How Zillow Makes Money and Why It’s Free

It’s free to post a home for sale by owner or agent, as well as a rental property, on Zillow. Users can search for a home and examine estimated property values for free using Zillow’s web and mobile search capabilities, including its smartphone app.

 

On February 19, 2020, Zillow released its fourth-quarter and full-year 2019 earnings, which included $2.7 billion in yearly sales, up 106 percent year over year.

 

In August 2015, Zillow Group (Z, ZG) divided its stock, following through on a promise made in July to create new shares to enable access to new revenue streams while also establishing a means for continued investment.

 

How does Zillow Group, Inc., Zillow’s parent business, make money while providing all of these services for free? Let’s have a look. (It’s worth noting that Zillow is a wholly-owned subsidiary of Zillow Group, which also owns Trulia, StreetEasy, and RealEstate.com.)

 

In the fourth quarter of 2020, Zillow reported its most lucrative quarter in business history, with a net income of $46 million. It’s the first time the company has turned a profit in consecutive quarters since going public.

 

While the profit was not enormous, the company’s objectives were. To that aim, Zillow announced on Wednesday that it has agreed to pay $500 million for ShowingTime, a real estate showing management and market analytics company. 

 

And, most intriguingly for fans of Zillow’s iBuyer program, in the fourth quarter of 2020, Zillow made a profit on the properties it sold for the first time – a first for the company. After interest charges, Zillow Offers’ gross profit in the fourth quarter was $27 million, and the company’s gross profit on properties sold was $19,206.

 

The company’s fourth-quarter and full-year 2020 earnings were released on Wednesday, and it blew over the consensus forecast of $741.2 million in revenue in the fourth quarter, bringing in $789 million.

 

 

Advertisement Sales to Property Management Firms

 

If you wish to know how does zillow make money, know that Property management firms pay Zillow to display their listings on the Zillow Rental Network, including Zillow, Trulia, Hotpads, MyNewPlace, AOL Real Estate, and MSN Real Estate.

 

To assist these advertisers in getting the most out of their advertising budget, Zillow provides qualified leads – potential tenants – to them. Rentals have been seen as a significant business opportunity by the corporation. Renters move more frequently than homeowners, so landlords must spend money on advertising and lease discounts to keep their units occupied.

 

 

iBuying

 

Zillow announced in early 2019 that it is expanding its house flipping or Offers business, which it debuted in April 2018. The real estate technology trend known as iBuying is at the heart of this service, available in at least 14 cities by the end of the year. Thanks to automation, the transaction is streamlined and made faster and easier for sellers. Customers can give Zillow details about their home via the website, and the business responds with a cash offer within days. The customer has the option of accepting Zillow’s offer, listing their home with a local realtor Zillow recommends, or not selling at all. If Zillow purchases the property, it will renovate it, relist it, and sell it within 90 days. Over the next three to five years, the corporation plans to add $20 billion in annual sales. The company also sends seller leads to its Premier Agent program members and brokerage partners.

 

 

Real Estate Agent Services of the Highest Quality

 

According to Zillow, Premier Agent Websites include free professional designs, an integrated multiple listing service search, and a domain name. Real estate agents can also purchase Zillow advertising. If you wish to know how does zillow make money, know that Agents can obtain new clients who buy or sell houses by running ads targeted at users in their local marketplaces. The advertising also assists agents in discovering buyers by increasing the visibility of their listings. The Premier Agent program also includes a customer relationship management system that allows agents to keep track of Zillow users interested in working with them. The cost of services varies depending on where you live.

 

Premier Agents also help the company with its house flipping business by representing Zillow in exchange for a commission, soliciting offers from Zillow to submit to its sellers, or assisting clients who reject Zillow’s offer with a traditional sale. Premier Agent revenue climbed by 3% year over year to $923,876 for the fiscal year ended December 31, 2019. Real estate agents primarily compensate Zillow based on the number of ad impressions given to consumers in certain zip areas. The majority of Zillow’s revenue comes from Premier Agent services.

 

 

Advertisement Sales to Mortgage Lenders and Other Companies

 

Mortgage lenders and other businesses that wish to reach Zillow users can buy ad space on Zillow’s website. Interior designers, home organization retailers, and general contractors are among the other firms. The majority of these advertisers are in the real estate market, but others provide telecommunications services, automotive products and services, insurance, and consumer goods. 

 

Mortgage lenders primarily compensate Zillow based on cost per click (CPC) or cost per thousand impressions (CPM) (CPM). A click signifies the customer asks for additional information from a local lender after searching for mortgage rates. In contrast, an impression means the ad displays on Zillow’s online or mobile site. Zillow also makes money from Mortech, a subscription-based mortgage software company Zillow Group, Inc. owns and operates. The Mortgage Lenders of America also provides lending services.

 

 

Revenue Threats to Zillow

 

Because the majority of Zillow’s advertising agreements are short-term, it can’t rely on them. If existing advertisers terminated their relationships with Zillow and Zillow could not replace them, the company’s financial viability could be jeopardized. Ad revenue might fall if Zillow’s user base shrinks or its competitors become more appealing marketers for mortgage lenders, property management businesses, and real estate salespeople. Furthermore, because the company relies mainly on ad revenue from its Premier Agent program, revenue might suffer significantly if agents no longer perceive the value in advertising on Zillow. Finally, a downturn in the real estate market or a reduction in consumer interest in home buying and mortgages, both of which are outside Zillow’s control, would undoubtedly affect site traffic and ad revenue.

 

 

 

Final Thoughts

 

Zillow makes money by selling advertising space on Zillow.com and the Zillow mobile app to property management firms with openings, real estate agents seeking buyers and sellers, and mortgage lenders seeking borrowers. It also sells to other types of advertising, particularly those in the real estate industry.

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