, we're increasing our investment in Ten-X marketing by 400% from $9 million in 2020 to potentially $36 million in 2021, a fourfold increase. We have made great progress on our Ten-X integration plans in 2020 and now is the right time to accelerate our investments to be ready to take full advantage of the expected increase in distressed assets coming to market. While it's difficult to quantify the amount and the timing in expected increase in distressed assets, current CMBS foreclosure rates are trending upwards and are now above the level seen at this stage in the last recession of 2008 and 2009.Our estimates indicate potentially hundreds of billions of dollars of distressed properties will materialize over the next three to five years, implying potential for hundreds of millions of dollars in revenue for Ten-X.

Now, I'm going to skip the economy update section of my script and start moving closer to the CFO section. The challenges of 2020 highlighted the strengths of CoStar's business model. Our mission critical subscription-based products combined with disciplined investments in the business enabled us to deliver outstanding financial results. In 2021, we expect to deliver double-digit organic revenue growth and margin expansion, while simultaneously investing very aggressively in LoopNet and Ten-X, and we believe in those investments. We're going to use our strong balance sheet and successful acquisition track record to pursue multiple large growth opportunities.

At this point, I'm now going to turn the call over to our distinguished but still youthful CFO, Scott Wheeler.

Scott Wheeler -- Chief Financial Officer

Thank you for that introduction. I will try and display my youthful vigor as I march through my comments today. Thank you, Andy.

So 2020 was a great year for CoStar, both strategically and financially, and personally at least, I find it much easier to sleep at night with $3.8 billion in the bank, a negative leverage and a shiny new investment-grade debt rating sitting on my nightstand. Now, we certainly staged a great comeback rally after the early pandemic scrambled our plans this past year and we managed to beat the original 2020 profit guidance that we gave way back in February. I think it's a great complement to the strength of our business model, the value of our products and the execution focus of our leaders and all of our teams. Of course, you throw in a few exciting acquisitions along the way and 2020 starts to feel like a typical year here at CoStar Group. As Andy mentioned in his comments, we're excited for the potential opportunity to add CoreLogic to our business, but I won't be providing any financial comments nor will to take any questions on this topic during the Q&A session.

So onto some color on the results; so revenue here, Andy talked about, was up nicely in the fourth quarter. Margins were also improved in the fourth quarter. Our adjusted EBITDA grew over the year and from the third quarter, and we ended out outperforming the high end of our guidance by $23 million, which is a fantastic outcome. Even as we continued to invest to support our future growth which involved the marketing investments we made this year for Apartments.com and increased marketing we began later in the year for LoopNet.

Before I go through our sector results, you notice that our EBITDA and our net income results for the fourth quarter and the full year of 2020 include one-time costs related to the terminated RentPath purchase agreement. The proposed transaction was terminated in the fourth quarter and we recorded a $59.5 million charge as part of our G&A expenses. This chart includes settlement of the termination fee for $52 million, as well as the cost for extension payments that we made earlier in the year. The total $59.5 million charge is removed in our adjusted EBITDA calculation as non-recurring acquisition-related expenses. The approximate income on net income for the year is $44 million or $1.15 per diluted share.

So onto our revenue by services; CoStar Suite grew 5% in the fourth quarter and 8% for the year, which is a little bit ahead of what we projected back in October. We've seen a stronger than expected sequential performance in CoStar Suite in both sales and renewal rates, and we expect the quarterly growth in revenue will continue. We expect CoStar Suite growth in the 5% to 6% range for the year 2021, with the first quarter representing the low point of growth at around 3% to 4% with the most significant difficult comparables to get past for the next year.

The CoStar Suite revenue growth is expected to increase sequentially throughout the year. We've not assumed any contract renewal rate increases in our outlook, although we anticipate that this could occur if the economic environment strengthens in the latter part of 2021. Information services revenue grew 16% in the fourth quarter and 47% for the full year and includes the impact of the STR acquisition, which we closed in mid-fourth quarter of 2019. Excluding STR, revenue in Information Services in 2020 was broadly in line with revenue in 2019 for both the full year and the fourth quarter.

