Is Zillow afraid of Keller Williams, Compass, Realogy, or Realtor.com? Nope.
How about Opendoor? Of course, both companies are pioneering the budding iBuying movement.
But Zillow faces a bigger threat.
And the company is not even in the residential for-sale business, yet. CoStar, a 33-year old commercial real estate data company, is knocking on the door of online residential real estate and could be on the scene by next year.
It was reported last week that CoStar is in talks to acquire CoreLogic.
Data giant CoreLogic has 600,000 real estate agents as clients and 17 of the 20 largest MLS organizations, which could put it in the home listing business overnight. The company also has a lead in the mortgage-related data business.
Such a merger worries Zillow because CoStar is a good executor. Look at its rental property, Apartments.com, which has already outpaced Zillow Rentals on revenue and the size of its inventory.
Plus, like Zillow, CoStar is imbued with founder zeal and has a strong management team. The company is led by Andrew Florance, who like Zillow founder Rich Barton, is a Wall Street darling. Both are charming but sometimes ruthless.
Founded in 1987 by Florance, then fresh out of Princeton University, the company has grown to include commercial database CoStar and many online marketplaces, including Apartments.com, LoopNet, Lands of America and BizBuySell. Twenty million unique visitors come through this collection of sites each month.
The company has a market cap of $32 billion (Zillow’s is $20 billion) and an 82 percent gross margin, compared to Zillow’s 45 percent. Plus, CoStar is sitting on a $6 billion cash reserve and it’s profitable.
In its earnings report last week, Florance talked about the residential listings business, specifically mentioning similar businesses in the U.K. and Australia where agents pay to post their listings online. That is Co-Star’s business model with commercial listings.
No doubt, Co-Star is on the prowl to sew up the missing parts of its real estate portfolio.
“One common theme for us has been to use acquisitions to enter a new, closely related real estate segment,” Florance said. “We acquired a national retail bureau to jump-start our retail entry. We acquired Apartments.com to enter the apartment sector. We acquired STR to enter hospitality. We acquired Lands of America to enter the real land space.”
Residential sales seems like a missing piece in his real estate puzzle.
I have heard that Florance wants to take on Zillow, and at one time even had ambitions to acquire the online portal. But that was before the Zillow market cap more than tripled in the last year.
CoreLogic’s market cap is $6 billion.
Earlier this year, CoStar acquired real estate auction platform Ten-X in a $190 million deal. That may be how the company enters residential sales.
Whatever its journey, CoStar is on the move. Don’t be surprised if some day in the future you wake up and find yourself buying ads from them for your home listings.