CoStar Group, inc (CSGP) Q2 2021 Earnings Call Transcript

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CoStar Group, inc (CSGP 0.25%)
Q2 2021 Earnings Call
Jul 27, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Q2 2021 CoStar Group Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your host, Mr. Bill Warmington, Vice President of Investor Relations. You may now begin.

Bill Warmington -- Vice President of Investor Relations.

Thank you, Chris. Good evening, and thank you all for joining us to discuss the second quarter 2021 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 third 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 -- CoStar Group's press release issued earlier today and in our filings with the SEC, including our most recent annual report on Form 10-K and quarterly report 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 include EBITDA, adjusted EBITDA, non-GAAP net income and forward-looking non-GAAP guidance are shown in the 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 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.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Thank you, Bill. Good evening, everyone. Good morning to our Asia Pac employees, and thank you for joining us for CoStar Group's Second Quarter 2021 Earnings Call. Total revenue for the second quarter of 2021 grew 21% year-over-year to $480 million, ahead of the $470 million high end of our guidance range. Net bookings of $50 million, $51 million were up 47% year-over-year, and adjusted EBITDA of $150 million was well above the $135 million high end of our guidance range. CoStar Group saw a substantial increase in the demand for the information on our marketplace as evidenced by a 47% year-over-year increase in unique visitors. In total, almost 30 million more people visited CoStar Group websites in the second quarter of 2021 than did the same quarter a year ago. We believe that growth in marketplace audience is a leading indicator of future growth in marketplace subscription revenue.

Leading the results, CoStar Suite had its strongest new bookings quarter in years. CoStar Suite bookings in the second quarter of 2021 grew 19% sequentially and and we're almost 10 times last year's level at the start of the pandemic. As a result, we expect CoStar Suite organic revenue to return to double digits by the fourth quarter of this year. well ahead of our expectations just six months ago. The commercial real estate economy is a tale of two cities with examples of both strengths and weaknesses in key indicators. Overall, it feels like the heat economy is driving solid demand for CoStar Suite. CoStar Suites quarterly renewal rate for the second quarter of 2021 reached an impressive multiyear high at 94.5%. That's extraordinarily high. This high renewal rate is all the more impressive because it does not exclude the solutions of commercial real estate firms as principles and companies normally retire cease operations. I believe the renewal rate for those clients that remain in business could be approaching 98% plus. Historically, we have sold CoStar on a module basis offering clients modules covering basic property information, comparable sales, tenant information and various geographical modules covering cities, states or countries.

Clients buying just a few product modules for just one geography, we're only getting a fraction of the value we could offer them. As we've grown and as we continue to expand internationally, it requires more and more effort to offer our products as limited modules. Reversely, that cost us more money to offer clients less. Effective this month, we started selling only the full global CoStar Suite product to new clients, which we now simply call CoStar. The CoStar sales team's primary focus is now upselling our existing clients who currently subscribe to less than our full product to the full product. There are approximately 18,000 client firms with partial coverage for our sales team to upsell. Through Friday, early days, early stage of the effort, 553 clients have upgraded their CoStar service, generating $111,000 in incremental monthly revenue an average increase per client of about $200 per month. We expect the upsell process to generate $30 million to $40 million in incremental annual revenue with encouraging initial results leaning toward the higher end of that range. These upgrades were more than just an incremental revenue generator. We believe our clients are overwhelmingly more satisfied after the upgrade as evidenced by increasing Net Promoter Scores.

We believe that this may result in even higher renewal rates, if that's possible. Of the almost 300 clients surveyed by our quality assurance team actually upgrader had a conversion, conversation about upgrading roughly 2/3 gave us a Net Promoter Score of nine or 10. Clients certainly didn't see this upsell as a cost increase they see it as a value-add to their business. In the first quarter of this year, we integrated CMBS data into CoStar. We have received very positive feedback from our clients on the value of this new content. Since the launch of the CMBS data, our clients have used that detailed loan and financial data extensively with about 45,000 users accessing the data over 0.5 million times. Later this year, we plan to launch CMBS Analytics, which aggregates CMBS loan and property data by property type across more than 1,000 markets. CMBS Analytics will include loan origination metrics distressed loan levels, maturity volumes as well as detailed revenue expense information. In later releases, we plan to include detailed prepayment information and over 150,000 disposed loans.

We estimate that CMBS data has already generated over $1 million of net new annual revenue year-to-date. Over half of that revenue signing was in the last month of the second quarter and monthly sales continue to increase. We're also hard at work on a CoStar solution for lenders that leverages the expertise we've developed with CoStar Risk Analytics to support lenders with risk management, underwriting surveillance and compliance through the CoStar product. CoStar lender is progressing as anticipated with plans for a full release in the first quarter of 2022. The first lender release will focus on portfolio risk analytics and surveillance to help lenders meet regulatory and accounting requirements. Subsequent releases will focus on loan origination and underwriting. We believe these tools have the potential to become the standard for regulatory reporting in the U.S. That said, these lender tools are specialized, high-value applications and so will be priced at a premium to our standard CoStar offering. In April, we released the first international version of CoStar.

This new release integrated our databases for the U.K., U.S. and Canada into one system. In addition, we loaded basic information on hundreds of thousands of additional buildings across 200 countries that we obtained through our acquisition of Emporis in October of 2020. In the 60 days since we launched this international product, about 10,000 CoStar users have viewed properties outside their home country 4.6 million times. We view this as a confirmation of our clients' need for cross-border property information. We know that trillions of dollars of capital across the borders to invest in commercial real estate annually, and that global corporations have up to one million facilities internationally. We recently gathered a dozen senior CoStar leaders in -- for a week-long Summit to evaluate and plan our international growth strategy. Obviously, Iceland is one of the few places where staff for multiple countries can gather without a weaker corn tenets a good spot to meet. We believe there's a clear opportunity to expand CoStar into 50 additional countries over time. We believe we can win tens of thousands of new customers and create much more value for many of our existing clients.

We believe that international expansion presents a unique opportunity to leverage our scale and expertise. And we're really excited about that opportunity. Beyond CMBS, CoStar lenders, student housing, international and hospitality information, we have over 100 additional product enhancements that we have in planning for CoStar over the next five years. We believe that these future enhancements will help us win more customers, sell more to our existing customers and increase the value of our service to existing customers. Given the strength we see in CoStar renewals and sales as well as our clients' good performance, we are restarting annual price adjustments on CoStar contract renewals in September of this year.