As we move past, finally, the high levels of onetime implementation revenues and we're at our 2019 results for the Real Estate Manager business. Subscription revenue growth remained strong in Real Estate Manager, up 11% in the fourth quarter and increasing 13% for the full year of 2020. STR results in 2020 were very encouraging as we worked to integrate STR data and products into CoStar. As we all know, the hospitality sector sort of took it on the chin in 2020, with hotel revenue per available room down as much as 50% in the US and up to 90% in some European markets. Nevertheless, STR proved vital to the operations of our hotel customers, and our revenues grew in the fourth quarter sequentially up 5% to 6% over the third quarter of the year. Retention rates on STR subscriptions remain over 95% and STR subscription revenues increased in both the third and fourth quarters of this year. A strong and a positive sign as we work toward launching the new STR products in CoStar that Andy talked about in 2021.

Overall, we expect double-digit revenue growth in the 10% to 12% range for Information Services sector in 2021, starting at approximately 7% revenue growth in the first quarter of 2021 and improving as we continue throughout the year. We had another great year in the Apartments business with 23% growth in the fourth quarter and 22% revenue growth for the year, all of which is organic growth. The number of properties advertising with us increased around 10% in the fourth quarter, while the average revenue per property increased by approximately 11%. the revenue per property increase is the result of customers continuing to trade up to higher value add packages as we did not raise pricing on our rate cards at all during the year.

For 2021, expect to see continued strong performance in sales and revenues for Apartments with revenue growth of approximately 20% in the quarter and 19% to 20% for the full year. That was my 20% growth alarm. It goes off every time I get a business growing over 20% organically in a quarter. We expect 2021 revenue growth in dollar terms, let's see the dollar revenue growth in 2021 for Apartments as we continue to focus efforts on penetrating the mid and the small property market sectors. The Commercial Property and Land sector grew 51% in the fourth quarter and 31% for the full year, including the impact of the Ten-X acquisition. Organic growth was 15% for both the fourth quarter and the full year respectively. For 2021, we expect total revenue growth for Commercial Property and Land in a range of 45% to 50% for both the first quarter and for the full year. Organically, excluding the revenue from the Ten-X and Homesnap acquisitions, we expect growth of approximately 20% for the full year.

LoopNet revenue growth was stronger than ever at 20% for the full year of 2020 and 20% in the fourth quarter, the signature ad revenue growing 50% on a full-year basis. We expect LoopNet revenue growth to continue at around 20% in 2021 with growth of around 15% to 16% in the first quarter, against tougher year-over-year revenue comparisons.

Revenue in our Land and Small Business Marketplaces were essentially flat in the fourth quarter and grew at single-digit rates for the year. The Small Business marketplace in particular was sharply impacted by the pandemic in 2020. We expect growth rates to recover in both Lands and Businesses for sale marketplaces in 2021 with revenue increases in the 8% to 10% range. Ten-X delivered a strong finish to the year with $19 million of revenue in the fourth quarter and $32 million in revenue in 2020, exceeding our initial revenue estimates and delivering positive pro forma growth year-over-year since the acquisition. Now each of the three years prior to our acquisition of Ten-X, revenue had declined by approximately $10 million per year. Of course one positive data point is not yet the trend, but the metrics so far are promising for Ten-X as Andy talked about. And due to the transactional nature of the revenue in Ten-X, we expect to see revenue fluctuate from quarter to quarter depending on economic conditions, historical seasonality as well as our own investment in integration initiatives.

Historical seasonality for Ten-X indicates lower transaction volumes typically in the first quarter and stronger volumes in the fourth quarter. Our 2021 forecast assumes around $50 million to $55 million of revenue for Ten-X with approximately 20% of that revenue in the first quarter. We have built our revised pricing rate card for Ten-X into our outlook, but have not assumed a material volume lift from distressed property sales or from our marketing investments in 2021, making this what I'd consider a relatively cautious forecast until we see how the year starts to turn out for the business.

