Zillow is a real estate marketplace that allows home buyers and sellers the convenience of researching all the details required for making a decision for property transaction sitting at home.
According to their website, “Zillow’s mission is to empower people to confidently buy and sell homes, and find the right neighborhood to call home.”
Zillow was first released in 2004, and has since grown to become one of the most visited real estate websites in the world. With Zillow’s home-buying services, Zillow provides services for both homebuyers and sellers.
When a homebuyer enters their location into Zillow’s website, the site identifies nearby homes that match a search profile, for sale by owner or for sale by realtor, and provides the following:
- Price and information about the home
- Links to the property listing or realtor’s website
- Satellite, aerial, or Street View pictures of the home
For those who prefer not to show up in person, Zillow also provides homebuyers with a tool for estimating the listing home’s value, using an algorithm called Zestimate, which the company reports is one of the most accurate estimating tools available for home values.
Zillow also provides homebuyers with the ability to request a no-obligation property evaluation or estimate (using Zestimate) and allows them to submit offers to sellers.
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How Does Zillow Make Money (2022)
Who Owns Zillow?
Zillow is owned and operated by Zillow Group, Inc., a California-based corporation that is one of the world’s most recognized names in the field of real estate analytics.
The firm’s online services include Zillow Home Value, which is used to calculate the market value of a given house; Zillow Real Estate, which provides real-time market data, property information and news;
Zillow Neighborhoods, a tool used for research and marketing of neighborhoods based on local demographics; Zillow Realty Roundups, a database used by real estate agents to find and share real estate information;
and Zillow Mobile, a smartphone application that gathers real-time data about an agent’s listings and allows buyers and sellers to find properties in their area. It is also responsible for the real estate services offered through its website, mobile app, and advertising campaigns.
Zillow also provides its services to other companies, in order to help them advertise and sell homes. It also helps real estate professionals market and sell their services.
Lastly, it provides reports and other analytical tools to consumers and real estate professionals. It is headquartered in Seattle, Washington, and its main competitors include other websites and companies which specialize in real estate analysis.
Zillow, Inc., was incorporated in California in 1993 and was founded by Rich Riley. His early work was with a company that sold technology products. That was until he discovered the first website that allowed a person to enter home values online. He came up with the idea of using this information as a marketing tool for real estate agents.
He contacted real estate brokers across the country, hoping to gather information on real estate data, and he asked them to participate. When he had enough information, he launched the first Zillow website, with $500 that he borrowed from his parents.
The first version of the site sold for $2.5 million. After launching the first version, Rich Riley decided to use the information gathered for an advertising tool.
He asked Zillow to license the data to real estate agents, who would then use it to market their services. However, the real estate agents resisted, because it was difficult to gather data and they didn’t want to pay for a service that they would be unable to monetize.
Zillow was not initially successful. They had no funds and were unable to advertise on the first version of their site. This led to a slow business growth. In fact, the business was so slow that Rich Riley sold the company for $4 million in 1994.
2005-2017: Building a successful real estate company
Zillow and Trulia
Zillow started sharing data with Trulia in 2006. Since then, the two companies have been sharing information that could be used to generate a home value estimate.
In 2010, Zillow added its home value technology to Trulia's website, in the form of a free data-sharing program, called Trulia.com, powered by Zillow. Trulia.com allows real estate professionals to use the website’s database to estimate the market value of a property. The company said that the addition of Zillow technology to Trulia.com increased their database size by 25 percent.
Later, the two companies worked together to expand their relationship. The agreement stipulates that Zillow would be a major sponsor of Trulia and its mobile application. Trulia's users would be allowed to search properties listed in the Zillow database and share their search results on Trulia. This sharing service was called Trulia Insight. Trulia Insight was launched in February 2011.
In 2011, Zillow and Trulia's founders met at the Black-Eyed Peas music festival to discuss the possibility of joining forces.
- On October 26, 2014, Zillow Group, Inc. announced that it had acquired Zillow.com for $4.05 billion. The acquisition was made at a time when the company was struggling with negative operating margins, partly due to competition from real estate brokerages.
- In August 2015, Zillow and Trulia announced a new real estate search partnership. The service is known as Trulia Live Search, and it allows users to get detailed information about a house they are interested in.
- In April 2018, Zillow acquired RentJuice, a rental management platform, for about $25 million. RentJuice provides its rental property owners with a web platform that connects landlords and renters.
- On October 6, 2019, Zillow and Trulia announced that they would become one company again. They also announced that they were teaming up to acquire Movoto.
Real estate technology acquisitions
Zillow has acquired several real estate technology companies since 2000. They are all real estate and technology companies.
Zillow acquired Zestimate in 2018. It is an online home value algorithm that is powered by a network of real estate professionals that provide data to Zestimate’s proprietary real estate valuation model.
In fact, Zestimate provides a free home value estimate for any home listed on the Zillow website.
