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In light of the jury verdict in the Sitzer/Burnett suit and the terms of the National Association of Realtors’ nationwide settlement agreement of the commission lawsuits, several prominent industry analysts believe Zillow will struggle with its financial performance.
On Wednesday evening, during the firm’s Q1 2024 earnings call with investor and analysts, CEO Rich Barton took a contrary view: Zillow is just beginning to unlock its revenue generating potential.
“In a hostile housing market and a noisy industry environment, why is Zillow outperforming?” he posited. “The simple answer is that Zillow is wholly focused on solving real consumer problems with software. In a giant industry that has historically had very little R&D investment, digitally re-platforming and integrating a huge disparate local industry where transactions are relatively infrequent is an audacious undertaking. We are advantaged primarily because we are a product and technology company first.”
While Zillow’s net loss of $23 million for the quarter, which was up from its net loss of $22 million in Q1 2023, did not necessarily reflect Barton’s confidence, the firm’s 13% annual increase in revenue to $529 million did. During the first quarter of 2024, Zillow recorded revenue growth across all sectors of its business, including a 31% annual jump in its rentals revenue to $97 million and a 19% year-over-year increase in its mortgage revenue to $31 million.
Zillow’s residential revenue, which still makes up the vast majority of the company’s revenue, also posted an increase, rising 9% on a yearly basis to $393 million.
On the call, Barton said that Zillow’s technology has helped it earn consumer trust, putting it “in the enviable position of having a large enough audience” that comes organically.
“The product led organic marketing growth story is rare, but it is common for the great ones. Those are the products and brands we admire the most,” Barton said. “Those who have followed us for a long time know how aggressive and innovative we have been, methodically converting our sticky audience into revenue. We have built a substantial, growing, diverse, EBITDA profitable business, yet we still monetize only a small share of our audience. Our massive unconverted audience will drive years of growth ahead for Zillow.”
Barton also touched upon the terms of NAR’s settlement agreement. According to Barton, the “substance of the settlement” is a “very reasonable middle path forward for the industry, where commissions are communicated between sellers and buyers and both parties are better educated.”