HomeSnap is our latest addition to the Commercial Property and Land family, having completed the acquisition in late December of 2020. We did not include any HomeSnap result for the handful of days that we owned the company in 2020. HomeSnap revenues are comprised of both advertising and subscription revenue, with advertising making up approximately two-thirds of the revenue. Our 2021 forecast assumes around $50 million of revenue for HomeSnap, with approximately $10 million of that revenue in the first quarter. Pro forma growth rate of the business is a little over 20% year-over-year in 2021. Profit contribution of Homesnap in 2021 is expected to be around negative $5 million, as we continue to invest for growth we absorb both the acquisition deferred revenue adjustments, which are typical in acquisitions of this type, and the cost of moving the approximate 165 Homesnap employees to our CoStar compensation and benefit plans.

Our gross margin was 82% in the fourth quarter and 81% for the year, up 2 full percentage points from last year and 4 full percentage points from 2019. This is a great reflection of the strong leverage that's inherent in our subscription business model. We believe we can continue to deliver revenue growth over our underlying platforms and produce margin improvements over time. We expect gross margin of approximately 81% for 2021, with margins early in the year around 80% as we add Homesnap to our results, and improving to around 82% by the end of 2021. Net income was $36 million in the fourth quarter and $227 million for the full year, which as I mentioned, includes the tax affected impact of the $59.5 million of one-time charges relating to RentPath. Our effective tax rate was 23% for the fourth quarter and 16% for the full year.

Fourth quarter adjusted EBITDA was $167 million, up 18% from the fourth quarter of last year and came in approximately $23 million above the high end of our guidance range. The improved adjusted EBITDA was the result of outperformance of $9 million in revenue, lower spending on personnel and marketing and improvements in our bad debt levels from earlier in the year, which is certainly a welcome sign. The resulting adjusted EBITDA margin of 38% in the fourth quarter was a full 5 percentage points above the midpoint of our guidance range. Cash and investment balances were approximately $3.8 billion as of December 31, 2020. We generated almost $0.5 billion in operating cash flow in 2020, $486 million to be exact, and we deployed approximately $440 million of that positive cash flow to buy Ten-X and Homesnap.

In addition, if you've been following news in Richmond, Virginia lately, which I do religiously, you will have noticed we purchased a parcel of land, adjacent to our current Richmond location in the third quarter of 2020 and we recently purchased the Richmond building that we've occupied under sublease for $130 million in the first quarter of 2021. Both of these purchases provide a variety of expansion options for our teams in Richmond. Or perhaps we should become a digital commercial property flipper, I hear that's a trending new model that is emerging these days. But we'll leave that future earnings calls.

Onto the performance metrics which won't include anything for Homesnap until future quarters reaching $49 million of net new sales in the fourth quarter, rounding out a great second half recovery in sales following the pandemic disruption in the first half of the year. We saw continued solid sequential improvement in CoStar bookings and another very strong quarter in Apartments. The strength of our sales efforts along with planned investments in both sales and marketing in the coming year are expected to keep us on track for strong double-digit organic growth in our subscription businesses in 2021. Our sales force totaled approximately 900 people at the end of the fourth quarter of 2020, an increase of around 40 people from the third quarter and up over 50 people from the fourth quarter of 2019. We continue to build out our dedicated LoopNet sales team as we discussed last quarter, which accounted for most of the growth in our sales team in the fourth quarter. So for perspective, at the end of 2020, our largest sales organizations are CoStar with 340 salespeople, Apartments with around 320 sales people, and LoopNet with 115 salespeople.

