It's official: As of last Wednesday, Zillow Group (Z 4.49%) completed its integration of Trulia, an effort capped by combination of the two companies' advertising products. The milestone came nearly seven months after Zillow's $2.5 billion stock-for-stock acquisition of its online real estate peer was finalized this past February.
Along with the announcement, Zillow also unveiled its new "Premier Agent" advertising platform, which allows clients to seamlessly purchase and manage advertising across Zillow Group's four consumer-facing brands including Zillow, Trulia, Hotpads, and StreetEasy. To commemorate the occasion, Zillow arranged for the team responsible for the real estate advertising integration to ring the opening bell at NASDAQ:
But this also raises the question: What's the big deal? Though it marked the final step in the process, there was plenty of other work that preceded it, including the previously announced integrations of Zillow's and Trulia's mortgages, rentals, and display media businesses.
And those already-complete segments are growing quickly. Mortgage revenue most recently climbed 44% year over year to $10.4 million last quarter, with traffic, loan requests, and contact volumes all significantly outperforming broader mortgage industry trends. Meanwhile, in May Rascoff revealed Zillow Rentals has already exceeded its early goal of reaching a $10 million annualized revenue run rate -- a feat the mortgages segment took four years to achieve. Thanks to the enormous scale Trulia brings to the table, Rascoff also predicted rentals will exceed mortgages' roughly $40 million annualized rate "within the next few years."
Why the new "Premium Agent" platform matters
But why all the fanfare with the final piece of the puzzle in real estate advertising?
For one, it's easily Zillow's most lucrative revenue stream. Real estate revenue increased 37% year over year last quarter to $122.6 million, representing over 72% of total sales. Excluding sales from Market Leader, a real estate CRM software company Zillow inherited in the acquisition and sold earlier this month, real estate's share of total revenue would have been over 77%.
This piece was also by far the most complicated. For perspective, integration of both the mortgages and display media segments were already complete by the end of April. And in Zillow Group's most recent quarterly report, management told investors the aim was to complete the real estate advertising segment work by the end of the third quarter. And even that was an improvement over Zillow's initial goal to finalize all integration activity by the end of 2015. .
Of course, this could simply be a case of Zillow repeatedly underpromising and overdelivering. But either way, investors should be more than happy Zillow was able to finish earlier than anticipated -- especially since the FTC approval process for the acquisition was drawn out longer than expected in the first place. According to Rascoff when he described 2015 as a "transition year" in April, the FTC's delay left Zillow "trending a couple quarters behind" where it wanted to be.
Mission accomplished -- now the real work begins
Consequently, he also insisted fully completing the integration was Zillow's top priority for 2015. With that top priority accomplished, Zillow's customers will now be able to more easily take advantage of advertising across all of Zillow Group portfolio of largely complementary sites -- and to a massive audience of almost 141 million monthly unique visitors -- using a single, seamless platform. If that's not enough to accelerate Zillow's ability to grow its share of the $13 billion agents spend annually advertising their real estate listings, I don't know what is.