Zillow.com is set to go public this coming week, with its 3.5 million shares being offered at $16 and $18. The deal could value the company at $458 million[1]. However, analysts are warning that investing in Zillow could be less of a wise investment and more of a surrender to the technology buzz that has been fueled by the success of companies like LinkedIn, which priced its IPO at $45 a share earlier this year and is now trading at $110. They point to Zillow’s “nonexistent” profits, warning that a decrease in losses – from $21 million in 2008 to $6.8 million in 2010 – does not necessarily indicate a company truly on the rise.
Advocates for the company believe that Zillow’s massive database holds the key to profitability, given that buyers, sellers, realtors, investors and plain old “nosy neighbors” consult the service for free and have been for years. Do you think that Zillow will monetize that database and grow in profitability, or would you pass on this offering for now?
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[1]http://online.barrons.com/article/SB50001424053111904582604576432080435069292.html?mod=googlenews_barrons
I’d definitely pass. In my market, one of the top 5 in the nation hardest hit by foreclosures, Zillow prices are SO FAR OFF and SO WRONG that it would have to take an all-night train ride just to get back to WRONG.
I agree with Gus. Zillow’s Data Base is not worth a nickel.
Zillow is absurdly inaccurate and very definitely NOT taken into consideration by any legitimate real estate professional. To think that anyone would actually pay for an ownership in this nonsense is incomprehensible. Fools abound.
I agree that Zillow’s Zestimates are worthless. Still, the question is: Can it monetize its traffic? Answer: Probably not. And here’s why.
A little bit of background. I actively post on Zillow. I also actively post on a Zillow competitor–Trulia. On Trulia, I’m ranked #1 nationally for “Best Answers.” So I see A LOT of questions and post a lot of answers. I try to do the same on Zillow. And here’s my take:
Trulia gets a lot of traffic from people wanting to buy or sell. They ask how they can buy with a poor credit score, or not much money down. Or they ask about school districts, crime and safety, etc. The sellers often ask about selling FSBO. Or why their house isn’t selling after xx days on the market. Or whether their Realtor is doing a good job for them. That’s the Trulia user profile.
Zillow is different. Most of the questions are from homeowners asking about, or complaining about, their Zestimate. Why is it so low? Why is it lower than their neighbor’s? Why did it drop $20,000 overnight? I have a difficult time finding the Trulia-type questions I described above.
Now let’s get to monetization. Nearly each of those questions on Trulia offers a potential opportunity for Realtors or investors. Each of those people have a problem that can be solved by a Realtor or investor–who often would be willing to pay Trulia for that lead. Same with lenders and mortgage brokers.
On the other hand, most of the Zillow questioners aren’t prospects for either Realtors or investors. They’re generally not interested in buying or selling. And so they’re not good prospects for Realtors or investors. Or for mortgage brokers or lenders.
Can Zillow monetize its services by selling primarily to homeowners? I doubt that’s their business plan. There’s a lot more money selling ad space to Realtors, investors, lenders, etc., than selling a Zestimate for, what, $5 or $10 a pop.
So Zillow is going to have to appeal to the companies with money to spend. And, judging from the thousands of questions I’ve seen on Zillow, I don’t think that’s an attractive market.