The renewal rate on annual contracts for the fourth quarter of 2020 was 90%, slightly better than the 89% in Q3. It's great to see our renewal rate moving back up. You recall, earlier this year, that there were concerns of a deeper more sustained drop in renewal rates, similar to what we saw in the last recession. But it looks as though those concerns can be laid to rest, at least for now. In fact, the fourth quarter 2020 renewal rate is essentially in line with the fourth quarter of 2019. The renewal rate in the fourth quarter for customers who've been subscribers for five years or longer was 95%, in line with the renewal rate of 95% in the third quarter of 2020. Subscription revenue on annual contracts accounts for 78% of our revenue in the fourth quarter, down approximately 5 percentage points compared to last year. The decline is entirely due to the addition of Ten-X into the portfolio this year. If we include subscriptions on shorter duration contracts, such as three, six or nine months, approximately 92% of our revenue is subscription based

I will now discuss our outlook for 2021 and the first quarter. We expect full-year revenue in a range of $1.925 billion to $1.945 billion in 2021, which implies an annual growth rate of 17% and the midpoint for the year. As I mentioned previously, our outlook includes approximately $50 million for the Homesnap business, which we acquired at the end of 2020. On an organic basis, excluding the full year impact of Homesnap and Ten- X, which we acquired in mid-2020, we expect growth of approximately 12% to 13% for the full year of 2021. We anticipate organic growth rates will be lower in the first quarter in the 11% to 12% range, as this is expected to be the low quarter for CoStar Suite. Throughout the year, we expect organic growth rates to improve sequentially and finish the year around 14%. For the first quarter of 2021, we expect revenue in a range of $450 million to $455 million, representing revenue growth of 15% year-over-year at the midpoint in the range.

For the full year of 2021, we expect adjusted EBITDA in a range of $640 to $650 million, which implies an adjusted EBITDA margin of a little over 33% at the midpoint of this range. Excluding both the revenue and the adjusted EBITDA of Homesnap, our adjusted EBITDA margins are expected to improve by approximately 120 basis points in 2021, to 34.5%, compared to the adjusted EBITDA margins of a little over 33% that we achieved in 2020. So overall, our underlying margins are improving over 100 basis points year-over-year in 2021 to a little over 34%, prior to the acquisition of Homesnap. We plan to increase our investment in marketing in 2021 to support the significant growth opportunities we have in both LoopNet as well as the Ten-X business. We expect total marketing costs of approximately $345 million in 2021, an increase of around $70 million over our marketing costs in 2020. The Homesnap acquisition brings along a little over $20 million of the increased marketing spend, with the remaining net increase focused on LoopNet and Ten-X, as Andy talked about. When you think about it, just a few years ago, increased investments of this scale, like the ones we expect in 2021, would have had a significant negative drag in our profitability.

What's becoming increasingly obvious is that with the increasing scale of the Company, we're now able to invest much more aggressively for future growth while at the same time improving our profit margins. For example, in 2021, Our expense growth, without counting the recent acquisitions year-over-year into our results, is probably around $120 million, which happens to be about the same amount of marketing investment that was made back in 2015 when we launched Apartments.com. You may recall at that time that $120 million Apartments.com marketing investment wiped out all of the CoStar Group's profit. By contrast, in 2021, we can make that same size investment and not only will it not decrease our profit level, but we will generate close to $100 million more adjusted EBITDA in 2021 than we did in 2020. This is a significant growth advantage as we continue to enter new market sectors.

We expect adjusted EBITDA of approximately $140 million to $145 million in the first quarter of 2021 for an adjusted EBITDA margin of between 31% and 32% and up approximately $20 million compared to the first quarter of last year. In terms of the timing of adjusted EBITDA across the remaining quarters of the year, we expect second quarter adjusted EBITDA slightly lower than the first quarter as our marketing expense typically increases in the second quarter. In the third quarter, adjusted EBITDA is expected to move back up above the first quarter level with fourth quarter increasing significantly as the marketing spend is expected to tail off near the end of the year. In terms of earnings, we expect full year non-GAAP net income per diluted share of $10.83 to $11.03 based on 39.7 million shares. For the first quarter of 2021, we expect non-GAAP net income per diluted share in the range of $2.33 to $2.43 based on 39.5 million shares.

