The Real Deal New York

Zillow revenue jumps 22% thanks to strong Premier Agent spending

Listings giant said it obtained a brokerage license in Arizona
By E.B. Solomont | August 06, 2018 04:44PM

Zillow CEO Spencer Rascoff (Credit: iStock)

UPDATED, Aug. 6, 6:20 p.m.: Thanks to its lucrative Premier Agent ad program, Zillow Group’s revenue rose 22 percent during the second quarter, the listings giant said Monday.

The Seattle-based company said revenue for the quarter hit $325.3 million, compared to $266.9 million during the second quarter of 2017. Zillow’s net loss narrowed to $3 million, compared to $21.8 million during 2017’s second quarter.

Zillow’s revenue from Premier Agent — a program that lets buy-side agents advertise on listings — also rose 22 percent to $230.9 million during the second quarter. Zillow’s rental business line was its fastest-growing segment, with $33.3 million in revenue, up 40 percent year over year.

In New York, Zillow has tried to monetize StreetEasy through Premier Agent and a $3-per-day fee to post rental listings. Spencer Rascoff, the company’s CEO, called the price a “screaming deal” for anyone posting listings.

“We haven’t changed that price,” he said during an earnings call on Monday. “We have no plans to change [it] in the near term, but it is a terrific deal and very ROI positive for anyone who advertises rental listings on StreetEasy.”

On Monday, Zillow also said it acquired Mortgage Lenders of America, a 300-person mortgage brokerage in Overland Park, Kansas. While Zillow already sells ad products for mortgage lenders, the company said the acquisition is related to “Zillow Offers,” a new program through which it buys and sells homes from consumers.

During the earnings call, Rascoff described the deal as part of Zillow’s broader push to evolve beyond a lead-generation platform into “an end-to-end provider on housing-related services.”

And he said it would enable Zillow to further monetize Zillow Offers.

“On a Zillow-owned home, when we’re re-selling it to a consumer, we’ll provide mortgage origination,” said Rascoff, who estimated that if the company buys and sells 10,000 homes a month, that could generate revenue north of $800 million from mortgage origination alone.

Zillow debuted the program in Phoenix, Arizona, and recently said it would expand to Denver and Atlanta. During the second quarter, Zillow said it purchased 19 homes in Phoenix through Zillow offers.

At the behest of Arizona regulators, Zillow recently obtained a brokerage license in that state. In a letter to regulators dated August 6, Zillow stressed that it’s not looking to cut brokers out of the home-buying and selling operation — a concern that some traditional brokerage firms have expressed. (Zillow Offers uses Premier Agents to broker deals.)

“Our intention to obtain a license is not an indication of any change to Zillow Offers, nor does it mean we will be operating as a traditional brokerage,” the letter said. “With Zillow Offers, Zillow will still be represented by a local agent who is part of a separately licensed brokerage.”

Update: This story has been updated to include quotes from Zillow’s Q2 earnings call.