CoStar’s Andy Florance Says Zillow Is “Under Siege”

CoStar Group’s Andy Florance is fanning the flames in an ongoing fight with its residential operation’s chief competitor.

The CEO of the real estate data giant delivered some good news about the company’s recent performance, but spent a decent chunk of the third-quarter earnings call on Tuesday lambasting Zillow Group and the pile of pending litigation against the firm.

During his tirade, Florance said Zillow was “under siege” as it faces multiple federal lawsuits, which he summed up as “exposing alleged antitrust violations, widespread copyright theft and blatant consumer deception.”

Among those suits is one filed in July by CoStar itself, which accuses Zillow of violating copyright laws by using 46,000 of CoStar’s proprietary images on its website without permission.

Compass sued Zillow in June, alleging its new set of listing policies amounted to “anticompetitive tactics.” The guidelines barred agents from listing properties on Zillow that were previously marketed for more than a day without being added to multiple listing services. The company adopted the rules after Compass unveiled its three-phase marketing strategy, which included private listings.

On the call, Florance said the new rules appeared to be aimed directly at Compass and its private listing network, contradicting what representatives from Zillow have insisted was not targeted at one single brokerage.

“Compass sued Zillow, exposing Zillow’s so-called ‘Zillow ban’ for what it truly is, a ruthless scheme to strangle competition [and] trap home sellers inside of Zillow’s walled garden,” said Florance.

He added that Zillow’s new rules thrust Compass toward “defensively merging” with Anywhere Real Estate, the seismic deal for which was announced last month and is expected to close next year. Once combined, Compass and Anywhere would have roughly 340,000 agents, making it the largest brokerage by headcount, and in control of a significant share of inventory in several markets.

“Zillow just picked a fight it cannot win,” Florance said. “Compass will have the most important listing content in real estate, and Zillow will need them a lot more than Compass needs Zillow.”

In September, the Federal Trade Commission also filed a lawsuit against Zillow and Redfin, arguing the firms’ agreement for Zillow to be the exclusive provider of multifamily listings violated antitrust laws. The companies announced the $100 million deal in February, describing it as a “partnership.” However, the FTC disagreed with that portrayal in the complaint, casting it instead as Zillow “paying off a competitor to stop competing against you.”

Florance said that if it had been him reviewing a similar deal, he “would never have pursued it.”

“My immediate and clear reaction would have been that, obviously, the FTC would not allow such an illegal deal and any effort to end-run the FTC regulatory process would bring unnecessarily excruciating pain and damage to anyone foolish enough to try it.”

He added that if a federal judge sides with the FTC and rules to reverse the deal, the decision could “seriously damage Zillow’s reputation in the apartment industry.”

Florance’s criticism of Zillow isn’t surprising, given the company’s aggressive quest to gain market share for its residential listing portal, Homes.com, complete with a billion-dollar advertising push. Florance is marketing Homes.com as an optimal alternative for agents frustrated with Zillow’s lead diversion model, which relies on subscriptions.

“In competing portal models, 95 percent of the agents are losing business because of the portal and 5 percent are gaining business,” Florance said on the call. “In our model, almost every agent can gain business.”

Florance routinely touts Homes.com’s growth since it acquired the portal in 2021, but the platform is still falling significantly short of Zillow’s traffic (though by how much depends on the source). Homes.com’s self-reported traffic numbers were roughly three times higher than those on third-party sites such as SimilarWeb and Comscore, according to an analysis by strategist Mike DelPrete published in December.

That discrepancy was among the targets of a legal fight with the parent company of its competitor, Realtor.com, which alleged that its platform was the No. 2 portal behind Zillow, despite Homes.com’s claims. The lawsuit, which also accused CoStar of stealing trade secrets, was dismissed earlier this year.

CoStar reported a more than 30 percent annual uptick in revenue from its residential portals in the third quarter. New subscriptions to Homes.com totaled $16 million last quarter, up more than 50 percent from the previous three-month period.

The company also reported 115 million unique monthly visitors during the quarter.