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Portal giant and erstwhile iBuyer Zillow revealed Wednesday that its profit fell year-over-year in the final months of 2023, though it also managed to reduce losses.
In total, Zillow brought in $435 million in revenue during the fourth quarter of last year, according to the company’s newly published earnings report. That’s down 19 percent compared to the fourth quarter of 2021 when Zillow earned $535 million in revenue.
The fourth quarter of 2022 also saw Zillow suffer a net loss of $72 million. While an objectively large number, that loss is actually way down from the $261 million Zillow lost in the fourth quarter of 2021.
Significantly, the fourth quarter of 2021 was when Zillow announced plans to end its iBuying efforts and sell off its remaining inventory of homes.
Wednesday’s new earnings report also includes totals for the entirety of 2022. Overall, the company brought in about $2 billion in revenue over the course of the year. That’s down 8 percent compared to 2021. Zillow lost $101 million during 2022, which is down from $528 million during the prior year.
Rich Barton
In the report, Zillow CEO Rich Barton celebrates the company’s earnings, saying they “outperformed our expectations.” He also said the company is “building momentum that will help us scale as we serve customers and the industry with an easier, more seamless way to transact in real estate.”
“While navigating a slow and difficult housing market in 2022, we kept our eyes on the future — our vision of building the housing super app,” Barton continued.
Barton first announced the “super app” in 2022, describing it as an “integrated digital experience in which Zillow brings together” the various moving pieces of a real estate transaction.
During a call with investors Wednesday afternoon, Barton added that “2022 was an extraordinarily difficult and transformative year for Zillow” — though he reiterated that the super app remains a priority for the company as it moves forward.
Shortly before Zillow published its fourth-quarter earnings Wednesday, shares in the company were trading for around $47 which was up for the day, as well as compared to the last six months.
Zillow’s share price spiked in after-hours trading shortly following the report’s publication. The price bounced around over the next couple of hours but ultimately settled higher compared to where it was when regular trading ended for the day.
Credit: Google
Zillow had a market cap of just over $11.2 billion as of the end of trading Wednesday.
Zillow last reported earnings on Nov. 2, 2022, revealing that its revenue during the third quarter of that year was down 12 percent compared to the same period in 2021. The portal also reported a loss of $53 million during the third quarter.
That loss was an uptick from the second quarter of 2022 when Zillow made a profit of $8 million. But it was a massive improvement from the third quarter of 2021 when losses clocked in at $329 million.
Though Zillow’s losses and year-over-year dip in revenue were not insignificant, they also aren’t entirely surprising. Speaking with Inman this week, multiple analysts described the fourth quarter of 2022 as “horrendous” and “really tough.” The challenging landscape was a result of rising mortgage rates, which were, in turn, a response to the Fed’s efforts to curb inflation. The higher rates sapped demand for new loans and new homes.
As a result, many experts are bracing for a challenging earnings season and expect most real estate companies to report numbers that are down from their 2021 highs.
In addition to revenue and losses, Wednesday’s report also sheds light on how various verticals within Zillow have performed. The report notes, for example, that Premier Agent — the company’s lead generation program for real estate professionals — generated $283 million in revenue during the fourth quarter of 2022. That represents a year-over-year dip of 20 percent.
However, the report notes that these numbers “outperformed the company’s expectations and the industry total transaction dollar decline of 31 percent.”
Zillow’s websites and mobile apps received 198 million average monthly unique users, according to the report, which the company described as flat compared to the same period one year earlier. Total visits to Zillow’s sites added up to 2.2 billion, which was down 5 percent year over year.
Also in the fourth quarter, Zillow’s mortgage business lost $32 million, up from $14 million during the fourth quarter of 2021. For all of 2022, the company’s mortgage business lost $92 million, a jump from $9 million in 2021.
During his call with investors, Barton spent time outlining various products the company is now rolling out, or will roll out soon, as part of its efforts to streamline the consumer experience and build a super app. Among other projects, Zillow is currently trying to make home tours as easy as “booking a restaurant reservation,” and wants to provide more consumers with financing services. Barton also said the goal is to “drive our transaction share from 3 percent to 6 percent.”
One analyst on the call also asked Barton to weigh in on what CoStar’s entry into residential real estate might mean for Zillow. CoStar CEO Andy Florance has pointedly criticized Zillow, and the company already operates a rival portal in New York City. Additionally, CoStar is considering an acquisition of Realtor.com. Such a deal would make CoStar a more direct national competitor with Zillow.
Barton offered a circuitous response to the question, never mentioning CoStar by name. But he did say that “building great consumer products and brands is really hard,” and that many leaders of Zillow have engineering backgrounds that make them well-positioned to respond to competition. Barton went on to say that for Zillow, “our position and power and confidence is derived” from having a great relationship with the company’s massive audience.
At several other points during the call Wednesday, Barton weighed in on the state of the economy and the housing market. Barton’s take was that “it’s going to take time for these market dynamics to normalize.” And he said that “we are not out of the woods yet given high uncertainty in the macro economy and how it might affect the housing industry.”
However, Barton also indicated that Zillow’s fortunes don’t necessarily rise and fall with the larger macroeconomy. Rather, they depend on increasing the company’s market share of transactions. And on top of that, Barton sees some positive signs in the economy more broadly.
“As we head into 2023,” Barton said on the call, “we are seeing some signs of stabilization.”
Update: This story was updated after publication with additional background, as well as with information from Zillow’s earnings report and a call company leaders held with investors.