LoopNet revenue in the second quarter of 2021 grew 18% year-over-year, driven primarily by a 71% growth in our diamond platinum and gold adds that provide unparalleled exposure and branding benefits for our clients. We also saw LoopNet net new sales growth accelerate 36% from the first quarter of 2021. In the quarter, LoopNet earned the highest renewal rate of annual contracts that we've seen in years and possibly ever. We have launched a broad-based marketing campaign to enhance LoopNet's brand, increase our visibility and support our clients who own office properties and their need to bring people back to the workplace. The campaign also serves as a message to the commercial real estate audience that LoopNet is a high-value marketplace, connecting premier properties with the most valuable tenants and investors. I hope many of you have seen the LoopNet space for Dreams advertisements broadcaster in the PGA Championship for the U.S. Open. Or you may have seen the ads airing during prime time at CNN, NBC News, MSNBC, CNBC and many other leading media outlets. In May and June, we delivered over one billion high-value media impressions across TV, streaming and social channels. I believe that these pieces are both well done and very well received. Office vacancy rates remain elevated by historical standards, and LoopNet is uniquely positioned as the ideal marketplace for brokers and owners to market to help fill those painful vacancies.

We believe LoopNet with almost 20 times more traffic than our closest competitor is the best commercial real estate marketing solution available. Our space for Dreams advertising campaign, coupled with our enhanced SEM investment and the SEO optimization has led to record average monthly traffic of approximately 10 million unique visitors across our LoopNet network in Q2. Traffic to the LoopNet network of sites is up 33% year-over-year in the second quarter of 2021 compared to the second quarter of 2020. We are seeing quality traffic as well with 887 of the Fortune 1000 companies searching on LoopNet in Q2. This is the site also spending 59% more time on the listings this quarter compared to the second quarter of 2020.

We've seen the owners and brokers with the properties that are the best candidates for our highest level diamond and platinum ads show increased activity on LoopNet with overall search activity from them up about 40% year-over-year. Our investments in e-commerce have yielded positive results with e-commerce sales rising 86% year-over-year based on improvements in the checkout flow and mobile responsive workflows. Today, we are relying on the CoStar sales force to sell both CoStar and LoopNet, which is suboptimal with the market for the two products being so vast. The CoStar sales force is delivering exceptional results, selling more new business in the second quarter of '21 than in any quarter over the past three years on a combined CoStar LoopNet product basis. So they're not as productive as they had ever been.

We continue to believe that we're in the early stages of a major offline to online shift in marketing and commercial property. So we are building the recruiting, training, leadership in facilities to support a centralized team with professional dedicated LoopNet sellers in Richmond, Virginia. Our first sales class on this new model is expected to join the third quarter and grow to 50 or more by the end of the year. We believe the LoopNet brand has so much more growth potential beyond the current business. The online advertising shift is a year's long journey, so building a strong foundation for the business is critical -- this year, as property owners come to view LoopNet as a must-have property must have to properly market their properties. Our Apartments.com platform continues to deliver unprecedented value to our customers. Our 2021 consumer ad campaign starring Jeff Gold Bloom has been our most effective campaign ever delivering 4.1 billion impressions in the second quarter alone.

The campaign runs across multiple outlets, including traditional television and top prime time and sports programs and we have expanded investments into new outlets, including video-on-demand, streaming audio, social media and new partners such as Twitch, Tik Tok, esports and more. aren't we had? As a result, in the second quarter, we saw record network visits up 32% year-over-year to $363 million and record unique visitors, up 30% to $177 million. The consumer campaign will continue heavily into Q3 with more top programming as we've already aired in every game in the NBA finals and are currently running across the Olympics. More and more properties continue to make the decision to advertise on Apartments.com. There are now over 60,500 paying properties in Apartments.com, an increase of 17% since the beginning of 2020. In addition, our existing customers are staying with us longer. Our renewal rates have increased over the past three years and are now at their highest levels ever.

That's a trifecta. We've got LoopNet, Apartments and CoStar at their highest renewal rates. We believe the reason for this is because we've consistently delivered exceptional value to our customers, site traffic represents valuable reach and exposure for our customers' vacancies. Looking back to the start of the pandemic in the first quarter, apartment site traffic has increased significantly with visitors, up 48% and visits up 60% in the second quarter of 2021. As a result, with high-quality consumer leads to our advertised properties, have increased a whopping 123% since the beginning of March last year. Leads are up 123%. Because we held our subscription package advertising rates flat during the pandemic, we essentially more than cut in half what we charge our clients on a per lead basis. Our growing competitive advantage and our success in driving such strong traffic and lead growth had the unintended consequence of creating a half-off sale and reducing organic revenue growth for a short period of time. In the second quarter of 2020, the average client received 88 leads from our lowest ad level, silver. Silver clients needed more leads, they often upgrade to our highest ad level Diamond and received, on average, 118 leads per month.

With so much success in traffic and lead growth, the average lead flow from our lowest end to add the silver level surge beyond Diamond to 129 leads per month in the second quarter of 2021. The silver ad package is generating so many leads, clients essentially stopped upgrading to our higher ad level spend packages, slowing our organic growth. Fortunately, this is a high-class temporary problem that's easily solved by adjusting our price per lead upward closer to the level it was before the pandemic. We believe conditions are ideal to reduce the discounts in our price per lead. Demand for apartments, not the dot com, the actual apartments has increased. Vacancy rates have decreased. Evictions will soon expire and rents are soaring.

For investment-grade apartment buildings, three to five star with 100 units plus average rents as started 12% from 1,464 unit in Q3 '20 to $1,634 in Q3 '21. 12% is a pretty big jump in that short time period. The value of investment-grade apartment buildings has soared as well. The sales price per door of an apartment building climbed 74% from the second quarter 2020 and from a low of $102,000 per door to a second quarter '21 price of $263,000. That is a massive increase in price per door. We believe that turnover apartments is poised to increase as organizations have been 100% remote returned to office work, resulting employees shifting back to the cities they just left. That increased churn should drive increased demand for leads. In addition, as landlords raise rents, it drives even more turnover as tenants move to avoid rent increases.

