The Real Deal New York

Redfin sees $36M loss in Q1 amid advertising, hiring push

Firm shelled out $11M on advertising and inched closer to 1% market share
By E.B. Solomont | May 10, 2018 06:36PM

Glenn Kelman

Redfin lost $36.4 million during the first quarter of 2018 as the tech-focused brokerage poured millions of dollars into advertising in a bid to gain market share, the company said Thursday.

The Seattle-based firm reported $79.9 million in revenue during the first quarter, marking a 33 percent year-over-year jump. While its losses widened from $28.1 million in 2017’s first quarter, operating expenses of $42.9 million accounted for 54 percent of revenue, down from 58 percent a year ago.

During an earnings call Thursday, CEO Glenn Kelman said the wider loss reflected the cyclical nature of real estate, as well as higher expenses related to hiring agents and advertising — the firm shelled out $11.3 million on advertising, up 39 percent from 2017.

Thanks to the heavy advertising push, Redfin said its market share crept up to 0.73 percent, up 0.15 percentage points year-over-year.

The company also began offering a 1 percent listing fee in San Francisco during the first quarter. (The fee has been an option in New York since October 2017.)

Kelman stopped short of providing hard numbers, but said he’s seen anecdotal evidence that the 1 percent fee is gaining traction even in the luxury segment, where traditional brokerage firms have a stronghold.

“We just did a $7 million humdinger in Seattle, and I could not be more excited,” he said. “It gives permission to all sorts of people who are risk-averse to sell their home.”

Redfin logged $3.1 million in revenue from Redfin Now, through which the company purchases homes and flips them. The program is part of a growing “iBuyer” phenomenon that lets buyers and seller transact online.

“I know everyone is excited about it because Zillow got into it over the past few weeks or months,” Kelman said, referring to Zillow’s Instant Offer program. “But it’s a capital intensive business. The largest segment of the market is listing homes through an agent, and the way to take the most listing share is to lower the cost of selling homes through an agent.”

At some point, Kelman added, the market will turn and not only will the cost of capital be higher, but it will be harder to find buyers.

“No one — not Opendoor, Redfin or Zillow,” he said, “knows what will happen to this business when that happens.”