Zillow loses $28M in third quarter

CEO Rich Barton said firm “well positioned” in wake of antitrust ruling

Zillow's Rich Barton (Zillow, Getty)

Sheridan Wall

Nov 1, 2023, 7:00 PM

Three’s now a crowd for Zillow, which for the third straight quarter reported losses while touting an optimistic take on its position.

The company posted a net loss of $28 million in the third quarter of 2023, which is less than the $53 million it lost in the same period last year.

Despite the losses, executives said the firm’s earnings and adjusted EBITDA — earnings before interest, taxes, depreciation and amortization — exceeded their expectations.

Zillow reported $496 million in revenue last quarter, up from $483 million in the same period in 2022. The firm’s adjusted EBITDA was $107 million in the third quarter, down from $130 million in the previous year.

The firm attributed its revenue growth largely to its rentals segment, which increased 34 percent year-over-year to $99 million.

CEO and co-founder Rich Barton kicked off the call by addressing the verdict issued one day earlier in the landmark antitrust lawsuit over broker commissions. A Kansas City jury found the National Association of Realtors and two major brokerages guilty of conspiring to inflate fees charged to home sellers.

“We strongly believe Zillow is well positioned to thrive regardless of how it all plays out,” Barton said. He added that the firm supports access to information, commission negotiability and independent representation.

Barton said he expects the industry to develop policies around commission transparency and negotiability, which the firm considers to be “good initial steps” for consumers.

“We believe a well-lit game is cleaner and more equitable,” Barton said.

Zillow’s share prices fell 8 percent after the verdict was released on Tuesday. The firm’s stock has since rebounded, up 0.73 percent on Wednesday, but the ruling’s implications could extend beyond the momentary drop.

Zillow’s Premier Agent segment, which accounts for nearly two-thirds of the company’s revenue, draws its income primarily from buyer’s agents, who are at the center of the lawsuit.

Some claim the judge’s final decision in the case could steer buyer’s agents away from the industry, which could have a short-term effect on the Premier Agent revenue stream.

However, Barton said buyer’s agent activities only account for less than 50 percent of the company’s revenue in the third quarter.

He added that he doesn’t believe the lawsuits will eliminate buyer’s agents entirely, and even if it does, the firm is in a “strong position” to handle the change. Under that scenario, the market would likely transition to a “pay-to-play” model led by digital listing marketplaces, similar to some international markets.

Though this could lead to a “more profitable business model” for the firm, Barton added that Zillow is not pushing for the elimination of buyer’s agents and that it would be a “step backward” for the industry.

The company also announced hours before the call that it acquired a popular customer relationship management system called Follow Up Boss for $400 million in cash and another $100 million in potential cash earnout.

The CRM is the latest software brand to join Zillow, which is on the quest to build a real estate super app. In early 2021, the firm purchased ShowingTime, which includes agent services brands like Listing Showcase and Aryeo.

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