We believe that this, combined with the fact that we continue every year to deliver more and more value to our customers will allow us to increase our advertising rates for Apartments.com in the third quarter, while still providing the best value per lead our clients have ever seen. We are once again growing our mid-market multifamily sales force in Richmond, Virginia. A component of this train classes from the Homes.com sales force as we are repurposing a portion of that team for Apartments.com. And we're really excited to have almost 30 of these reps join our mid-market sales effort. In total, we expect to more than double the size of our mid-market sales force by the end of the year. We believe the U.S. apartment market is a $6 billion to $8 billion opportunity and our penetration rate across all segments remains relatively low. Although our near-term sales and revenue growth rates will be lower than last year, we believe that our exceptional price value and ability to once again grow our sales force will return sales and revenue growth to strong double-digit levels.

The global hospitality industry is finally seeing an encouraging recovery driven primarily by leisure travel in the United States. We are seeing positive signs of activity around the world with a number of hotels providing data STR now over 67,000, which is again growing and above the pre-pandemic data contribution levels. STR's Solid performance in spite of the challenging macro backdrop affirms the critical nature of STR's data of the hospitality industry. STR subscription revenue grew 5% year-over-year on a pro forma basis. During a pandemic with renewal rates of 95%, and we saw positive net new sales consistently throughout the second quarter. Although the pandemic stop the hotel industry in its tracks only five months after we acquired STR. Our subscription revenue was up 10% compared to the trailing 12-month revenue prior to the acquisition. In the 91 days since the release of fatality performance data in CoStar, we are seeing strong interest and activity levels. 47,000 CoStar users have performed over 94,000 analytic searches, including views of market and submarket reports and capital market reports. In total, there have been almost 690,000 hospitality property views.

The initial sales effort for this product was focused on training existing subscribers and increasing the number of distinct users at customer locations. At the end of June, we launched a new CoStar sales campaign focused on the new hospitality data prospects. This initial campaign targets 1,200 high-quality leads a team of 70 CoStar account executives selected and trained to focus on hospitality owners and brokers. It's like an elite group of hospitality salespeople. We acquired Ten-X in June 2020. And One year later, we've transformed Ten-X into a very vibrant transaction platform with a lot of potential with growing traffic and increasing asset volume and size. Ten-X revenue grew 42% year-over-year on a pro forma basis in the second quarter of 2021, driven by a 31% increase in average deal size and a 35% increase in transaction volume. Connecting Ten-X to our CoStar platform, increasing lipid advertising and producing our highly successful -- Ten-X with Michael Keegan-Michael Key, have all contributed to this transformation. Ten-X's value proposition of speed, certainty and market price is increasingly resonating with buyers and sellers and brokers.

We are making significant progress on both the supply and demand side of the business, which are working together synergistically to produce better results for both buyers and sellers. On the supply side, the number of assets brought to the Ten-X platform grew 30% year-over-year in the second quarter of 2021, and the dollar value of assets grew 80%. About 80% of the assets we closed in the second quarter of 2021 were sold by institutional and private client groups, which is a good proxy for performing assets. So about 80% of the assets were performing. In the second quarter of last year, that figure was 59%. So this reflects the continuing transformation of Ten-X from a distressed asset platform into a market rate commercial property sales platform. Though it is ready, should there be a surge in distressed.

The rate card reduction on high-value properties we implemented in the first quarter this year is clearly working. We have -- even with the rate reductions, we have really solid margins on those high-value properties. We're seeing an increasing number of higher-value assets brought to the platform. In the second quarter, we had a $20 million student housing facility, $120 million multi-building industrial portfolio and a $60 million loan moved through the Ten-X platform. On demand side, traffic grew 18% quarter-over-quarter and 140% year-over-year. The product detail pages grew 110% year-over-year, and the number of approved bidders was up 150% year-over-year. The average number of bidders per asset there's a Ten-X distressed asset in the next property Platform I think that's my right. It's recycling capital. The average number of bidders per asset increased from 2.9% a year ago to 4.4 in the second quarter this year. The synergistic network effect, improving supply and demand is reflected in the total assets sold as a percentage of total assets brought to the platform known as the trade rate. Second quarter of '21, trade rate reached an all-time quarterly high of 74%. Notably, this is about twice the average trade rate for off-line property sales. We are adding to the Ten-X sales force every month and expect to have a sales team of about 60 by year-end. Our experience so far is that our sales training combined with our strong product offering is producing highly effective new salespeople.

Almost 20% of Ten-X sales pipeline already in the second half of '21 is from new sales people hired and trained in '21. Homesnap had an excellent, excellent second quarter, growing total revenue 50% year-over-year and SaaS revenue 46% and Homesnap Pro registered users grew 14% to $750,000. Total agent subscribers grew 80% to 63,000 at the end of the second quarter. Total paying agents grew 52% year-over-year from 53,000 to 81,000, and those agents are spending 35% more in advertising, about $80 per year versus $60 per year, a year ago. Our residential portfolio now consists of Homesnap, the leading real estate productivity and marketing application Homes.com a well-recognized residential marketing portal acquired in -- just May of this year. The combination of homes.com is the homebuyers portal and home stops the agent's professional platform sets the stage for us to offer sellers, buyers and real estate agents a better, more collaborative online home sale and purchase experience. Once integrated, we plan to provide agents with instant access to manage their listings on Homes.com view and respond to inquiries, collaborate with clients and provision sophisticated digital marketing campaigns.

We believe this direct connection between agents and a consumer portal would be both very unique and very valuable in this industry. We plan to grow Homes.com site traffic by offering homebuyers accurate real-time information straight from local MLS, supported by the best photography of multimedia content possible, along with good agent interaction traffic and a website that Paris home buyers collaborate with the agents they trust. CoStar Group's hundreds of talented architectural photographers have brought millions of properties live for millions of renters with the highest quality photographs, videos and 3D tours. Now this team is committed to providing an immersive and compelling presentation of residential properties in Homes.com. We began integrating homes and Homesnap immediately and have already taken steps to improve the experience for buyers and eliminate products that work against the agent and seller relationship. If you had looked at Homes.com when we acquired them back in May, you probably noted there was a little bit of room for improvement on the site. We still have a lot of head of work.

