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This post originally appeared on The Basis Point: How Zillow Makes Money On Its Mortgage Business
We’re doing research on Zillow this week for a couple large pieces forthcoming on how they make money and serve customers.
It’s important to understand Zillow’s changing business model as they add home buying, selling, financing to their media and advertising model, which has been their main focus.
It’s no longer just Zillow connecting you with real estate agents and lenders when you want to buy, sell, or finance a home.
Now they’ll buy your home from you, sell a home to you directly, and finance a home you buy from them.
The mortgage financing is key to their direct home buying and selling strategy because they believe it makes the process super easy.
Think about getting out of an Uber or Lyft and having to reach for your wallet.
No way.
Shouldn’t it be the same for mortgage?
It’s not about the payment for the house. It’s about the house.
That’s the deal.
But to see if it’s all going to work, you have to get into the weeds of their financials.
So below are some excerpts on Zillow’s mortgage business model from SEC filings.
Before August of 2018, Zillow mainly made money in mortgage by selling leads, ads, and software services to lenders.
Then they acquired a mortgage lender which formed the basis of their own mortgage bank called Zillow Home Loans.
Now analyzing Zillow mortgage revenue is getting more complicated.
So these SEC notes are for the nerds, including The Basis Point team.
We use this wonkier stuff to supplement and add credibility to our core content which is super simple and consumer-friendly.
That’s why created this Research feature to share nerdy stuff we’re doing behind the scenes.
Enjoy, and stay tuned for some cool Zillow stuff coming tomorrow.
Mortgages revenue primarily includes marketing products sold to mortgage professionals on a cost per lead basis, including our Custom Quote and a portion of our Connect services, and on a subscription basis, including a portion of our Connect service. Zillow Group operates Custom Quote and Connect through its wholly owned subsidiary, Zillow Group Marketplace, Inc., a licensed mortgage broker. For our Connect and Custom Quote cost per lead marketing products, participating qualified mortgage professionals typically make a prepayment to gain access to consumers interested in connecting with mortgage professionals. Mortgage professionals who exhaust their initial prepayment prepay additional funds to continue to participate in the marketplace. For our Connect subscription mortgage marketing product, participating qualified mortgage professionals generally prepay a monthly subscription fee, which they then allocate to desired geographic counties. In Zillow Group’s Connect platform, consumers answer a series of questions to find a local lender, and mortgage professionals receive consumer contact information, or leads, when the consumer chooses to share their information with a lender.