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This post has been republished with permission from Mike DelPrete.
Zillow and Realtor.com’s Q1 results shine a light on two key factors: overall revenue growth is slowing in a cooling market, and Zillow’s next-gen lead gen business, Zillow Flex, is building momentum.
Why it matters: Zillow is going all in on next-gen lead gen; it’s an important evolution of the real estate portal business model, and perhaps the singularly most critical component of Zillow’s future growth (Zillow 3.0: Back to Basics).
- Revenue growth in Zillow’s Premier Agent business, which includes Flex, has slowed and is projected to remain relatively flat in the months ahead.
- It’s far too early to pass judgment, but the results highlight future challenges — and that Zillow will need to do something new to re-accelerate its business.
Comparatively, Realtor.com’s revenues are also flat, and its next-gen lead gen business accounts for a similar amount of revenue as at Zillow (28 vs 25 percent).
- Meanwhile, revenue in Zillow’s traditional lead gen business dropped 10 percent during the same time, compared to growth of 3 percent at Realtor.com.
- It’s extremely unlikely that Zillow will hit its 2025 targets with traditional, market-based pricing; it’s all about Flex.
Yes, but: Even though traffic and lead volumes are down at the portals (22 percent lower for realtor.com), overall lead gen revenues are up (7.5 percent at realtor.com and 9 percent at Zillow).
- The portals always win: In a slowing market, agents are paying more money for fewer leads.
The bottom line: It won’t happen overnight, but the future of Zillow appears very much tied to the future of Flex.
Mike DelPrete is a strategic adviser and global expert in real estate tech, including Zavvie, an iBuyer offer aggregator. Connect with him on LinkedIn.