We have a lot of work ahead for us. But you might be impressed to see how many improvements we've already made in just a matter of a month or so on the site. The results are tangible with daily lease the site of approximately 70% since we first made the improvements about a month ago. Homes.com has a large real estate portal sales force, and we are repurposing that to sell Homesnap products to hundreds of thousands of additional real estate agents as well as we're using them for middle market advertising sales for Apartments.com. In order to build our integrated residential marketplace, we're planning to increase the level of integration investment in our residential offering in the second half of '21 by $25 million. The investment is split roughly in two between marketing costs and additional technology and content generating resources. We're calling you today from within our headquarters building, and we've seen most of our colleagues in this building today.

We're pleased to report that we're making great progress bringing our employees safely back to work. We believe that being physically in the office is essential to collaboration, productivity and company culture. We evacuated our offices last March because of the global pandemic, not because in HR innovation that discovered that remote work was more productive. Currently in the U.S., approximately 94% of our employees are vaccinated. And approximately 85% of our employees have come back to the office. When school reopens, we expect our in-office numbers to grow as parents have better day care options. We're grateful to all of our staff who kept CoStar Group ranked so well during the challenges of the past year. As CEO, it feels great to see our staff back in the office together, collaborating, learning and growing. I believe that while other companies have yet to come to grips with the challenges of getting their workforce back to full productivity, we're well ahead of the game at this point.

The U.S. economy is experiencing the strongest rebound in growth of the G20 economies. This strength in turn is fueling a broad-based recovery across the commercial real estate sector, with cash in the bank, plenty of accrued vacation time and vaccination cards in hand, leisure travel is driving a recovery in the hospitality sector. Over 70% of U.S. held tells have occupancy above 60% in June the most since October 2019. In multifamily, search activity apartments is trending well above 2020 levels. High consumer demand, combined with vacancy rates at 20-year lows and limited supply growth is resulting an unpresent rent growth. Single-family market remains white hot driven by tight inventories and low interest rates. In retail, government stimulus, both wage growth have driven retail sells well above pre-pandemic levels.

As a result, both leasing activity and transaction volume in retail surpassed pre-pandemic levels in Q2 2021. While bankruptcies and closures persist, they are on pace for their lowest levels since 2016. In industrial, elevated spending and consumer goods, the rise in e-commerce and the need to expand industrial supply chains drove leasing volumes to all-time highs in Q2 '21, up 40% year-over-year. Despite record high construction demand continues to outpace supply and produce rent growth of 5% in Q2 '21. Despite negative net absorption and high vacancy rates, office sector is beginning to show early signs of recovery, leasing volume rose above pre-pandemic level for the first time in Q2 '21, sublease space growth decelerated as companies realize they may neither office space and occupancy losses moderated.

In Capital Markets, total transaction volume in Q2 2021 increased and actually exceeded Q2 2019's levels. Q2 '21 deal volume exceeded 5-year averages in multifamily industrial and retail, but did lag in office. Distressed sales to date are running about half of 2020 levels. At this point, I would like to turn the call over to our Chief Financial Officer, Scott T. Wheeler. And I suggest the first question the Q&A will be what does the T stand for in Scott T. Wheeler?

Scott T. Wheeler -- Chief Financial Officer

I thinks that's a mystery might just have to leave unsolved for the remainder of this call. Then maybe I'll decide to answer that one. Keep your guessing. All right. Well, that was a lot of ground to cover in just a short call. Great summary. And it seems like we keep having increasing opportunities with every new component that we add to this business. Fortunately, it's easy to summarize financially. We delivered another strong set of results this quarter with revenue, adjusted EBITDA and sales bookings all growing in the strong double digits.

Our results include a short period of results for Homes.com in the second quarter, which are not material to the overall revenue or profit for this quarter. Revenue in the second quarter of 2021 increased 21% over the second quarter of 2020, coming in above the high end of our guidance range with CoStar, Ten-X and Homesnap, all exceeding our expectations. Organic revenue growth for the second quarter was 13%, improving from the 11% in the first quarter on the strength of both CoStar and the LoopNet growth improvement. The product, which we now simply will call CoStar grew revenue 7% in the second quarter of 2021 versus the second quarter of 2020, improving from 4% growth in the first quarter and exceeding our forecast of 5% to 6%. With very strong sales results, improved renewal rates the launch of the single CoStar product upsell program and the planned return of annual renewal price increases in September. The outlook for CoStar continues to improve.

We now expect CoStar revenue growth to improve to around 9% in the third quarter and returned to double-digit growth in the fourth quarter of this year. This improves our full year revenue growth outlook for CoStar from 6% that we talked about last quarter to approximately 8% this quarter. We fully expect CoStar revenue growth to improve quarter by quarter and return to the historical growth rates in the 12% to 13% range as we move into 2022. Revenue in Information Services grew 15% year-over-year in the second quarter of 2021, exceeding expectations for the quarter. Subscription revenue growth remained strong in Real Estate Manager and STR with both increasing 16% when compared to the second quarter of 2020. Overall, we expect Information Services revenue growth of around 10% in the third quarter and for the full year. Multifamily revenue grew 18% in the second quarter of 2021 at the lower end of our 18% to 19% range. Roughly half of the revenue growth over the year was in the second quarter is from new properties advertising with us and the other half is growth from the average rate per property.

As Andy talked about, the rapid increase in lead generation recently is creating a negative sales mix shift with fewer customers upgrading to our higher level ad packages. This reduced the second quarter sales levels for Apartments.com, which in turn impacts our revenue growth rate outlook for the third quarter. We expect the year-over-year revenue growth rate of multifamily to be approximately 12% in the third quarter of 2021 and to improve sequentially in the fourth quarter as we implement new pricing at the contract renewal times. As the new pricing begins to layer into the revenue every month, we expect revenue growth rates to continue to increase into 2022. Also, the recent shift of Homes.com sellers to the apartments mid-market team and the ability to hire salespeople as the economy reopens, are both expected to contribute to improved revenue growth after the third quarter of this year and well into 2022.

Commercial property and land revenues grew 73% year-over-year in the second quarter of 2021, well above our expected 55% to 60% growth rate. Both Ten-X and Homesnap delivered revenue above expectations with pro forma growth of over 40% for Ten-X and 50% for Homesnap. LoopNet revenue increased 18% in the second quarter compared to the second quarter 2020, slightly below expectations as the combined CoStar LoopNet sales team sold a little less LoopNet and more CoStar than we had assumed. In aggregate, the CoStar LoopNet sales team, like Andy mentioned, delivered sales bookings above our forecast in the second quarter and one of the highest levels they've generated for a long time. Accordingly, the combined revenue of CoStar and LoopNet was also above our forecast in the second quarter.