Zillow acquired data aggregator Go-Zillow in 2011. The company was a pioneer in the field of real estate valuation and research.
Zillow acquired LoopNet in 2013 for $140 million in cash and stock. LoopNet was founded in 1999 and was the second biggest website for connecting people who were looking for a home with home sellers.
The company had more than one million listings and 10 million unique monthly visitors.
Zillow acquired Zillow Mobile in January 2017 for $950 million in cash. Zillow Mobile is a mobile application that provides users with real-time information about home values in their neighborhood.
The application is also integrated with Zillow.com
How does Zillow make money
- Public Exposure and Company awareness
Zillow News launched the Zillow Newspaper Consortium (ZNC) in September 2013 to help its users access quality news and information about their homes and neighborhoods, regardless of where they live. Today, ZNC connects Zillow to more than 280 U.S. newspapers that cover residential real estate news.
This allows Zillow to direct users to highly profitable listings for homebuyers and sellers. Through this comprehensive listing, sellers can advertise their properties and buyers can search for all the available for-sale properties.
This enables Zillow create a proposition that appeals to real estate developers, agents and advertisers equally. They get an access to 150 million+ monthly users of Zillow to see their listing, while Zillow users get the benefit of accessing these listings published in consortium newspapers.
The Zillow Newspaper Consortium pays newspapers millions of dollars to have their content placed in Zillow’s targeted advertisements. These advertisements target people in specific regions and cities. They target these ads to specific people based on the types of property they are interested in. Zillow has contracts with these publishers that let them place their advertisements in their newspapers for a certain number of years.
Each newspaper must place these Zillow ads if they want to have access to the advertisements. This gives Zillow an unmatched superiority over other Real Estate listing websites.
All these factors make it a compelling proposition for advertisers, who pay a premium to Zillow to get a listing on this network along with targetted advertising to Zillow users who are searching for a property. It contributes to the revenue of Zillow handsomely.
- Premier Agent Services for Real Estate Agents & Brokers
Zillow offers a number of different services to help real estate agents. Agents can create a free profile and provide a contact number, email, and real estate company. While profiles can be purchased, agents can upgrade to Premier profiles and access additional services and data.
Advanced technological tools provided by Zillow complemented by marketing products, help premier brokers real estate agents reach the targetted population with their advertisements.
These agents pay Zillow for advertisements as well as for every lead. These leads are made available to agents registered for premier agent services through targetted advertising. As these leads have a high conversion rate, agents are only too willing to pay for these services.
There are two ways Zillow earns money here - 1. Cost for number of times ad is shown to a user, and 2. Cost for each lead provided by Zillow. The cost per lead depends on many factors like neighborhood of the property and competition.
Zillow has been using two pricing models to charge agents for premier services.
- Auction based pricing - This is very similar to google ads, where depending on the money spent by an agent for an advertisements vis-a-vis other agents decide the number of leads, ad visibility and other metrics.
- Flex pricing - This is available in limited markets where quality leads are provided to a premier agent without any upfront cost and the advertising cost is payable only after the transaction is closed with any of the leads provided by Zillow.
- Advertisement Sales to Homebuilders and Rental Property Management Companies
RMS is a property management tool that allows users to manage multiple properties, view photos, and list properties on Zillow and other real estate companies.
Zillow charges Homebuilders and Rental property management companies for these advertisements on the basis of cost per impression and cost per lead.
With impeccable and trustworthy customer insights for real estate industry most of the large homebuilders and rental property management companies find it useful to advertise on Zillow and its network. This brings in good revenue stream for Zillow which is growing every year.
- Subscription model & Advertisement sales for Mortgage Lenders and Other Businesses
Zillow website gets more than 150 million unique users every month on its website and is therefore a great place to put advertisements for real estate properties. Zillow allows it on cost per lead basis and is used by mortgage professionals and other businesses who are interested in this audience.
Zillow also offers mortgage services through its platform raking in more revenues. There is a complete CRM module for agents on subscription basis as well as estimation tools.
Zillow is the largest Real Estate digital platform providing services to home buyers, sellers, Real estate agents and companies. The power of providing accurate insights by regularly updating its data as the transactions happen has given in the pole position in US market.
Strong analytics data has also provided it with unmatched offering for strong revenue streams. The future of company will depend upon its leverage of this strength and find new ways of monetizing this data
Does Zillow make a profit?
Yes, Zillow makes money in different ways from different stakeholders in Real estate business. It also provides ancillary services through its digital platform to earn revenues.
Is Zillow really free?
Yes, Zillow is absolutely free for its customers. It charges property management companies and other professionals linked to Real estate business to earn money.
Does Zillow take a percentage?
Zillow charges a listing fee and also earns money by selling value estimation services and other relevant data to Real estate professionals. It however doesn’t charge a percentage of transaction value.
How is Zillow doing financially?
There have been some challenges Zillow has faced in last couple of years. It is closing down certain analytics services and has also decided to reduce its workforce by 25% to become profitable.