Pursuant to the jury verdict and terms of the Sitzer/Burnett lawsuit national association of realtors Several prominent industry analysts believe the nationwide settlement of commission litigation Zillo Its financial performance will struggle.
On Wednesday night, during the company’s first-quarter 2024 earnings call with investors and analysts, Chief Executive Rich Barton offered a counterargument: Zillow is only beginning to unlock its revenue-generating potential.
“In a hostile real estate market and a noisy industry environment, why is Zillow doing so well?” he asserted. “The simple answer is that Zillow is entirely focused on solving real consumer problems with software. In a massive industry that has historically invested little in R&D, digitally re-platforming and integrating a huge, fragmented local industry with relatively infrequent transactions is A bold undertaking. Our strength lies primarily in the fact that we are a product and technology company first.
While Zillow’s net loss of $23 million for the quarter (up from a net loss of $22 million in the first quarter of 2023) doesn’t necessarily reflect Barton’s confidence, the company’s 13% annual revenue growth to $529 million does. Patton’s confidence. In the first quarter of 2024, revenue from all Zillow business units grew, with rental income increasing 31% year-on-year to $97 million, and mortgage income growing 19% year-on-year to $31 million.
Zillow’s residential revenue, which still accounts for the vast majority of the company’s revenue, also grew, rising 9% year over year to $393 million.
Barton said on the call that Zillow’s technology has helped it gain the trust of consumers, putting it naturally “in the enviable position of having a large enough audience.”
“Product-led organic marketing growth stories are rare, but common with great people. These are the products and brands we admire most,” Barton said. “Those who have followed us long-term know how proactive and innovative we are, methodically converting our sticky audience into revenue. We have built a large, growing, diversified, EBITDA profitable business, but We’re still only monetizing a small portion of our audience. Our large unconverted audience will drive Zillow’s growth for years to come.
Patton also addressed the terms of the NAR settlement. Barton said the “substantial substance of the settlement” is “a very reasonable middle path for the industry, where commissions can be communicated between sellers and buyers and both parties can be better educated.”
“This is a positive evolutionary step for the industry,” Barton added.
However, Barton noted that he and the Zillow team do not view the changes outlined in the AR settlement as revolutionary.
“Clear and negotiable remuneration is very much in line with our published consumer rights market principles of free access to lists, independent representation and negotiable remuneration,” Barton said.
As a result, Barton said he believes Zillow will benefit from this evolution.
“We have the largest and highest-interest clients in real estate, we work with the most productive agents, and we provide them with superior technology to make their lives more efficient,” Barton said.
Barton highlighted Zillow’s Premium Agent program, which sells buyer leads to agents who are part of the Premium Agent network. Because the program relies heavily on homebuyers using a real estate agent during the home-buying process, some analysts have criticized the model in light of commission lawsuits.
“Of the approximately 1.5 million real estate licensees, many handle only one or two transactions a year. These are not our premier agency partners,” Barton said. “Eighty percent of real estate transactions in the United States are completed by the top 20 percent of agents and teams, and today, nearly four out of five Zillow Premier Agent partners belong to this top tier.”
Barton added that Zillow’s premium agent partner base has shrunk by about 60% since 2015, while its premium agent revenue has increased more than 2.5 times.
Zillow executives also discussed its new “travel contract,” noting that Zillow will not require potential homebuyers to sign its travel contract in order to book a home tour.
Jeremy Wacksman, chief operating officer at Zillow, said of buyer representation agreements: “These types of agreements help educated buyers understand what services they are paying for, which is a good thing, and they have an added benefit that It’s about helping identify high-intent buyers.
Going forward, Zillow executives said they will continue to focus on the company’s five pillars of growth: travel, financing, seller solutions, enhanced partner network and leasing.
“It’s noisy out there, there’s a lot of chaos, there’s a lot of distractions, but I’ll tell you, we’re peaceful,” Barton said. “We’re moving forward, we’re improving the numbers, the product is getting better and better, and we have a long way to go because there’s all this incredible pent-up potential deal energy in our wonderful market.”
