There’s a shockwave hitting the real estate industry and Zillow is poised to capitalize on a seismic shift in how people are living, Gene Munster, the managing partner of Loup Ventures, said on CNBC earlier this week.
Gene Munster | Photo credit: Loup Ventures
“The reasons I think there’s going to be a fundamental shift is people are moving from dense urban areas to less dense urban areas,” Munster, a Zillow investor himself, said during an interview on the news channel. “Also, from bigger cities to smaller cities, from dense urban areas to suburban areas or even rural areas.”
“Ultimately this has created a shockwave in terms of how people live their lives.”
According to Munster, Zillow began with the Zestimate as a differentiator. It’s a tool often maligned by some circles of the real estate industry — especially real estate agents — but that Munster praised as reasonably accurate. The company parlayed that tool in nearly 200 million monthly active users in the U.S., which is compared to social media giant Facebook.
“This is a platform that is formidable and unlike any other real estate platform,” Munster said.
Due to its large audience, Zillow is able to capture top-of-the-funnel engagement from all the people looking to move, or just curious right now what their home is worth in this uncertain economic climate.
What’s more important, however, is the company’s latest shift into buying and selling homes through it’s Zillow Offers platform, what co-founder and CEO Rich Barton has dubbed “Real Estate 2.0.”
According to Munster, Zillow has moved beyond capturing the sales lead and turning it into an advertising opportunity to generate revenue. Now, the company is looking to disassemble and re-assemble to the real estate process.
In the first quarter of 2020, Zillow topped $1 billion in revenue for the first time in company history, on the back of Zillow Offers generating $770 million. It was more than double the revenue the company posted in the first quarter of 2019.
The losses, however, have widened, as Zillow has continued to ramp up homebuying, which is a capital-intensive business.
“Of course we know that Zillow is trying to make offers — essentially take some of the friction out of selling a home,” Munster said. “That is capital intense and has worried some investors about capital risk.”
“But ultimately, as those companies — big companies, companies like Zillow — they can take on this risk and ultimately it’s a big opportunity.”