Now, with 2020 in the rear view mirror, I believe we are firmly on track to achieve our long-term objectives of $3 billion in run rate revenue and 40% adjusted EBITDA margins in 2023. 2020 was certainly an amazing year for our Company for CoStar Group and we ended the year with strong double-digit revenue growth, both in total and organic revenue growth. And despite the continuing global pandemic, and uncertain economic environment, we generated over $0.5 billion of profit and nearly the same in operating cash flow while strengthening our balance sheet with both equity and investment grade debt. The acquisitions we completed represent significant strategic and financial growth opportunities for the Company, and the acquisitions we are pursuing can truly transform the business.

Thank you for supporting CoStar this year in so many ways, and I look forward to updating you on our results, as we navigate the year 2021.

Bill, we'll turn the call now back over to you so you can issue the ground rules for today's fun and exciting question-and-answer session.

Bill Warmington -- Investor Relations

Thank you, Scott. Two items before we start the Q&A this evening. First, one question per participant, so make it an exceptionally insightful or probing one. And second, a reminder that we will not be taking any questions about our bid to acquire CoreLogic. Angela, would you please assemble the questioners for the queue.

Questions and Answers:

Operator

Of course. [Operator Instructions] Our first question is from the line of Sterling Auty with JPMorgan. Please go ahead.

Sterling Auty -- J.P. Morgan -- Analyst

Yes. Thanks. Hi, guys. So, in terms of the marketing investment that you're making across the business, what gives you the comfort that now is the right time that you can actually lift the gas pedal on spending for apartments -- for the multifamily segment?

Andy Florance -- Founder & Chief Executive Officer

Well, we are -- I would say is that we've got the pedal down pretty firmly. We're well over $200 million some over there on that. We're not increasing it. We're easing it off a little bit, but we're still there at a very aggressive pace. So it's a little bit of net new investment into Ten-x and LoopNet but we think we need to balance those investments across the whole portfolio, and we think the ROI in LoopNet and Ten-x will be more impactful over the next two to three years than a similar investment Apartments.com. And that's not to say anything negative about Apartments.com, but we've had the pedal down pretty hard there for a while.

Operator

Your next question is from the line of Pete Christiansen with Citi. Please go ahead.

Pete Christiansen -- Citi -- Analyst

Hi. Good evening, and thanks for the question. Andy, obviously outside CoreLogic, how are you feeling about the M&A environment? Are there other potential assets out there that are of interest and how are you feeling about valuations for potential acquisitions?

Andy Florance -- Founder & Chief Executive Officer

Sure. So other than that $6.9 billion or $7 billion deal up here, there actually are other things out there that we are engaged with and developing. We have definitely -- and so, that is not the only thing occurring. There are other things occurring. They all have a similar theme right now for us. They're all going -- they're supporting the kinds of directions you're already familiar, they're just strategic building blocks on the same theme. The valuations, I would say that I have certainly seen a couple of deals going by at valuations left me very, very comfortable not to participate. And I took my hand off to those folks and said, wow good work that's a heck of a valuation. But there are a couple of things recently, and usually my skepticism on some of the valuations I've seen in some places recently are around the total addressable market relative to the valuation. So they may be performing well in their context or in their field, but their field is relatively small and doesn't have the long-term growth. So there is a little frothiness out there, but there are also some real value plays out there that we're focused on.

Operator

Your next question is from the line of Ryan Tomasello with KBW. Please go ahead.

Ryan Tomasello -- KBW -- Analyst

Thanks for taking the question. Andy, I was hoping you could dive a bit deeper into your strategy for entering the residential portal space. There's obviously a lot to talk about there, but I think one key question is how you intend to cost effectively build consumer traffic, considering the existing well branded competition in that space. What traffic synergies do you think the existing Apartments.com audience can provide and is there any competitive advantage that Homesnap's strong user base of agents can bring to help you build that consumer traffic on the residential side?