We expect this combined revenue growth rate of CoStar and LoopNet to continue to improve in the third and fourth quarters ahead of our previous revenue guidance. On a stand-alone basis, we are forecasting LoopNet revenue growth of around 15% for the second half of this year as we assume that the CoStar LoopNet sales force will be focusing on more CoStar sales and not quite as many LoopNet sales. in the second half and while we build our stand-alone sales force. Overall, we expect the reported commercial property and land revenue growth rate to be approximately 50% for the third quarter and for the full year of 2021. Organically, we expect growth of approximately 17% to 18% for both the third quarter and the fourth quarter of '20 and '21. Our gross margin came in at 81% in the second quarter of '21, in line with our expectations and we expect gross margins to continue at that level through the end of the year. Net income was $61 million in the second quarter, and our effective tax rate was 35%.

The effective tax rate includes an incremental impact of around 10% related to a modification to our international tax structure. This change only affects the second quarter, and we expect the effective rate to drop back down into the mid-20% range for the rest of the year. Second quarter adjusted EBITDA was $150 million. Adjusted EBITDA is up 17% from the second quarter of last year and came in approximately $15 million above the high end of our guidance. The resulting adjusted EBITDA margin of 31% is 300 basis points above the midpoint of the guidance range. This improved adjusted EBITDA was primarily the result of higher revenue, some timing variances for our marketing spend and lower-than-expected hiring in the second quarter. Most of the cost favorability in the second quarter will reverse in the second half of the year due to the timing of our marketing -- the growth in our sales team that we expect and investments in our emerging residential business.

Now I look at some of the performance metrics for the quarter, starting with our sales force. Our sales force totaled approximately 905 people at the end of the second quarter, an increase around 64 people from the second quarter of 2020 and up a little over 70 people from the first quarter of 2021. The growth is primarily due to the addition of the Homes.com sales team, the majority of which we have deployed to sell Homesnap products and mid-market apartments products. The renewal rate on annual contracts for the second quarter of 2021 was 92%, up from 90% last quarter and 89% a year ago. People are really hanging on to our product.

This renewal rate is the highest since the third quarter of 2014 and a strong testament to the mission-critical nature of our products and the success of our continued investment in our platform. The renewal rate for the quarter for customers who have been subscribers for five years or longer was 97%, an increase from the renewal rate of 96% in the first quarter of 2021. Subscription revenue on annual contracts accounted for 77% of our revenue in the second quarter, a decrease of 1% from the last quarter as a result of adding Homes.com to our metric. I'll now talk to our outlook for the full year and the third quarter of 2021. we are reconfirming, revising and slightly improving our revenue guidance for the year and raising the range to include Homes.com. We expect full year revenue in the range of $1.94 billion to $1.95 billion, which implies an annual growth rate of 70% at the midpoint of the range.

For the third quarter, we expect revenue in the range of $495 million to $500 million, representing revenue growth of 17% year-over-year at the midpoint. For the full year of 2021, we have revised our outlook to include the previously announced adjusted EBITDA loss of $15 million for Homes.com along with an incremental $25 million of investment in our residential business that Andy mentioned. Approximately half of this investment is related to marketing and agent engagement with the other half related to technology development resources and content generation. Accordingly, the full year outlook for adjusted EBITDA is expected to be in the range of $605 million to $615 million, which implies an adjusted EBITDA margin of 31% at the midpoint of the range. We expect adjusted EBITDA for approximately $130 million to $135 million in the third quarter of 2021 for an adjusted EBITDA margin between 26% and 27%.

The third quarter marks the highest quarter of our marketing spend as we will have Apartments.com, LoopNet and Ten-X marketing campaigns running throughout the third quarter. Overall, we had a very strong first half of this year, and it's great to have the heavy lifting of returning to work almost behind us. I'm certainly encouraged by the continued strong rebound of CoStar and the great growth potential that we have in our marketplaces of apartments, LoopNet and our new residential business. Thank you, everyone, for your continued support. And operator, we can now open the call up for questions with a few rules from our friend, Bill Warmington. Bill, back to you.

Bill Warmington -- Vice President of Investor Relations.

Thank you, Scott. Chris, would you please assemble the questions for the Q&A section?

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from Sterling Auty of JP Morgan Chase. Your lines open.

Sterling Auty -- JPMorgan Chase & -- Analyst

My -- first of all, my guess on Scott T. Wheeler is I'm going to go with T for Thomas. Am I close?

Scott T. Wheeler -- Chief Financial Officer

Wow. Timothy would be good. knows how do you Google very effectively question. I'm not sure

Sterling Auty -- JPMorgan Chase & -- Analyst

And for my one question, the most popular question I get is everyone sees the investment that you're looking to make in residential. And I think they agree with the opportunity, but they don't know how to think about that investment in the context of your previous 2023 margin target of 40% for EBITDA. Can you maybe give us an update on how we should think about it? And if that target is still viable?

Scott T. Wheeler -- Chief Financial Officer

Yes. Good to hear from you, Sterling. Question comes up frequently. -- with the investments we just talked about, additional resources and some marketing as we build the platform out. We are still online to hit our 2023 targets, and we still consider those the marching orders for the business. And so we need to get through the integrations, watch the site improvements. Andy mentioned that traffic visitors improvements in the sites. A lot of these things are going to depend on what happens for the rest of the year in our integration program. And then we'll decide what next year's plan look like relative to investment in residential versus our other platforms. So no change to our 2023 guidance. Right now, all our plans for residential we've just talked about, we can still make those numbers and intentive to based on what we have so far. And if that changes or new estimates come our way, we will let you know. And I wouldn't want to deflate the question a little bit by pointing out that 10%, the core business of CoStar Group is solidly on target for that goal. And should there be a clear opportunity to invest in what would be a significantly different business, we'll communicate that at the point that we are doing that, but -- but the fundamental business is definitely on track for those goals and is performing really well. So it's -- it's probably -- It's probably a little bit hyperbolic. I don't know what that means, but it sounded good.

Sterling Auty -- JPMorgan Chase & -- Analyst

That sounds like back-end loaded to me, but I just want to make sure.

