Recently, the Fool sat down with Zillow (NASDAQ:ZG) CEO Spencer Rascoff to get an update on the company's current strategy and learn more about how Rascoff sees Zillow's future opportunity. Joining Zillow as one of the founding employees in 2005 and at the helm since 2010, Rascoff brought Zillow through its IPO and has overseen the strategy that has led its stock to more than triple over the past 17 months.
In this video segment, Rascoff explains that mobile usage migration also drives monetization migration, due to the nature of the real estate market. He also explains the role of online and offline advertising in Zillow's bid to grow its lead over the competition.
Brendan Byrnes: Let's talk about mobile; 65% of your traffic is coming from mobile. For a lot of media companies, that would scare them because advertising is so difficult on mobile. But I don't think that's the case for you guys. Could you talk about the different dynamics there, and how you guys monetize mobile?
Spencer Rascoff: Real estate is the perfect use case for mobile. It's when you're driving around looking at a home, or walking around looking at a neighborhood, that you want access to real estate information -- when you're untethered. Real estate is just perfectly suited for mobile information consumption.
We have been the beneficiary, though, not just of usage migration to mobile, but also monetization. When you're looking at a real estate listing on a smartphone on Zillow, you're three times more likely to contact an agent as when you're looking at the same listing on the desktop.
We benefit from the usage migration but also the monetization migration because ultimately that's how we get paid, is when we connect a consumer with a real estate agent.
Byrnes: Let's talk about some advertising you guys are doing -- $65 million this year, versus about $40 million last year -- a lot of that going to TV. Could you talk about the overall strategy there, and TV in particular? I'm sure a lot of people have seen those ads.
Rascoff: Yes. TV, but just generally advertising for us, has been very effective. In 2013, we spent around $35 or $40 million, and we tripled the size of our lead over the competition. We really ran away with the category in terms of audience growth last year, and based on the results we saw last year, we're nearly doubling our investment in 2014.
As I mentioned, it's because advertisers follow audience. We see this in every category, whether it's in search marketing -- Google has query dominance. They have 65% query share in the U.S., but they have almost all of the search advertising budget in the U.S. YouTube has the bulk of video consumption, and therefore they get the bulk of video advertising.
Advertisers follow audience. We need the audience leadership, and advertising for us helps amplify our audience leadership.
Byrnes: What's the rough breakdown in advertising? I don't know if you're willing to share that or not.
Rascoff: Between online and offline?
Rascoff: It really changes. We go into the year with a budget, but then during the course of the year, based on what we're seeing, we adjust. We may dial up online search engine marketing and dial down mobile acquisition, or dial up TV and dial down other forms of marketing, through the course of the year as we see the market dynamics changing.
Byrnes: When it comes to marketing for a company like Zillow, that's very data-based, is it more difficult as far as television goes? You're not necessarily looking exactly; you can't pinpoint the leads, and you can't pinpoint exactly the kind of revenue that you're bringing in from that.
Rascoff: That's a great question. Television is harder to quantify than online media, for sure. For us, though, our brand is still so new and we're still in the brand-building stage, that we're comfortable with the inherent ambiguity in television advertising.
You can measure it, but it is harder to measure than direct response advertising online, for example, where you buy a click from Google and you know exactly what happens to that user, downstream. TV's a little bit more amorphous, but I'm comfortable operating in that environment.