Andy Florance -- Founder & Chief Executive Officer

Yes. So, we're not -- we've obviously been thinking about this and building that strategy and we believe there is a pathway to build organic traffic very cost-effectively. We are not in a position to share our thinking on some of that right now for competitive reasons. But I think that these things, building traffic, does not happen overnight. These things, you build this up through time. We obviously know how to build up traffic through time, we've done that. Any time we enter into a new space and try to build traffic, there's generally skepticism that you can build traffic in that space through time and we have proven we can do that. And in particular, we entered the apartment space seven years after Zillow had made a significant priority and we ultimately were clearly more successful in doing that. I think one of the important considerations, as you build a marketplace or build traffic around a marketplace is what is your revenue model and how much -- how strong is that revenue model, and will that revenue model fund investments to continue growing traffic or is your revenue model actually a drag on your ability to grow traffic.

And I think we see those conditions existing in the home sale market. Definitely Homesnap is a useful component in this and there's one or two other useful components that we're looking at, but there's no guarantees on any of these things. But we are pretty excited to get working on it and we have a pretty clear view as to where we think we can take it and how we can get it there. And I'm sorry, I can't give you more detail and stuff, but I want to have success and telling you about it will make it less likely.

Operator

Your next question is from the line of George Tong with Goldman Sachs. Please go ahead.

George Tong -- Goldman Sachs -- Analyst

Hi, thanks. Good afternoon. Commercial Property and Land saw a step up in organic revenue growth this quarter, as you continue to sell higher tier ads in LoopNet and you're guiding the further acceleration in 2021. How much of your client base do you believe you've penetrated with higher tier ads in LoopNet and how sustainable is 15% to 20% plus organic growth in Commercial Property and Land?

Andy Florance -- Founder & Chief Executive Officer

I really appreciate that question. I really do. So we had just -- I mean, it is really early, early days on these higher tier ads. So we've been very successful with that standard ad placement, in fact in some markets we have too much penetration. In Southern Florida, we might be 80% some penetrated, which I think is too high. But I think we are less than 1% penetrated in these higher tier ads and that's because we've just begun to really focus on bringing them out. As you remember, we acquired LoopNet. We separate out the information side from LoopNet, upsell in the CoStar and then began developing more fully the potential LoopNet marketplace. We began aggressively bringing the Apartments.com style tiered advertising levels into LoopNet last year, that was the first time we began doing this. So this is really the first year of doing that properly and aggressively, and you have -- I think there's -- if we have a 1,000, there's 75,000 we're keeping an eye on, but you have two components moving. One is penetration into which properties want to move up that prominence level in LoopNet, and the other is what people are willing to pay for that top position and both those items are moving. So, it's sustainable for a decade or more. I feel comfortably that we could sustain this for a long, long time.

Operator

Your next question is from the line of Jeff Mueller with Baird. Please go ahead.

Jeff Meuler -- Baird -- Analyst

Yes, thanks. On the opportunity to upsell existing comps and tenant module clients into Suite, since that's where the innovation is going, can you just help size up, how big of an opportunity that is? Like how much of the revenue base for that line item is still for comp or tenant module clients, how much uplift do you typically see when they transition over to Suite etcetera? Thanks.

Andy Florance -- Founder & Chief Executive Officer

Sure. So I'm going to be giving you -- these are not precise numbers. I'm just going to give you numbers that are an educated estimate in order to give you a feel. I believe probably 15%, 20% of that customer base is not on the full suite, and I think that typically it is a doubling as they go into the full Suite. And any time you do something like that, definitely it's time for us to do this and I think it's an opportunity that in reflection maybe we should have done it last year. But now as we bring in the CMBS and the international and the STR and we think we have another three or four innovations coming in the equally powerful, as we keep doing this we need to -- it's time to leave behind these partial solutions. It just doesn't represent our brand well, and we can -- it actually saves us money to stop supporting these lesser modules. And so I think it's in the $10 million of revenue of potential revenue comfortably. And I think more importantly, I think when it's done I think the customer is happier. I think they appreciate a much more powerful product, and then just half of it is they just don't know what they don't have.

