ZipRealty revenue falls 37%, company sheds 1,200 agents

'Powered by Zip' referral program to expand


Technology-based brokerage ZipRealty Inc. says it will pursue referral partnerships with brokerages nationwide based on the results of pilot tests of its "Powered by Zip" program in two markets.

Expansion of the "Powered by Zip" program, which is already up and running in Atlanta and Tucson, will initially be focused on markets where ZipRealty does not have a brokerage presence, the company said.

Participating brokers feed listings to the ZipRealty website, and ZipRealty earns referral fees from leads it sends back to the brokers. The "Powered by Zip" service also helps brokerages "incubate" leads using a customer relationship management tool.

In announcing the expansion of the "Powered by Zip" referral program, ZipRealty said its partnerships with Atlanta-based Better Homes and Gardens Real Estate Metro Brokers and Tucson’s Long Realty have generated $40 million in home sales in the last six months.

ZipRealty reported Tuesday that second-quarter revenue was down 37 percent from a year ago, to $23.6 million, after the company started the year by closing offices in 12 of 35 markets.

But revenue from transaction referrals and corporate marketing agreements, lead generation and advertising was up nearly 19 percent from a year ago, to $1.35 million.

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The Emeryville, Calif.-based brokerage said it expects the office closures — which left the company with 2,197 agents at the end of June, down from 3,403 at the start of the year — will save $20 million a year in operating costs.

During the second quarter, revenue fell more sharply than operating costs and expenses, which were down 35 percent from a year ago. ZipRealty posted a $972,000 loss for the quarter, up from $225,000 a year ago, as revenue for the quarter failed to cover $25.6 million in expenses.

Adjusted losses before interest, taxes, depreciation and amortization (EBITDA) were $54,000, compared with $1.3 million in adjusted EBITDA earnings during the second quarter of 2010.

ZipRealty said its goal of posting positive adjusted EBITDA for the year as a whole "remains a challenge," but anticipates that transaction volume and revenue comparisons will begin to improve in the second half of 2011.

Transaction sides closed in the second quarter of 2011 were down nearly 44 percent, to 3,992, while average revenue per close was up almost 8 percent, to $5,558.

"Same market" revenue in the 23 markets where the company continues to operate brokerage offices was down 25 percent from a year ago, while transaction sides fell 29 percent.

ZipRealty CEO Lanny Baker, who was named to lead the company in September, said company executives "remain committed to placing ZipRealty on a profitable footing and plan to manage the business aggressively."

Last month, ZipRealty announced it would eliminate buyer rebates. The buyer rebate — which was 20 percent in most ZipRealty markets — is available only to clients who entered into a contract to purchase a home by July 15, 2011, and who close escrow by Aug. 31, 2011.

Baker said the recently overhauled website is attracting more users, ranking higher within search engine results, and "doing a far better job of showcasing" ZipRealty’s agents.

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