Revenue Sharing A Good Strategy For Zillow

The real estate market in the U.S. does not seem to be on the verge of any recovery. In a survey conducted by Trulia and RealtyTrac.com of 2,018 homeowners across the country in April of this year, 54% of the surveyed population believes that the housing market recovery will take another two and a half years. The sentiment is reflected in declining home prices, which fell 3% sequentially last quarter, the largest quarterly drop since Q4 2008.  The National Association of Realtors also reported that existing home sales fell 0.8% over the previous month to 5.09 million in April, and the U.S. Department of Commerce reported that new home starts fell 10.6% from March to April. But that has not stopped online real estate portal Zillow.com from filing for an IPO listing scheduled to raise $51.75 million later this year.

Zillow’s Financials
Seattle-based Zillow was founded by Rich Barton and Lloyd Frink, founders of Expedia, in 2005. It is a real estate portal that focuses on providing information about homes, real estate, and mortgages to homeowners, buyers, sellers, renters, real estate agents, mortgage professionals, landlords, and property managers. They have a database of more than 100 million homes in the U.S. that contains information not only on homes on sale or rent, but also on those that are not on the market.

Zillow’s tools include Zestimate and Rent Zestimate, which help homeowners assess home values and potential rent for their homes. They also operate Zillow Mortgage Marketplace, a portal where borrowers can connect with lenders to get loans at the best mortgage rates. Experian Hitwise rated Zillow.com as the third most visited Real Estate site in the U.S. with 5.36% of Real Estate traffic share of the country in March this year, growing 53% over the year.

The company earns revenues through subscription for marketplace services besides traditional display advertising. According to their filing, revenues doubled last year to $30.5 million with marketplace revenues contributing 43% of revenues at $13.2 million and display advertising contributing 57% revenues. For 2010, losses fell significantly from $12.9 million in 2009 to $6.8 million. Their user base grew from 7.6 million in 2009 to 12.7 million last year end. As of March of this year, that number had grown to 19.4 million unique users.

Zillow’s Focus on Mobile
Zillow has also managed to create successful mobile device applications. For March of this year, their mobile app was used more than 8 million times and 1.4 million homes were viewed daily through mobile devices. Zillow has the most popular mobile real estate app across the iPad, iPhone, Android, and BlackBerry devices. Traffic to their mobile sites is reported to have grown 90% over the year.

Zillow Expands Listing Services
Last year, Zillow tied up with Yahoo Real Estate to create the Zillow/Yahoo Real Estate Network, the most-visited real estate entity in December. To further their listing features, they recently acquired Postlets, an online real estate listing creation and distribution platform. Postlets enables agents, managers, and landlords to distribute listings across real estate and social media websites free. Postlets has more than 500,000 registered users with more than 350,000 listings across the country. Zillow also enabled a feature that lets users list their properties on Craigslist from Zillow in simple steps.

Like other Internet players, Zillow seems to be under-monetizing their network. I strongly believe that Zillow could benefit much more from turning to affiliate revenue-sharing business. They should be looking at entering into affiliate deals with various service providers catering to Realtors, which could better monetize their traffic.