Scott T. Wheeler -- Chief Financial Officer

Thank you. You bet.

Operator

Your next question comes from Pete Christiansen of Citi. Your lines open.

Peter Corwin Christiansen -- Citigroup Inc -- Analyst

I was just wondering if you could dig into the LoopNet performance a little bit more here. Obviously, the decel growth there is clearly coming from the silver ads. And you did point out, obviously, the CoStar Suite guys are are doing double duty here, which is likely making an impact. But I guess I would presume that, a, you have an easy comp and real estate activity is improving quite dramatically, I'm surprised that the silver ads are decelerating so much. I was just wondering if you could put a bit more color on it. Maybe I don't understand the relationship exactly to what's going on in the sales force and what's going on in the broader market? That would be helpful.

Scott T. Wheeler -- Chief Financial Officer

Sure. So a couple of core issues. One is, I mean, so you're correct to point out that the economy is great. The product is performing really well. The product looks really good. The traffic is fantastic. The marketing is well received. We are limited by how fast we can scale that sales force. And as you listen to the earnings call, you hear, we're adding salespeople in this bucket in that bucket, and we're clearly hiring a lot of salespeople. And that's great news because we have opportunity for them. Our primary focus is on those upper-end ads. We don't want to just keep on selling the low end ads forever. And we would like to, within the next year, come up with a more optimal way to sell those entry-level ads where we don't charge the same price for all properties in all geographies. And we'd rather shift to a more demand-based pricing algorithm on the silver ads. So we are holding off, driving a lot of activity in there until we can do that. There are some areas where we want to reduce our prices on silver ads and many others where we want to significantly increase our prices in Silver ads. So if you look at Apartments.com, -- The average silver ad is probably 8 times the average LoopNet Silver ad, and we want to basically move toward a way of rebalancing that while reducing prices on some and then increasing on some other areas where people would notice even happen. So it's more of a an evolving dynamic. But the fundamental marketplace is super strong, and we're hitting the things we're trying to hit with that right now.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

And Pete, if I can just add a couple the numbers on top of that, the Lister revenue that you mentioned the Silver Ads is about 75% of the revenue for LoopNet, and it's still growing. It's growing at mid-single digits. And with Sumatra ads growing the 70% we talked about, that mixes into that 18% growth rate for the second quarter. So it's still growing. It's just at a slower level right now. It's not the primary focus.

Operator

Your next question comes from David Chu of Bank of America. Your lines open.

David Chu -- Bank of America -- Analyst

So bookings have clearly rebounded off like the COVID lows, -- Just wondering what it takes to get back to like the prior peak, which I think was in second quarter 2019 of like $59 million. Is it really a recovery in apartment -- And then just based on the macro environment, when do you think this would be achievable?

Scott T. Wheeler -- Chief Financial Officer

I think the quarter you mentioned all cylinders were cranking. So you had a great quarter for apartments, LoopNet, Apartments, LoopNet and CoStar. We also have other contributors now like Homesnap and Real, Manager, Thomas date lands are all cranking. They have a lot of different things happening here. I think there's -- you're in an organizational flux that we're trying to get past us or return to work or return to normalcy. There's a lot of adjustments going on. And we're getting back into a growth mode and you want to have all your sales forces lined up and you want to get your price per lead numbers, right? But I think that could happen in the next quarters. We have a lot of good things going on and all the products are really solid. So I think it's just a question more of transition and friction in this environment right now.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

And David, when you look at where we are now on the bookings, like we said, the CoStar LoopNet sales force produced its highest level for quite some time. So those are very strong, and we talked about this the multifamily piece, if multifamily sales go up to, let's say, the average we were doing in 2019, we would have had our best quarter ever in bookings. And the other thing, as Andy mentioned, the Ten-X and Homesnap are two brand-new businesses that we have. And they're not accounted in the subscription metrics because Ten-X is all transactional and Home Snap has a large piece of it that we consider transactional at this stage before we convert our residential offerings to subscription-style businesses. So right now, we have about 91% of our revenue is subscription, and that typically had been up in the 95%, 96% plus range. So there is a growth element we have right now in our business. It's that's coming from 10 times and Homesnap that you're not going to see in the bookings right now until we convert those to subscriptions. So you get a little lift out of that versus the numbers we talked about. But that's really it's the price we talked about in multifamily, that should return that to better sales numbers and that would move us upward.

Operator

Your next question comes from John Campbell of Stephens Inc. Your line is open.

John Robert Campbell -- Stephens Inc. -- Analyst

Just back to the residential side, Andy, I'm guessing there's a way to, I guess, more meaningfully build out the traffic there without relying solely on the ad spend to get you there. But I think you might have hinted at that in the commentary around the kind of even split of investments in across the marketing and content in the back half. But I know for competitive reasons, you can't -- you guys aren't going to fully show your hand there. But Andy, to what extent you can, maybe just provide a kind of high-level peak into that strategy?

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

The -- you're right about not wanting to show our hand. So thank you for the opportunity. But what we're offering is really quite simple, really brutally simple, which is 90% of the real estate transactions in the United States, a buyer collaborates with an agent. And if you look at our website right now, Homes.com it's all of a month old, so it's not going to be a master piece. But if you look at that website, it's got something really unique. It's the only website that I'm aware of the United States where you can actually look at a property for sale and see -- clearly see the name and phone number of the agent and push a button and contact them. So that puts one million real estate agents on our side. And those one million real estate agents are involved in 90% of all transactions and communicate regularly with our clients. So -- we're excited about that opportunity. We love the fact that it's so simple. Most people can't understand it. And -- and we're not afraid to -- if we think there's a fantastic ROI that will have a fantastic return for our shareholders, we're not afraid to invest in it, but we are -- right now, we're working on the software and the fundamental structures, which are not wildly expensive. And -- and as I mentioned, four weeks of work and the lead flow is up 70%. So that's the first -- of many. But I think that as it evolves and we can talk more with analysts and investors about the progress we're making and the vision we have for it. I think that people will support our initiatives, but it's still -- we don't have some secret magical plan that we're laying out for 2022 or '23 right now, we're dealing with orders of magnitude, we're more focused on software and strategy right now.

Operator

Your next question comes from George Tong of Goldman Sachs. Your line is open.

