In an earnings report today, Zillow Group, the operator of listing portals Zillow and Trulia, posted a net loss of $220 million in 2016. The loss includes the impact of a $130 million legal settlement with archrival Move Inc.

In an earnings report today, Zillow Group, the operator of listing portals Zillow and Trulia, posted a net loss of $220 million in 2016. The loss includes the impact of a $130 million legal settlement with archrival Move Inc.

After the real estate behemoth posted a $6.8 million profit in the third quarter, it went on to lose $23.5 million in the fourth quarter.

The company’s revenue grew 31 percent year-over-year in 2016, to $846.6 million — beating its own revenue forecast — and rose 34 percent year-over-year in the fourth quarter, to $227.6 million.

In a statement, Zillow Group CEO Spencer Rascoff said 2016 had been a “fantastic year” for the company.

“We set records for annual revenue and site traffic, and ended on a strong note with solid fourth quarter results that were ahead of expectations,” he said.

“We executed on all of our strategic priorities for the year and completed the roll out of our self-serve account interface to Premier Agents nationally.

“In 2017, we are committed to further extending our audience leadership in the online real estate category.

“We expect to pass the $1 billion annual revenue mark in 2017, and we will press our advantage with continued investment across all Zillow Group’s brands and emerging marketplaces.”

Zillow Group’s Q4 expenses clocked in at $224.9 million, up from $195.7 million a year earlier. The company’s full-year expenses came in at $1.04 billion, up from $794 million in 2015.

$1 billion in revenue

The company expects full-year revenue for 2017 in the range of $1.03 billion to $1.05 billion, Rascoff said in an earnings call today. The company anticipates revenue of between $232 million and $237 million in the first quarter.

Spencer Rascoff

“The further we go down this path, it has become clear to us that size of the prize is even bigger than we thought,” he said.

“To fully grow into our opportunity, we are going to invest today to benefit tomorrow. We have learned from our successful investments in the past that marked the path to $1 billion in annual revenue, including our investment in growing our brands and investing in our emerging marketplaces.”

Zillow Group’s Premier Agents earned roughly $4.4 billion in commissions from the leads the company delivers them — about 5 percent of the $87 billion or so in total real estate agent commissions paid in the U.S. in 2016, according to the company’s internal estimates.

That’s up from an estimate of 3.9 percent in 2015, Rascoff said. “The opportunity in front of us remains massive,” he said.

Nonetheless, Zillow Group expects to post a net loss of $14.1 million and $19.1 million in first-quarter 2017 and a net loss of $20.2 million and $40.2 million for all of 2017.

Rascoff laid out the company’s 2017 priorities:

  • Growing its audience size and consumer engagement
  • Growing its Premier Agent advertising business
  • Growing its emerging marketplaces (mortgages, rentals, New York City and new construction)
  • Maintaining its “extraordinary company culture, which attracts and retains incredible people, and motivates them to do their best work”

The company ended 2016 with nearly 2,800 employees and about $506.4 million in cash and investments, the company said.

Traffic growth

Zillow Group’s first priority remains growing audience size and engagement because “advertisers follow audience,” Rascoff said.

“Traffic to Zillow Group brands’ mobile apps and websites reached more than 140 million average monthly unique users in the fourth quarter of 2016 and our annual seasonal peak was more than 171 million in May.”

In 2016, the company spent more than $100 million advertising its consumer brands, which Rascoff said “has been a very effective strategy for us.”

“We plan to increase our advertising expense across our five consumer brands, our business brands, and our four marketplaces in 2017, but at a rate that is lower than revenue growth, as we did last year,” he said.

“We are choosing to increase advertising investments this year to help us realize advantages of scale over the long term.”

Agent advertising

Revenue from Premier Agent advertisers increased to $164.3 million from $124.4 million a year earlier in Q4 2015 — a 32-percent jump.

Premier Agent revenue grew even faster for 2016 as a whole: 35 percent to $604.3 million from $446.9 million in 2015.

“We continue to see the nation’s best real estate agents — those who convert leads at high rates — gain transaction share in their respective markets as a result of advertising with Zillow Group,” Rascoff said.

