1/ the $1.8bn lawsuit became the catalyst to lower commission revenues for each home transaction.
Some real estate agents may exit the industry as the pie is smaller; and spending on Zillow per transaction will likely decrease.
Therefore, Zillow’s revenue from home sales shall decrease under the current model.
2/ competition from CoStar is very real while Zillow is not growing
CoStar combined traffic from 23q4 earnings presentation
Home.com (owned by CoStar) had 149 million unique visitors in Feb 2024, with 567% yoy growth.
Zillow’s 2023q4 reported average monthly unique users was 194 million, down 2% year over year. Visits during Q4 were 2.2 billion, up 1% year over year.
Zillow’s DAU trend from Investor Deck February 2024 – not looking amazing.
Their business models are different. CoStar is more SaaS like. And Zillow is more e-commerce.
(above from ChatGPT 4)
3/ of course the current interest environment is not helping.
While it’s not new and Fed may cut this year, marginal benefits of lowering from 6.5% to 6% won’t move the needle.