Operator

Your next question is from the line of Brett Huff with Stephens. Please go ahead.

Brett Huff -- Stephens -- Analyst

Good evening, guys.

Andy Florance -- Founder & Chief Executive Officer

Good evening, Brett.

Brett Huff -- Stephens -- Analyst

My one question is, Scott, you mentioned the TTM retention rate. I think you said it was 90% this quarter versus 89% last quarter. That's a question that we've gotten a lot and we've obviously paid a lot of attention to that. Could you impact that a little more? Is that small broker who is not maybe going out of business as much as we thought? Is it large brokers spending more? Is there a lever in there that could give us more comfort in the resilience of that in the face of what could be a pretty tough CRE market? Thank you.

Scott Wheeler -- Chief Financial Officer

Yes. Sure, Brett. The concerns as we went through the first to second quarter downturn was --- where will these renewal rates bottom out. And if you recall, they went from 90% to down into the low 80%s in the last recession. And so we watch closely, really by customer type and by customer size. Large customers all stayed with us, there was really no increase at all in drop off rates from anyone that was five or six brokers or more or in the owner categories. It was the small brokers that dropped out over the summer time, which also led to a little bit of increase in our bad debt. We saw in the later part of the year that certainly has trickled often stabilized. We're seeing all property -- or all customer types as well as customer sizes now are back to I'll just say the renewal rates that we were seeing in the beginning of the year at the end of last year. So it feels like those that were going to drop out have dropped out and the rest are operating in the stable way and our sales are picking up. So momentum is good, direction of travel is good and we think that that will continue into 2021.

Operator

Your next question is from the line of Mario Cortellucci with Jefferies. Please go ahead.

Mario Cortellacci -- Jefferies -- Analyst

Hi, thank you. Maybe you can continue with that thought on retention, and actually can we talk more about your sales cycle. And during Q2 last year, that was more or less frozen, decision making basically stopped. And just wanted to see, did you think some of the success in the back half of the year was just some of that Q2 being pushed to the right, or is this more or less sustainable going into 2021? And even maybe let's say ramping in GDP and economic activity in 2021, is there a lot of room for you guys to beat your guide based on that?

Scott Wheeler -- Chief Financial Officer

So when we saw the response in mid-2020, especially in the marketplaces with the online traffic going to record levels and then the sales accelerating, we assumed one, there's clearly a pandemic effect in there and then there's I think a continued longer term adoption that will stick from that and that experience, both from a customer's perspective and our sales effectiveness perspective. So certainly there is more online eyeballs, there's more effectiveness of the online advertising, and the effectiveness of our media that our customers can use to tour properties, you're clearly are a big hit in the year.

On the other side, our sales effectiveness in our Apartments.com sales force able to effectively and professionally connect with our customers and prospects through Zoom and remote working and actually produced thousands of more effective customer meetings and maintained their same high NPS scores throughout the year, allowing them to generate more sales per person than they have ever before. So we don't see either of those trends backing down, either as we come out at the end of this year or going into next year. And with the momentum we have building our mid-market sales force, which we will increase, the growth we're starting to see in the IO property space and then the translation of the same effects into LoopNet as we build our separate sales force in the LoopNet marketplace, I think we're going to see that same strength and that same momentum building throughout the year.

And we'll still have the CoStar sales force selling the LoopNet marketplace products as well until that LoopNet force is built up to full speed. So, I think we have a lot of momentum behind us, add a good bit of marketing to LoopNet and the future is certainly bright with our sales efforts as I see them.

Andy Florance -- Founder & Chief Executive Officer

And if it doesn't make it, will take it out with Ten-X.

Operator

And your final question comes from the line of Stephen Sheldon with William Blair. Please go ahead.