Leads to Premier Agents increased nearly 33 percent year-over-year in Q4 to 3.9 million. For all of 2016, that figure was 16.9 million — a 44 percent jump in leads from 2015.

“We expect to be able to continue to grow leads faster than unique users as our product innovations continue to drive increased engagement,” Rascoff said.

In the fourth quarter Zillow Group completed a national rollout of its dynamic self-serve pricing interface, which Rascoff said allows advertisers to independently control their budgets and ad impressions through an auction-based system.

“Premier Agent advertisers can now see how they measure up against all market participants in a given ZIP code, along with estimated ROIs for advertising in that area,” he said.

“With this new model, each agent pays the same price for an impression based on what all agents are willing to spend in a market.

“This transparent system benefits the best Premier Agent advertisers and is consistent with our strategy of focusing on elite agents who excel at lead conversion and provide great service to our home shoppers.”

Premier Agents stood at 84,151 at the end of the fourth quarter, down from 89,147 at the end of the third quarter.

Kathleen Philips

“The decline in agent advertiser count was an expected result of our new auction-based pricing model, and our continued strategy of focusing on top performing agents and teams that spend more over time with us as they realize the benefits of advertising on our platforms,” said Zillow Group Chief Financial Officer Kathleen Philips during the earnings call.

Average revenue per advertiser (ARPA) in the fourth quarter was $632 — a 44 percent rise annually. Revenue from agent advertisers that have been on the Zillow Group platform for more than one year grew by 58 percent in the fourth quarter compared to Q4 2015.

Existing advertisers made up 63 percent of new sales in the fourth quarter and the number of agents spending more than $5,000 per month grew 100 percent.

“Churn in this cohort continues to be minimal,” Philips said.

She reminded investors that the company will no longer report on the number of agent advertisers or ARPA. This is in part because the company has been focusing on increasing the number of teams that buy advertising, which distorts the number of agents represented by advertiser count, the company said in last quarter’s earnings call.

Asked today whether the company knows how many Premier Agents are actually agent teams, Rascoff said, “We honestly don’t know.” If the company were to try to answer that question it would look at the number of leads a Premier Agent handles. More than 30 leads per month probably indicates a team, he said.

“We are in the final stages of confirming which replacement metric most closely aligns with our new auction-based pricing model and Premier Agent business for purposes of measuring business performance,” Philips said.

“We expect to begin reporting on the new metric with our first quarter 2017 earnings conference call and will provide two years’ worth of historical data on that metric.”

Other revenue

Other sources of Zillow Group’s “marketplace revenue,” which totaled $210.6 million in Q4 and $778.1 million in 2016, include:

  • Other real estate revenue — $29.8 million in Q4, up 145 percent year-over-year (this includes agent services, dotloop, StreetEasy, Naked Apartments, rentals and “other offerings to endemic advertisers that are not traditional display advertising.”) This revenue rose 192 percent in 2016 as a whole to $102.6 million.
  • Mortgages revenue — $16.5 million, up 41 percent year-over-year. This revenue increased 61 percent in 2016 to $71.1 million.
  • Display revenue — $17 million, down 20 percent year-over-year. “The decrease is primarily a result of the company’s strategy to deemphasize display advertising and improve the user experience,” the company wrote in its earnings statement. This revenue fell 23 percent in 2016 to $68.5 million.

Last year was a busy one for the real estate media and technology giant.

Zillow Group settled a lawsuit with realtor.com operator Move Inc. for $130 million in June and acquired Bridge Interactive, a provider of listing management software for multiple listing services (MLSs) and brokerages, in early August.

The company also rolled out a series of new ad products in the fourth quarter, including Premier BrokerPremier Agent Direct and Seller Boost.

And the Premier Agent app received several upgrades, including new features designed specifically to support team leaders and the ability to take in leads from competitors.

Rascoff said today that the company plans to continue building functionality into the app this year.

Editor’s note: This story has been updated.

Email Andrea V. Brambila.

Like me on Facebook! | Follow me on Twitter!

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×