George Tong -- Goldman Sachs -- Analyst

Apartments.com revenue growth decelerated in the quarter because of the effective reduction in price per lead, can you elaborate a bit more on initiatives to help reverse this trend and when you would expect to return to 20% multifamily revenue growth?

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Well, that's an excellent question, George. I think that's the question. It -- the lead per ad at the lowest level was unimaginable. If I had told someone four years ago or five years ago, the number of leads the site is generating at the lowest ad level, it would have been impossible. No one could have believed it. So we are helping some very large properties generate a lot of revenue for very little money. And what we've done is worked with the leadership team at Apartments.com, and we are rolling out a new pricing strategy, and we're also adjusting the lead flow, the nature of the product that how it throws leads, to meter them more effectively to the upper-end ads. And we're also doing more strata in the pricing structure between the 80-unit properties, 100-unit properties, the 200-unit properties, 300-unit property to more appropriately reflect the value of one of these super high lead-generating ads. So it's pretty easy to go after, and it will take -- we're not -- it will be something that rolls out in the course of 12 months, and it begins rolling out as early as next month. So you'll see an advantage there. But this is fundamentally really good news. I mean this is there's two kinds of things you could have problems you could have. One is you don't have the traffic going to the leaves. And the other issue of way too many leads and clearly, our competitive position has gotten very strong recently. And it's been getting stronger and stronger, but it's gotten really strong over the last couple of quarters. So we will -- we will throw more power to the Dynamo will take more friction of the engine and throw more power to the wheels. Over the next couple of quarters, and you'll see us return to those growth rates as we go into 2020 and it's sustainable for a long time.

Operator

Your next question comes from Ryan Tomasello of KBW. Your line is open.

Ryan John Tomasello -- Keefe, Bruyette -- Analyst

I guess just following up on Apartments.com. Curious how you -- Andy, how you're thinking about the growth outlook there beyond the near-term disruption and say, over the next three to five years of that platform's growth. There's still obviously market share opportunity in the 100-plus unit category and understanding the comments around the rightsizing of the effective price per lead. But how are you thinking about managing the business as growth at the high end and even we start to slow. And in particular, when do you expect the middle market business really start to bridge that gap? How large of a business do you think that could be? And what types of growth rates are you investing for in that piece of the market over the next few years?

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

So I actually don't think the high end slows for many, many, many, many years, if not decades. We still are 50% penetrated at the high end, and we have many products and the services we can provide, as you see us getting into more actively facilitating the actual leases. If you look at a price per lead at the lower end was as little as $2 or $3 or if you were to say one to seven ratio lead to lease, $14 per lease, I would not say that we're within decades of maxing out the the value of the lease and those leases we can bring to the table here where as many as hiring communities are paying a month's rent or two weeks rent or $300 or $500 for lease, and we're charging $14 to $15 per lease. So we're not going to max out the high end. But it's really exciting what's available in the middle and lower end, we are successfully selling a lot of properties at the five unit level, the four unit level, the 20-unit level, the 50 unit level and we're in single-digit growth or single-digit penetration in all of those areas. So it's a question of -- It's a question of continuing to grow the sales force to go after that opportunity, but then also to build out our e-comm capabilities to capture it without having to have manual intervention. So it's a great place to be, and we -- and the demand side came at us harder than we ever would have anticipated in the last two quarters, but that's good news. You just have to change the model a little bit. So I think you've got a decade plus of good, solid 20% growth.

Scott T. Wheeler -- Chief Financial Officer

And Ryan, when you look at the universe of properties out there over 100 on -- Right now, they're growing faster than we can add them to our portfolio just given the growth in the general universe that we watch. So actually, our penetration into the upper end has stayed at 50% or 51% for like five or six quarters despite our growth just because of the growth in the universe of properties out there. So we've got a long ways to go just to penetrate the top line, let alone move up those penetrations in the lower ones.

Operator

Your next question comes from Mario Cortellacci of Jefferies. Your line is open.

Mario J. Cortellacci -- Jefferies LLC -- Analyst

On CoStar Suite, I guess just how much closer are we getting turning pricing back on there. Obviously, I know you're very focused on the upsell, the global product and there's a lot of opportunity there. But I believe that you guys talked about looking for stability within the commercial real estate market before kind of looking that pricing switch. So maybe you can just talk about what timing looks like there? And then how much price is being baked into the 2021 guide for CoStar Suite?

Scott T. Wheeler -- Chief Financial Officer

Okay. So when are we going to begin normal price escalations on CoStar Suite, wait for it, wait for it, now. Yes, -- we're doing that now. We have -- you have to -- there's a notice period on these -- there's a notice period on these contracts so that you have a delay. But clearly, the conditions are right for it right now, with renewal rates moving to 94.5 year clients up over 97%. And all the functionality we're putting into the product and all the functional that we're going to put in the product over the next couple of years, we absolutely should be accelerating our pricing at least in line with inflation. And I think it will be 200 to 300 basis points above that number. And so I'm not sure what Mr. Thomas has baked into the guidance, but I'll let him handle that.

Andy Thomas -- President, CoStar Real Estate Manager

Thank you. The start of the increases that go in the next couple of months go in on renewals, obviously, so it takes a little while to layer them in. So that's about 100 basis points, I think, to the growth in the -- in the fourth quarter, but then it really starts to build in next year. But keep in mind that we're doing the conversions to the full CoStar product. And so 18,000 our clients will be getting those increases, which are larger than the renewal price increases. And then the other clients will get the renewal price increases. So in aggregate, we're looking at some pretty good pricing lift going into next year.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Scott, we're not increasing those 18,000 people's prices. We're offering them incredibly attractive terms to expand their purchasing with us.

Scott T. Wheeler -- Chief Financial Officer

Actually, they look at it as a decrease in price. Price of CoStar nationally previously was much higher. So they're like, wow, let's go get this. This is a good bargain. So it's actually working pretty well so far.

Operator

[Operator Instructions] Your next question comes from Stephen Sheldon of William Blair.

Stephen Hardy Sheldon -- William Blair & Company -- Analyst

I wanted to ask a little bit more about the CoStar suite and that upselling process. I think that you talked about from modules to the full global suite. I guess how aggressive do you plan to be in that upselling motion? And would you also plan to sunset the module, I guess, pricing with existing customers at some point? And then I think you also noted $30 million to $40 million in potential incremental revenue. Can you provide some more detail on that number? Is that the potential revenue uplift at all of your suite customers move to that full solution? Just any more detail there.

