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Zillow Group’s momentum continued into the second quarter, as the Seattle-based residential portal’s revenue grew 13 percent year over year to $572 million — a performance that put Zillow 7 percent ahead of the midpoint of its outlook range ($533 million).
Zillow’s mortgage segment led the way in terms of percentage growth, with a 125 percent year-over-year increase in purchase loan origination volume pushing the vertical’s overall revenue up 42 percent year over year to $34 million. The company’s rental segment also logged double-digit growth, as a 44 percent jump in multifamily revenue pushed overall revenues up 29 percent year over year to $117 million.
Although the company’s residential revenue still lagged behind the rental and mortgage segments in terms of percentage growth (+8 percent), the segment — which includes Premier Agent, ShowingTime+ and Follow Up Boss — accounted for the lion’s share of Zillow’s success during the quarter with revenues reaching $409 million.
Zillow improved its net losses, dropping from $35 million in Q2 2023 to $17 million. The company’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) increased roughly 20 percent year over year to $134 million thanks to higher-than-expected residential segment revenue.
Jeremy Wacksman | Credit: LinkedIn
In his first statement as Zillow Group CEO, Jeremy Wacksman said the company’s performance reflects the Zillow team’s dedication to creating the “digital future of real estate.”
“Zillow outperformed the residential real estate industry for the eighth consecutive quarter, delivering better-than-expected revenue across the business,” he said in a written statement. “We’re executing well, continually shipping exceptional products and services in Zillow’s housing super app as we build the digital future of real estate.”
“With an increasingly diversified and growing business, we are on our way to deliver strong GAAP profitability over time and meet our 2024 expectations to deliver double-digit revenue growth and modestly expand our Adjusted EBITDA margin,” he added. “We are well positioned to capture more of our total addressable market and help more people get home.”
In a shareholders’ letter, Zillow co-founder and former CEO Rich Barton laid out his hopes for the company’s next chapter as it leans into a new era of opportunities and challenges, including the fallout from the National Association of Realtors buyer-broker commission settlement terms and an ever-intensifying portal war.
“The Zillow business is in great shape financially, strategically, operationally and organizationally, consistently outperforming the residential real estate industry,” Barton said. “We are executing well and methodically shipping great software and services in the Zillow housing super app that aim to digitize and integrate home buying, selling, financing, and renting, empowering consumers and partners alike.”
“Jeremy is right and ready to be CEO of Zillow now, and I’m excited to support him as he leads us through our next chapter of building the digital future of real estate,” he added.
The company said its growth strategy continues to yield strong results as it expands its digitally integrated transaction experience to additional Zillow Enhanced Markets (i.e. markets with access to integrated financing, hand-picked partners, Real-Time Touring, etc.). At the end of Q2, Zillow had 19 Enhanced Markets, with the goal of reaching 36 by the end of August and 40 by the end of 2024.
Much like the previous quarter’s shareholder letter, Real-Time Touring and Zillow Showcase were the stars of the show as the portal behemoth shores up its value proposition to buy- and sell-side agents. Premier partners who connected with homebuyers through Real-Time Touring experienced conversions three times higher than average, with homebuyers embracing the introduction of short-term touring agreements.
The agreements are good for seven days and enable buyers’ agents and consumers to comply with upcoming changes to commission procedures, including the requirement that buyers’ brokers sign representation agreements with buyers before taking them on a home tour.
“The early indicators of success we saw in our pilot gave us the confidence to integrate it into Zillow’s touring experience, and just last week, the agreement became part of the “request a tour” flow on Zillow for nearly 80 percent of our tour connections,” the letter read. “We plan to roll it out to remaining tour connections in the coming months.”
On the sell side, Zillow said Showcase is driving higher views, shares and saves than similar non-Showcase listings on the site, enabling agents who use Showcase to win more listings and sell those listings for an average premium of $9,000. One percent of all new listings now use Showcase, with Zillow nearing its Showcase listing coverage goal.
“We are on our way to our goal of 5 percent to 10 percent listing coverage, which represents a $150 million — $300 million annual revenue opportunity,” the letter read. “And we believe there is potential for future growth beyond that.”
Wacksman said the company’s strides with Real-Time Touring, Listing Showcase, and developments in its rental and mortgage segments show Zillow is well on its way to delivering a completely integrated “super app experience,” as traffic to the portal’s mobile and app sites reaches 231 million average monthly unique visitors per year. Although 231 million visitors represent flat traffic growth, total visits during the quarter grew 4 percent year over year to 2.5 billion.
“As you’ll remember from previous calls, and our February investor presentation, about 80 percent of our users come to us organically, and they’re using our app three times more than anyone else in the category,” he said in a Wednesday evening earnings call. “Another way to measure traffic and brand strength is through ComScore, which is widely viewed among internet brands as a reliable, transparent, third-party source because it aims to capture the number of unique visitors while de-duping cookies.”
“According to ComScore, Zillow groups apps and sites [were] at 116 million average monthly unique visitors in Q2,” he added. “We’re pleased with the progress we’re making to transform and digitize the moving experience on behalf of buyers, sellers, renters, agents, and the broader industry.”
Wacksman said Zillow and its partner agents are well-positioned to navigate upcoming changes — the largest of which is the Aug. 17 deadline for removing offers of compensation to buyer’s agents in Realtor-affiliated multiple listing services and requiring that buyers’ brokers sign representation agreements with buyers before taking them on a home tour.
“Our Premier Agent partners represent some of the best, most professional agents in real estate, who we believe are poised to take share in the evolution the industry is experiencing,” he said. “We’ve oriented Premier Agent around some of the best agent teams … The top 20 percent of agent teams handle 80 percent of transactions, and nearly four in five Zillow premier agent partners are in that top tier.”
Wacksman declined to predict how commissions may change after the deadline; however, he said Zillow and its partner agents have delivered a consistent performance throughout multiple market shifts — a trend he doesn’t expect to change.
“We believe we and our partners are the outsized beneficiaries of these changes coming in the industry. We have the most customers. We work with the best partners,” he said. “We provide the most technology, and we expect our Premier Agents will deliver and get paid because they provide great service.”
“So that’s how we’re seeing it,” he added. “That’s been very consistent for a while now, and nothing has really changed our minds on that based on the latest things that we can see.”
Zillow’s stock (NASDAQ: Z) experienced a post-earnings pop, increasing 12.52 percent to $47.00 per share. The company’s market cap stands at $3.47 billion.
Note: This story has been updated with commentary from Zillow’s earnings call.
