Zillow and Trulia’s share prices surge on merger report

Bloomberg: Zillow said to value Trulia at up to $2B

Shares in Zillow and Trulia are up sharply today on reports that Zillow is looking to acquire its smaller rival. Citing anonymous sources, Bloomberg reports that Zillow could value Trulia at as much as $2 billion, and that an agreement may be announced as soon as next week.

online poll by Opinion Stage

Talks between the companies are ongoing and may not lead to a deal, Bloomberg said. Both Zillow and Trulia declined to comment on the report.

Speculation that the online real estate space is ripe for consolidation helped push Zillow’s market capitalization past $5 billion last month, after analysts at Canaccord Genuity detailed their growth expectations for the company and raised the possibility of an eventual merger with Trulia.

Six investors with a 42 percent stake in Zillow also own 52 percent of Trulia, Canaccord analysts noted at the time, “potentially reflecting their desire to see consolidation in the vertical.”

“This has been rumored for a while and with the cross-ownership from Tiger Global Management and Caledonia some thought those investors would push for this,” said Bradley Safalow, founder and CEO of stock analysis firm PAA Research.

“I can’t see how this deal works,” Safalow said.

“Forgetting about the fact that Zillow and Trulia hate each other, a merger would make it easier for brokerage firms to stop working with them or squeeze them on featured listings programs,” Safalow said.

There were also rumors in June that Trulia might be interested in acquiring realtor.com operator Move Inc.

Zillow and Trulia’s share prices surged to new record highs in early afternoon trading today.

Unique visitor traffic to most popular real estate sites, May 2014

Website May mobile and desktop unique visitors % of total unique visitors to real estate sites in May
zillow.com 44.2 million 47.0%
trulia.com 26.4 million 28.1%
realtor.com 22.2 million 23.6%

Source: comScore

Brian Boero, partner at real estate design and marketing firm 1000watt, says that the agent ad and software market the three large, public companies are going after is not as big as many think, so a merger sometime in the next couple of years makes sense.

“The rumor mill has been grinding on this subject for the last six to eight months, but nothing’s hit yet,” Boero said. “We’ll see. If the Big Three, in some combination, became the Big Two you’d lose some of the competitive energy in the space, which may cause prices to drift up for agents, but, again, this is all speculative.”

Given their overlapping services, Gregg Larson, CEO of real estate consulting firm Clareity Consulting, questions whether the U.S. Federal Trade Commission would allow the deal to go through if it happened. However, lawyers on both sides are likely vetting that issue and if talks lead to a deal, then any antitrust issues might be moot, he said.

If a merger between real estate’s two largest online players, Zillow and Trulia, does take place, it could lead to one, clear leader in the space — and higher online advertising costs for brokers and agents.

Other than that, however, brokers, agents and multiple listing services won’t be hugely affected by the deal, said Steve Murray, president of real estate consulting firm Real Trends.

“For the agent on the street, a merger between Zillow and Trulia doesn’t change much,” Murray said. They still have to deal with buyers and sellers, he said.

Costs for online advertising would go up, but the resulting colossus would also attract more viewers, which would theoretically make the advertising worth more to brokers and agents, Murray said.

Murray says he sees room in the future for two separate portals that get 100,000 agents to each pay $1,000 per month to advertise on their sites. A merger between the two biggest sites simply unites that estimate, he said.

Editor’s note: This story has been updated with additional commentary from industry sources.


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