Scott T. Wheeler -- Chief Financial Officer

Yes. So the $30 million to $40 million, I think, is the modeling that our VP of Sales has done, and it assumes the cancellation rate assumes just going after that 18,000 it's assuming an average price increase. So I wouldn't have the details of the model I've reviewed and seen that model. In terms of how aggressive we would be with it, I would look at some of our prior efforts to move people onto a common platform. And in those prior efforts, we sell very aggressively for 12 to 18 months. And once we've had success in moving the majority of the revenue into the unified platform, then we typically sunset the prior platform because at that point, you're spending money, you're spending money that really isn't adding value to anybody to maintain two separate platforms. So our goal is to focus on intensively for 12 to 18 months and then streamline the product and have one version of the product. And that's sort of somewhat similar to what a Bloomberg does, where you're not buying Bloomberg by geography and there's a bunch of different modules you're getting one terminal. And as we go more international. We think it differentiates us against any sort of competitor and provides a very unique value proposition, having one platform.

Operator

Your next question comes from Trace Muller of Baird. Your line is open.

Jeff Mueller -- Baird -- Analyst

So I guess I'm still struggling a little with the magnitude of the deceleration in apartments revenue going into Q3. I guess can you just maybe first comment on Apartments.com client retention, specifically, I caught the overall retention, but it sounds like that's pulled up by really good results in suite. And then if retention is stable. I guess, does it come to a head now because Q2 is seasonally when you normally see clients trade up and then that trade-up just didn't happen -- and when it doesn't happen as kind of the season that you expected, that's why you have the meaningful deceleration going into Q3?

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Yes. So -- to be clear, the renewal rate on Apartments.com is the highest it's ever been. It is extremely high. Scott will have the number. I think I threw it in there. I'm not sure. But the -- I believe it is 1/10 of the cancellation rate on a monthly basis from where we started in 2015. So churn is down 90%. And the -- during the pandemic, it wasn't really an environment to Jack prices aggressively. And so you sort of came out of the pandemic after the first quarter and after vaccinations really got out there. And then the market is lit on fire. So it's a question of how fast you can respond to that. And we will respond very quickly, but I think that -- I don't think it's really just a one quarter of upsell that doesn't happen again. I think that I believe that as people go into the churn as people have to migrate back to where they were before to return to work. And as people churn as these price increases continue to crank in these apartment buildings. And as the fiction of moratorium relief, our customers are making good money and need more lead flow than ever. Then I think there's plenty of opportunity to capture value next quarter, the following quarter or the quarter after that and ongoing from there. So it's more of a -- if you're playing the game for the long haul, you don't want to jack people's prices during the pandemic. But we're well positioned to capture that value now.

Scott T. Wheeler -- Chief Financial Officer

And just the renewal rates at 94% for the quarter on multifamily, which is the highest it's ever been. And then to your point, you recall last year, we had the surge in the second quarter of sales in apartments to these record levels given the pandemic. And so that second quarter surge annualizes off in the second quarter this year. So you have a little bit of a cliff effect when you hit the third quarter because all that that weight of those sales goes away, and we haven't repeated that same sales level in any quarter since then. So you'll have some of that on annualizing before you then look at the upsells that weren't as strong in the second quarter of this year. So it's the difference in the growth rate in the second -- in the third quarter is around $6 million to $7 million, which on an annualized basis is around difference in that sales level between Q2 this year and last year. So that's mathematically how it all works.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

And the number one thing to focus on, if you're looking at a business like this is that 47% year-over-year growth in unique visitors that is basically our leading indicator of future revenue.

Scott T. Wheeler -- Chief Financial Officer

Yes. And of course, the whole platform is still adding more volume. New people are still coming to time form apartments, and then fortunately, when you have these issues that we work through that we've got a great portfolio where Ten-X and Homesnap, the rest of the business does remarkably well, and we ended up holding, if not increasing slightly our revenue guidance for the year on an aggregate basis, which is obviously what we want to do and continue to do.

Operator

I am showing no further questions at this time. I would now like to turn the conference over back to Andy. You may proceed.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Thank you. So we appreciate you joining us for the second quarter call today. I hope you share our enthusiasm for the abundance of growth drivers in our business. As we've discussed, CoStar Suite, a strong rebound and growing record net sales apartments record traffic growth and lead flow put in a position to begin to share more of the value we're creating for our customers. LoopNet is growing traffic, revenue and our primary goal of driving revenue signature ads is happening and happening well. 10 times is really fantastic gaining great traction. And Homesnap and homes are well on their way in the process of transforming how agents, consumers buy and sell residential real estate. We didn't have time to talk about Realla, Belbex, Biz by, Real Estate Manager, Thomas Daily lands. They're all doing fantastic as well. And I wish one day to give me two hours for the call. As we move to the second half of '21, we're working toward two important milestones. One is our goal of reaching $1 billion of annualized revenue run rate in our marketplaces. And by the end of the year. And the second is we're going to run through our $2 billion revenue run rate overall. So some good milestones on our way to much larger numbers. But we're clearly strong in our core business right now as evidenced by our amazing traffic growth, our amazing renewal rates. And -- And we're focused on building that core business, but also working to triple our addressable market opportunity through investments in residential and international expansion. So we look forward to meeting with you again for our third quarter call in October 26. And until then, stay safe. Thank you.

Operator

[Operator Closing Remarks]

Duration: 75 minutes

Call participants:

Bill Warmington -- Vice President of Investor Relations.

Andrew C. Florance -- Founder, Director, President and Chief Executive Officer

Scott T. Wheeler -- Chief Financial Officer

Andy Thomas -- President, CoStar Real Estate Manager

Sterling Auty -- JPMorgan Chase & -- Analyst

Peter Corwin Christiansen -- Citigroup Inc -- Analyst

David Chu -- Bank of America -- Analyst

John Robert Campbell -- Stephens Inc. -- Analyst

George Tong -- Goldman Sachs -- Analyst

Ryan John Tomasello -- Keefe, Bruyette -- Analyst

Mario J. Cortellacci -- Jefferies LLC -- Analyst

Stephen Hardy Sheldon -- William Blair & Company -- Analyst

Jeff Mueller -- Baird -- Analyst

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