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Commercial real estate giant CoStar revealed Tuesday that it will not buy portal Realtor.com, though the company does plan to continue pushing into the residential real estate market.
CoStar CEO Andy Florance made the surprise announcement about Realtor.com during an earnings call with investors Tuesday. Florance expressed respect for Realtor.com and parent company Move Inc. — which is owned by News Corp — but said that at this point CoStar will instead focus on its Homes.com business.
“At this point, CoStar is not acquiring Realtor.com,” Florance said on the call, adding that “we continue to believe that the Homes.com business model and principles are well aligned with [National Association of Realtors] members and real estate agents generally.”
Florance’s announcement was particularly surprising because only 10 days ago News Corp indicated a deal was still on the table when it said that “we have been actively engaged in discussions with CoStar Group about a potential sale of Move.” The company included the comment in its own fourth quarter earnings report.
However in a statement Tuesday, News Corp confirmed “that it is no longer engaged in discussions with CoStar” about a deal for Move and Realtor.com. The statement added that News Corp “will continue to actively assess opportunities to support the company’s strategy to optimize the value of its digital real estate services segment and otherwise maximize shareholder value.”
Though News Corp’s statement did not provide further information, a source familiar with the situation told Inman that other potential buyers have expressed an interest in Realtor.com.
News of CoStar potentially acquiring Realtor.com first surfaced in January. The possible deal made waves because CoStar has openly criticized Zillow and indicated a desire to offer a competing portal business. Among other things, Florance has suggested Zillow’s business strategy amounts to “blackmail” against real estate agents.
Florance’s willingness to criticize Zillow has earned the company some fans within the agent community who are dissatisfied with the portal giant’s lead generation business.
The two companies currently compete in New York City thanks to CoStar’s Citysnap and Zillow’s StreetEasy, but buying Realtor.com would have potentially pitted the two companies against each other on a national scale.
Though the deal now won’t happen, CoStar’s plan to continue building Homes.com suggests the company will end up deepening its rivalry with Zillow over the long run.
During Tuesday’s investor call, Florance compared CoStar’s portal ambitions to the choice consumers face between buying a home verses building something new. But thanks to what Florance described as Homes.com’s success with traffic, and its positive reception within the real estate industry, CoStar has apparently settled for now on the building, rather than buying, strategy.
“We feel we have a unique offering on the organic side that no one else is offering out there,” Florance said at another point during the call.
Tuesday’s earnings report states that Homes.com now has more than 20 million unique monthly visitors.
Later during Tuesday’s call, analyst John Campbell asked Florance if CoStar is “fully committed” to the “build” strategy — meaning it would have ruled out buying companies to beef up its residential business.
Florance replied that “I don’t think you can rule anything out.” He went on to say that last fall it felt like there were “too many [merger and acquisition] opportunities.” The remarks suggest CoStar could at some future point still buy a company to help it take on the established portal players.
However, Florance also said that “I think we are very fortunate to have a very viable organic path” forward — a comment that suggests the company isn’t planning any other major portal acquisitions at the moment.
Despite passing on the Realtor.com acquisition, Florance indicated during Tuesday’s earnings call that his company still plans to aggressively continue moving into the residential real estate space. Among other things, he said CoStar’s largest investment in 2023 will be into its residential business.
And he argued that the site’s “your listing, your lead” philosophy — which aims to directly connect consumers to listing agents — is better aligned with agents’ needs, and “offers a dramatically better consumer experience.”
Florance didn’t criticize any rival portals by name Tuesday, but said that his own experience using other companies’ offerings was “remarkably awful.”
In addition to growing Homes.com, Florance also indicated that he believes there’s a lot of money on the table for an up-and-coming portal like his. He said on the call that “maybe 97 percent of active residential agents aren’t buying anything from the portals.” And he added that such a figure means “there’s a very attractive opportunity.”
Update: This post was updated after publication with additional background, and more commentary from CoStar’s Tuesday’s earnings call with investors.