Zillow Group commands over 70% market share of mobile users in its category, Credit: Zillow Group,

Zillow Group (NASDAQ:Z)(NASDAQ:ZG) just released impressive third-quarter results and, more importantly, gave investors plenty of reason to celebrate what's to come. But the market offered mixed emotions in response. After initially climbing around 5% in after-hours trading Wednesday, Zillow Group stock reversed course to trade down around 6%.

But before we open that door, let's inspect the headline numbers. On a pro forma basis -- which offers perspective by assuming that Zillow's February acquisition of Trulia would have closed at the start of the year -- quarterly revenue climbed 13% year over year to $176.8 million, near the high end of Zillow's guidance for $175 million to $177 million. Excluding revenue from Market Leader, a real estate CRM software company that Zillow sold in late September, revenue would have climbed 18%.

Meanwhile, pro forma adjusted earnings before interest, taxes, depreciation, and amortization jumped 51% year over year to $29.5 million, well above guidance for $18 million to $19 million. On the bottom line based on generally accepted accounting principles, Zillow incurred a net loss of $26 million, compared with a $16 million GAAP net loss in the same year-ago period. On an adjusted pro forma basis, net income nearly doubled to $11.5 million, or $0.07 per diluted share.

Analysts, on average, were expecting an adjusted net loss of $0.03 per share on slightly lower pro forma revenue of $176.5 million.

Digging deeper
On one hand, driving Zillow's top line was a 22% increase in Marketplace segment revenue to $153.2 million, or nearly 87% of Zillow Group's total. That included a 27% jump in Real Estate revenue to $129.7 million, an impressive 60% increase in Mortgages revenue to $12.6 million. and a 29% decline in Market Leader revenue to $11 million.

On the other hand, holding back growth was a 23% drop in Display revenue to $23.5 million. But keep in mind that this reflects Zillow Group's previous strategic decision to purposefully underinvest in Display. In turn, those investments have been directed toward Zillow's mobile apps and websites to grow its more promising Marketplace businesses.

That shift appears to be working. Over 142 million average monthly unique users visited Zillow Group's four consumer-facing brands (Zillow, Trulia, StreetEasy, and HotPads) during the quarter, up from 141 million in Q2. In addition, data from comScore shows that Zillow Group brands now command around 60% market share of overall mobile and Web users in the category, and more than 70% of the market for mobile exclusive visitors.

Zillow also continued to maintain traction in its "MLS Direct" initiative, as over 350 MLSs have signed agreements to send listings directly to Zillow and Trulia since January (in last quarter's report, that figure read "more than 300").

Arguably most significant, Zillow also completed its integration of Trulia a full four months ahead of schedule during the quarter. That effort concluded with the combination of Zillow's and Trulia's advertising products, and the subsequent unveiling of a new "Premium Agent" platform to let clients purchase and manage ads across all four brands through a single interface.

Relatedly -- and perhaps explaining some of today's after-hours decline -- Zillow Group's number of advertisers totaled 96,965, down from 101,297 at the end of Q2 and marking its second sequential decline. As I suggested in my earnings preview, however, this is primarily due to Zillow's previously disclosed strategic focus on "high-performing agents who provide a superior customer experience."

Sure enough, Zillow Group's average monthly revenue per advertiser grew 20% year over year to $402, driven almost entirely by incremental advertising inventory purchases from these high-performing agents. For example, the number of advertisers spending more than $5,000 per month increased 45% year over year and was up 57% on a dollar basis. Churn among these advertisers also continues to be low. Meanwhile, the group with the highest rate of churn continued to be the lowest-spending advertisers, with the average monthly spend of those who stopped advertising during the quarter at around $270.

Looking forward
Looking forward, Zillow now expects full-year 2015 revenue of $675 million to $680 million. For perspective, Zillow's guidance last quarter called for 2015 revenue of $690 million, but that included sales from Market Leader. As a result, the new revenue range is effectively a reiteration of previous guidance.

But Zillow also increased guidance for full-year adjusted EBITDA to a range of $95 million to $100 million, compared with its previous outlook of $85 million to $90 million. During the subsequent conference call, Zillow Group CEO Spencer Rascoff explained that prior guidance accounted for potential risks and uncertainty surrounding the ad platform integration. With the integration now complete and uncertainty mitigated, Zillow is tracking significantly ahead of its earlier expectations for EBITDA.

Finally, with the caveat that planning for next year is still under way, Zillow offered preliminary guidance for 2016 revenue growth of 18% including Market Leader, and 24% excluding Market Leader.

Rascoff elaborated on their primary focus: "We are also prioritizing revenue growth over margin expansion given the huge [total addressable market] in agent advertising, rentals, mortgages, and New York City. Our largest business -- agent advertising -- is still a very small fraction of what agents spend on total advertising, and we are investing very heavily in its growth."

With that in mind, short of the decline in Zillow's overall number of advertisers -- which was an expected consequence of its strategic shift toward higher-value clients -- I can't find much not to like about Zillow's latest quarter. Whether the market recognizes its strength in the near term remains to be seen, but I think investors should be very pleased with where Zillow Group stands today.