Stephen Sheldon -- William Blair -- Analyst

Hi, thanks. On Ten-X, you talked about not investing heavily yet on the supply side. But have you seen any momentum on the supply side, I guess, in the second half of 2020 with momentum you had bringing in more bidders? And then related to Ten-X, any update on what you've seen in terms of distressed property sales and have you assumed any pickup in distressed activity in the 2021 guidance or would that be potential upside?

Andy Florance -- Founder & Chief Executive Officer

Okay, so starting with the second question first. We have not assumed any pickup in distressed though that may be possible that that will happen. Especially as there is a return to normalcy, some folks will at that point calculate it just doesn't work anymore, their property income she doesn't work anymore or their LTV doesn't work more. So I think there could be, but it's not in our forecast. We actually -- so we closed that in June.

Scott Wheeler -- Chief Financial Officer

Yes, July.

Andy Florance -- Founder & Chief Executive Officer

Yes. So it hasn't been long and so we really jumped into this both feet, and we're really just on the demand side, because that's the first component you got to build. And it's really a bit early to really expect any movement on the supply side. So we're just now beginning to turn in results. I was wandering through my neighborhood there, I saw two guys drinking a lot of beers and chipping golf balls on their front lawn. I stopped and said hello to them, and we chatted for a little bit. Determined the guy had just brought for multifamily properties to Ten-X that he didn't expect to sell, and he was really kind of blown away they sold with the number of bidders. And I love the fact that a neighbor was surprised with how many bidders we had. I think he actually was visiting a neighbor. But that story gets around, he's going to tell people. He is with a big brokerage firm and that'll get around. But some of the -- and -- but that's slower. Some of the investments we're making in marketing in 2021 I think absolutely will drive the supply side. So the broad media campaigns about the value of the auction at Ten-X that Don't Sell it, Ten-X it. That will reach a lot of the supply side.

Our performance numbers that we can use as sales demonstrations are fantastic and those will be very compelling. Also the gamification of the product where we hope to bring in hundreds of thousands of players on the supply side and educate them on the platform while they're having fun and winning some prizes. I think that will drive the supply side. We're educating [indecipherable] arrivals massive team in Richmond, Virginia to educate the people. They talked to all the time when they first bring a property to market and they're going to educate them about the opportunities on Ten-X, that should drive the supply side. And then as we grow the number of salespeople, that will grow the supply side. So, I think that by -- I hope that by the end of 2021, we can report really good progress on both the number of bidders showing up to each property and the number of total properties going to market and the trade rate. And if those things are all coming together, there is the potential for a very significant network effect, and that's because the results you get from aggregating a huge community of buyers to an online marketplace is in almost all cases vastly superior to an offline anecdotal email blast kind of non-scale marketplace.

So I like where it's going, and I hope we can show real progress on the supply side and demand side next year, and that's what we're working toward, but I'm really pleased with what we've done since just a July close. So, -- and I think the head of Ten-X is on his way over after the call to work on some more stuff with us. Anyhow, well I think that is probably the last call -- answer we have or question we have.

Bill Warmington -- Investor Relations

That is correct.

Scott Wheeler -- Chief Financial Officer

And so I think we can wrap up the call. And we certainly, Scott and I appreciate -- Scott, Bill and I certainly appreciate you joining us for this fourth quarter year-end earnings call. And we look forward to updating you on more interesting developments in earning calls in the near future and apologize for our verboseness today, there are few more extra things going on.

Operator

[Operator Closing Remarks]

Duration: 86 minutes

Call participants:

Bill Warmington -- Investor Relations

Andy Florance -- Founder & Chief Executive Officer

Scott Wheeler -- Chief Financial Officer

Sterling Auty -- J.P. Morgan -- Analyst

Pete Christiansen -- Citi -- Analyst

Ryan Tomasello -- KBW -- Analyst

George Tong -- Goldman Sachs -- Analyst

Jeff Meuler -- Baird -- Analyst

Brett Huff -- Stephens -- Analyst

Mario Cortellacci -- Jefferies -- Analyst

Stephen Sheldon -- William Blair -- Analyst

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