How Zillow Makes Money

Zillow helps homeowners list a home for sale by owner, allows buyers and renters to view listings, and enables agents to list rental properties. Zillow’s online and mobile search tools, including its smartphone app, let users search for a property and view estimated property values for free.

Zillow is a wholly-owned subsidiary of Zillow Group, which also owns Trulia, StreetEasy, and HotPads.Zillow reported 2023 Q4 revenue of $474 million with 194M unique users of its website. It’s live database included over 160M homes.

Key Takeaways

• Zillow charges property management companies to advertise their listings on the Zillow Rental Manager.
• Zillow offers Premier Agent branding on their website, which includes multiple listing service search, client reviews, photos, and videos.
• Zillow earns revenue when real estate agents purchase advertising on Zillow’s website that targets users in an agent’s local market.

Property Management Ad Sales

Zillow makes money by charging property management companies to advertise their listings on the Zillow Rental Manager, which includes websites from Zillow, Trulia, and HotPads. Zillow sends qualified leads—prospective renters—to these advertisers to help them maximize the return on investment on their advertising dollars.

As of Q4 2023, Zillow had the largest audience of renters in the market, with a growing number of advertised multifamily properties. Revenue grew year over year from 14% in Q4 2022 to 52% in Q4 2023, representing $93 million.

Services for Real Estate Agents

Zillow offers Premier Agent branding on their website, which includes multiple listing service search, client reviews, past sales, bio, photos, and videos. Real estate agents can also purchase advertising with Zillow. Ads targeted at users in agents’ local markets help them get new clients who are buying or selling homes.

The Premier Agent program also provides agents with a customer relationship management system that helps them track Zillow users who have expressed interest in working with an agent. Costs for services vary by zip code.Premier Agent helped boost residential revenue 3% year over year in Q4 2023 to $349 million.

Important

New rules for the National Association of Realtors, expected to take effect in July 2024, may lower commissions for home buyers and sellers. If a federal court approves the changes, the standard 6% commission ends and sellers no longer have to propose compensation to prospective buyers and their agents. NAR will also require brokers to enter into written agreements with their buyers to help consumers understand what services will be provided, and at what cost.

Ad Sales to Mortgage Lenders

Zillow sells advertising space to mortgage lenders and other businesses that want to reach Zillow consumers. These other businesses include interior designers, home organization retailers, general contractors. Most of these advertisers are in the real estate industry, but some sell telecommunications services, automotive products and services, insurance, and consumer products.

Mortgage lenders mainly pay Zillow based on cost per click (CPC) or cost per thousand impressions (CPM). A click means that after searching for mortgage rates, the user requests more information from a local lender, whereas an impression means that the ad appears on Zillow’s online or mobile site. Mortgages revenue increased 22% year over year, to $22 million in Q4 2023.

What Factors Can Impact Zillow’s Revenue?

Most of Zillow’s advertising relationships are short-term, so it can’t take them for granted. Zillow’s advertising revenue, on which the company’s financial success relies, could suffer if existing advertisers ended their relationship and Zillow was unable to replace them. If Zillow’s user base dwindles or its competitors become more attractive advertisers for mortgage lenders, property management companies, and real estate agents, ad revenue could decline.

What Factors Reduce Traffic to Zillow?

The company relies on ad revenue from its Premier Agent program, so revenue could suffer if agents stop seeing value from advertising on Zillow. A drop in consumer interest in home buying and mortgages, both of which are beyond Zillow’s control, would likely reduce traffic to the site and lead to a drop in ad revenue.

When Was Zillow Launched?

Zillow was launched in 2006 to empower individuals with information to find the right home.

The Bottom Line

Zillow makes money by selling advertising on Zillow.com and the Zillow mobile app to property management companies with vacancies, real estate agents looking for buyers and sellers, and mortgage lenders looking for borrowers.

Read the original article on Investopedia.