In an earnings report today, Seattle-based Zillow Group, the operator of listing portals Zillow, Trulia, StreetEasy and RealEstate.com, posted a net loss of $97.7 million in the fourth quarter and a net loss of $120 million for all of 2018, and announced a major leadership shift, with co-founder Rich Barton taking over as CEO, replacing Spencer Rascoff.
Despite the losses, the company’s fourth quarter revenue rose 29 percent year over year, to $365.3 million — beating Zillow’s own projections — and its full-year revenue rose by 24 percent year over year to a record $1.33 billion in 2018.
For the first time, the company also announced long-term growth projections for the next three to five years. These projections signal a major change in focus for the company toward its Zillow Offers cash homebuying service as its biggest revenue generator — a position currently held by its Premier Agent advertising program.
In three to five years, Zillow Group expects its Homes segment — Zillow Offers — will purchase 5,000 homes per month and bring in annualized revenue of about $20 billion. Through its acquisition of Mortgage Lenders of America , the company expects to originate more than 3,000 loans per month. Zillow expects 33 percent of the people who buy a Zillow-owned home will also originate their mortgage with MLOA.
At the same time, Zillow expects its Internet, Media and Technology segment — which includes its Premier Agent advertising program as well as rental, mortgage, new construction and display ads and its dotloop transaction management platform — to bring in more than $2 billion in annual revenue. That’s nearly double what this segment brings in now — but will dwarf the expected revenue from Zillow Offers.
“In the past year, Zillow Group has become a very different company,” said Rich Barton, co-founder and CEO of Zillow Group, in a statement.
“We’re making strategic investments to broaden the Zillow Group portfolio to move further down the home-shopping funnel, giving today’s ‘uberized,’ on-demand consumers a full spectrum of options to buy, sell, borrow and rent on their terms.
“Adding real estate transactions and eventually seamless mortgages to the Zillow Group portfolio positions us well for the next generation of online real estate and dramatically increases our addressable market.”
“We created Zillow Group in 2005 to make the real estate shopping and purchase process easier and more seamless. Much of our original dream is just now becoming possible,” Barton added.
The company’s revenue expectations stand between $417 million and $443 million for first-quarter 2019. Zillow Group did not provide a revenue forecast for full-year 2019. The company also did not provide a forecast of its expected profit or loss in the first quarter or in all of 2019.
Zillow Group expects its Premier Agent program to bring in between $215 million and $220 million in revenue first-quarter 2019 and between $905 million and $930 million in revenue for all of 2019. Meanwhile, it expects its Homes segment to bring in between $100 million and $115 million in revenue in first-quarter 2019. The company did not forecast full-year revenue for the segment.
As usual, most of the company’s revenue in Q4 and 2018 came from Premier Agent advertisers. That program pulled in $221 million in Q4, up from $199.5 million in the fourth quarter of 2017 — an 11 percent increase. Full year Premier Agent revenue rose 18 percent to $898 million from $761.6 million in 2017.
“We’re also in the process of transitioning our Premier Agent business from a web 1.0 lead-generation model to one that creates live on-demand connections with consumers to improve their experience and ultimately helps our Premier Agents close more deals,” Barton said.
“While our Premier Agent business is still recovering from some mid-year challenges, we’re now seeing better agent response rates and higher conversion rates, as our churn rates are approaching normal historical levels.”
The Homes segment brought in $41.3 million in revenue in the fourth quarter and $52.4 million in all of 2018. The average fee Zillow charged sellers for its Offers service was 7 percent in the fourth quarter. Zillow said it now has $1 billion of maximum borrowing capacity to support Zillow Offers’ growth in 2019 and beyond.
Zillow Group also reported that traffic to its mobile apps and websites reached more than 157 million average monthly unique users in the fourth quarter, up 4 percent year over year.
Zillow Group had a tumultuous fourth quarter. In October, the company launched Canadian home listings on its signature property search website. At the same time, longtime Zillow veteran Amy Bohutinsky resigned from her role as the company’s chief operating officer (COO) and joined its board of directors. Later that month, the company announced its “Best of Zillow” program, in which the company said it would start tracking consumer feedback and presenting it to Premier Agents who advertise on the platform to enhance their approach, rewarding the agents with the best track records and booting out those who don’t shape up.
In November, after agent complaints, Zillow Group announced it was bringing back unvetted leads to its Premier Agent platform — just seven months after it dropped them. That same month, the company also completed its acquisition of Mortgage Lenders of America and hired a new chief financial officer, Allen Parker.
In December, the company announced that its Zillow Offers would be coming to Dallas, Texas, in 2019. The service is already operational in Phoenix, Las Vegas, Atlanta, Denver, and Charlotte, and has announced expansions to Raleigh, Houston and Riverside, California sometime in this year.
Editor’s note :This story has been updated.