Last month on the News Corporation earnings call, CEO Robert Thomson said, “At the time of our acquisition of realtor.com in 2015, it was a struggling third-place platform with modest profitability and fewer than 30 million monthly users.”
True. And now?
Realtor.com is redeeming itself after sitting on the sidelines of the digital real estate wars. With growing profits and booming traffic, the wounded soldier is back on the battlefield.
News Corp. is publicly touting the turn-around. Previously, its Australian real estate portal REA was the crown jewel of its digital real estate strategy, as tarnished realtor.com lost ground to Zillow. Not anymore.
Realtor.com on the mend
“Realtor has contributed more to our profit growth, than … REA in Australia,” bragged Thomson on the earnings call.
In the last year, under new management and a strong real estate market, the fortunes of the real estate portal, originally founded by the National Association of Realtors, are turning.
A buffed-up realtor.com begs the question: is it the next target for a big acquisition by some company such as CoStar, which is in knee deep trying to acquire data monster CoreLogic. Realtor.com might be CoStar’s next stop to compete with Zillow.
Rupert Murdoch bought Move, the holding company for Realtor.com, for only $950 million. He moved quickly to shore up the enterprise, bringing in a new CEO and doubling down on a lawsuit with Zillow over the poaching of two realtor.com executives. The settlement was eye popping: Zillow paid News Corp $130 million.
Murdoch seemed ready for combat with Zillow.
“What the hell does Zillow mean?”
That was Murdoch’s famous deadpan at the 2015 Inman Connect conference in New York, when he was asked whether realtor.com remained relevant. He followed with, “We know what Realtor means.”
Zillow returned the FUD (fear, uncertainty and doubt) when then-CEO Spencer Rascoff waxed, “Realtor.com is now ‘Rupert.com.’”
But for the next few years, Murdoch stepped away and the promise of a realtor.com revival faded. Zillow’s dominance grew.
Now, the timing may be right for some sort of deal with realtor.com as its prospects improve.
This month is the two-year anniversary of the Murdoch family sale of 21st Century Fox to Disney. With it comes the lifting of restrictions that allow all or part of Fox to be sold. The Financial Times recently speculated that “a reappraisal of the entire Murdoch empire has begun.”
So what is realtor.com’s value?
In 2016, it was valued at $2.5 billion by Morgan Stanley. But much has changed since that time.
Five years ago, Zillow’s market cap was only $5 billion, today it is valued at $40 billion. Second place must put realtor.com’s value in the multiple billions. Redfin is valued at almost $10 billion.
Realtor.com is the second most trafficked portal with a record 94 million unique users in January.
Realtor.com’s revenues in the last quarter increased $34 million, or 28 percent, to $155 million. That’s still a fraction of Zillow’s $789 million in Q4. But it is more profitable than Zillow.
“So how much is REALTOR worth now?” Thomson asked rhetorically in the earnings call.
“How much is New Corp worth? I will let you do the math.” News Corp. is valued at $13.7 billion. Realtor.com contributed d 85 percent of its earnings last quarter.
“To help you do that math, a few specifics: Realtor traffic is now outgrowing Zillow for 19 of the past 21 months according to Comscore, including the last 11 months in a row,” Thomson said.
He seemed a tad obsessed about the company’s value. He wants Wall Street to value it higher, but he may also be sending a message to potential acquirers.
Of course, a hearty housing market has given every real estate company a lift.
Nevertheless, its profits are growing and it is shedding assets that don’t support its mission of chasing Zillow’s commanding consumer traffic lead. This week, it sold off software product Top Producer to Constellation Real Estate Group.
What else accounts for its improved metrics?
In a sharp elbow to Zillow, former eBay executive David Doctorow promised at Connect Now last month to not become a broker, iBuyer or a participant in the transaction. He seems content selling ads to Realtors and getting a healthy 35 percent cut on closed transactions. It is a high margin business.
In 2018, Move acquired Opcity, the Austin, Texas-based real estate technology company, for $210 million. The start-up mastered lead conversion and has applied its magic to Realtor leads ever since.
Plus, the Opcity management team joined Realtor.com, giving the company a boost. Scrappy start-up founder Ben Rubenstein and his wingman Michael Lam brought zeal to the enterprise.
A year ago, Doctorow became CEO. He is decisive, focused and willing to shake up the old guard at the portal.
What’s next for realtor.com? It comes down to execution. But something bigger may be underway.
Watch the headlines in the coming weeks. Everything seems possible these days.
