Since its founding nearly two decades ago, Zillow has been revolutionary for Americans to be able to sell, buy and ren houses all over America.
However, the declining traffic in an increasingly competitive housing market has triggered a range of problems for the company's stock- it dropped nearly 13% since Friday. Zillow made this point itself in its annual report last month, when the company warned that, “if agent commissions are meaningfully impacted, it could reduce the marketing budgets of real estate partners or reduce the number of real estate partners participating in the industry, which could adversely affect our financial condition and results of operations.”
Despite the problems, Zillow still leads in its market, with data on well over 160 million US homes, its residential revenue has outperformed the real estate industry average for six consecutive quarters. Still, it’s a down market. Zillow reported that it outperformed the residential real estate industry by 12 percentage points in 2023. Total revenue industry-wide declined by 17% from the year prior while Zillow fell by 5%.
The next step is for Zillow to create a new business model that will be beneficial for their company, Zillow generates revenue through agents who invest in enhancing their presence on the platform and purchasing AI-enhanced listings tailored to the preferences of homebuyers in specific markets. Should the ruling decrease agent fees as anticipated, they may have reduced budgets for these services. Without alterations to Zillow's business model, this could result in substantial declines in revenue.
Despite Zillow's significant contributions to the real estate market, its declining traffic poses challenges. How can Zillow pivot its business model to maintain revenue growth amidst potential reductions in agent fees and marketing budgets?
ReplyDeleteIt surprises me that Zillow is seeing a decline in traffic. Another student which I commented on found that despite inflation and price increases, home purchases are going up. It tells me that the problem probably lies in Zillow's rentention rather than the housing market.
ReplyDelete