Online RE Giants Losses Mount

David Goldsmith

All Powerful Moderator
Staff member
Zillow’s revenue jumps 28%, but losses mount
Online listing giant lost $84M in second quarter

Zillow beat its own doomsday predictions as homebuying bounced back quicker in the second quarter than most people predicted.
The Seattle-based listings giant said revenue grew 28 percent to $768 million, as homebuyers shopped online and the company saw increased sales of Zillow-owned homes. Its iBuying platform Zillow Offers saw an even bigger revenue spike, 82 percent, to $454.3 million.


Ahead of its earnings report Thursday, Zillow had projected second-quarter revenue between $577 million and $620 million.
“People want a new living space, that’s driving demand everywhere,” the company’s founder and CEO Rich Barton said during its earnings call. The second quarter was “better than we had hoped,” he noted, reflecting an uptick in tech adoption. “The retail to digital [shift] is happening in every category. But it’s really happening in real estate now,” he said. “We’re benefitting from this tidal shift.”

Overall, Zillow’s net loss widened to $84.4 million during the second quarter, compared to $71.9 million a year ago. The losses are tied to its expensive bet on iBuying, which Barton has described as its “moonshot” opportunity.

Revenue from Premier Agent, its agent advertising program, dropped 17 percent to $192 million, which Zillow chalked up to Covid discounts it offered to agents.
During the earnings call, Barton said he was optimistic after the housing market rebounded quicker than expected, following an effective shutdown in March and early April. “The changing needs of our homes has served as a catalyst for the pent up inherent demand in peoples’ desire to move,” he said.

That applies to Zillow’s own workforce. Last month, the company said its employees can work from home indefinitely. Zillow currently leases more than 1 million square feet of office space nationwide.
During the quarter, Zillow said visitors to its site and mobile app skyrocketed, hitting 218 million average unique users and exceeding pre-Covid levels. Barton is not among those who believe in a flight to the suburbs. “It’s really popular to tell this de-urbanization story,” he said. “The real story is that shopping is up everywhere, that’s what our data says.”

He said Zillow is benefiting from another big “tailwind” as real estate embraces technology like 3D pictures, virtual tours and digital transactions.
Amid the pandemic, Zillow suspended home-buying because of uncertainty in the market. It also cut expenses by 25 percent.

As of this week, Zillow’s iBuying program, called Zillow Offers, is active in 24 markets.
During the quarter, the company sold 1,437 homes and purchased 86 through Zillow Offers, ending the quarter with an inventory of 440 homes. But it faces an uphill battle to squeeze profits from each home. In a shareholder letter, Zillow said the average purchase price per home was $284,975 during the quarter, with $15,848 in renovation costs. Its average loss was $6,939 per home, after paying interest expenses.

Even as Zillow slashed its budget this spring, the company amassed a war chest to accelerate when the market bounced back. Its total cash balance at the end of the quarter was a record $3.5 billion, up from $2.6 billion at the end of this year’s first quarter.
 

David Goldsmith

All Powerful Moderator
Staff member
Move Inc. revenues drop as Realtor.com traffic climbs
New Corp.’s overall revenues were down 22% last quarter

Move Inc., the company that runs Realtor.com, saw a drop in revenues last quarter, as parent company News Corp. also took a hit.
Susan Panuccio, News Corp.’s chief financial officer, said in an earnings call Thursday that Move’s revenues had “declined 10 percent to $111 million, with real estate evenues down 5 percent.” She blamed the loss “almost entirely” on a customer-billing relief program, and said Move was still adjusting to a referral model.

Despite the tumbling revenues, Panuccio said traffic to Realtor.com was surging: The website had 86 million unique monthly users in June — up 18 percent on the same time last year.

News Corp., which owns a host of businesses on top of its staple of newspapers, saw quarterly revenues drop to $1.92 billion in the quarter — down 22 percent from the same time last year. The company purchased Move in 2014 for nearly $1 billion.

Revenues across the company’s digital real estate services portfolio, which includes Australia’s REA Group, were down 16 percent to $238 million, Panuccio said, noting a “decline in listings in Australia and the U.S.” On an adjusted basis, the decline was 13 percent.

Unsurprisingly, the pandemic loomed large over the Thursday call, and Panuccio said staff cuts had been made in the real estate side of the business.
News Corp. CEO Robert Thomson said the crisis had “irrevocably changed businesses — and our businesses — in expediting preexisting digital trends, challenging established business practices, and in prompting necessary in prospecton about work habits and the workplace itself.”

Discussing traffic to the company’s listings sites, he said the pandemic had also “prompted many families to consider their housing” in Australia, and noted similar trends in the U.S.
“We saw a significant improvement in profitability at Move, which runs the Realtor.com site, in the fourth quarter and for the year as a whole,” he added.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
"The losses are tied to its expensive bet on iBuying, which Barton has described as its “moonshot” opportunity. "

I mean, thank god they are buying in suburbs given the nature of the crisis ongoing right now. I always viewed ibuying as a thing these guys were forced into, as their old rev streams started to fade. And I always viewed it as one of those things that is great and works until it doesnt - all you need is a downturn in pricing and volume, and what happens to all of the inventory they got to unload? Unless they are making $$ along the way with data collections and fees, etc, which very well may be the case and hedge against what I noted
 

David Goldsmith

All Powerful Moderator
Staff member
As someone who has been buying and selling on their own account for close to 40 years now, I think their margins are way too low in iBuying. And I agree that it doesn't take a lot for them to get caught in a pinch and lose big.
 
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