The Real Deal New York

Zillow Q3 revenue jumps 22% but
Premier Agent disappoints

The listings giant lowered its full-year guidance for the lucrative ad program
By E.B. Solomont | November 06, 2018 04:40PM

From left: Matt Daimler, Spencer Rascoff, and Susan Daimler (Credit: Getty Images and Zillow)

Premier Agent remains Zillow Group’s cash cow, but the lucrative ad program had a rocky quarter.

Following a series of tweaks to the feature, Premier Agent’s third-quarter revenue fell short of Zillow’s own expectations, the company said Tuesday. More than 67 percent of the company’s earnings were tied to the program, where revenue grew 18 percent to $232.7 million. But the listings giant was targeting between $237 million and $239 million.

Overall, Zillow’s revenue was up 22 percent year-over-year to $343.1 million. And the company lost $492,000 during the third-quarter, narrowing its loss from $9 million a year ago.

In April, Zillow began screening potential buyers before passing live leads to Premier Agents by phone.

“These changes are great for consumers, our advertisers and our business in the long term,” CEO Spencer Rascoff tweeted Tuesday afternoon. “But change is always hard, especially in the short term.”

The company lowered its fourth-quarter revenue guidance for Premier Agent to between $898 million and $902 million, compared to a previous estimate of $921 million to $927 million. Last year, Premier Agent generated $761.1 million of Zillow Group’s $1.1 billion revenue.

During an earnings call, Rascoff conceded “higher-than-expected advertiser churn” during the quarter, related to “big changes” to the Premier Agent program that “were not all well-received by our advertisers.”

In particular, Zillow said it prioritized quality of leads over quantity.

“Regardless of lead quality, many agents tell us that they also value a higher quantity of leads,” Rascoff said.

He said Zillow believes the issues related to Premier Agent are “temporary and solvable,” and that Zillow has made changes to retain more advertisers, including a cap on lead price in some ZIP codes to improve agents’ return on investment. In the next few weeks, Zillow will also streamline the way it vets leads in order to send more prospective buyers to agents.

“These are leads which we had previously screened out of the immediate connection process that [will] likely require more time before being ready to transact,” he said.

Last month, Zillow promoted Susan Daimler, who was StreetEasy’s general manager, to a newly created national role running Premier Agent. Zillow’s New York operation — which includes StreetEasy, Naked Apartments and Out East — is now being led by Matt Daimler. Zillow just signed a lease for 130,000 square feet at 1250 Broadway. That’s up from 53,000 square feet at 130 Fifth Avenue.

The company announced on Tuesday that Allen Parker, a former Amazon and General Electric exec, was joining as chief financial officer. Kathleen Phillips retired from the role in May, and remained at Zillow as chief legal officer. Jennifer Rock, a vice president at the firm, served as the interim CFO.