In the opening remarks of CoStar Group’s Q3 earnings call Tuesday, CEO Andy Florance revealed to investment analysts the company’s grand plan to make the portal of the future.

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CoStar Group Founder and CEO Andy Florance isn’t paying attention to detractors.

Florance used the first half of his company’s third-quarter earnings call to assert’s ability to end Zillow’s decade-plus reign over the residential portal space, as the portal claimed a staggering 1,290 percent year-over-year rise in monthly unique visitors and continued to gain traction with its “your listing, your lead” promise.

Andy Florance

He said both advancements prove is the portal of the future, especially as the Sitzer | Burnett buyer-broker commission lawsuit threatens to upend the current commission structure.

“We could be seeing the biggest change to the residential real estate industry in recent or even intermediate history or long-term history,” he said during the call with analysts on Tuesday. “The first-generation real estate portals leverage this threatened buyer-broker commission rule to divert listing leads from all the agents in the market to a small handful of agents who are then required to split their commissions with a portal. Many agents and brokers strongly resent that model.”

“Now that is one of the most heavily trafficked portals, there’s a strong and viable alternative for lead generation available to agents that does not require users’ commission splits,” he added. “Momentum around our residential strategy is clearly building with early successes of, and there’s potential for dramatic change in the industry soon.”

Florance said CoStar will be pushing the pedal to the metal in the coming quarters, as leadership works on rolling out a membership by the end of Q2 2024. “CoStar Group has created dozens of successful monetization strategies and we believe that our planned monetization strategy for will become a dozen plus one of our successful monetization strategies.”

Read Florance’s opening remarks, edited below for length and clarity:

Good evening, everyone and thank you for joining us for CoStar Group’s third quarter 2023 earnings call.

Revenue for the third quarter of 2023 was $625 million or 12 percent growth year-over-year. Our commercial real estate information and marketplace businesses grew revenue at an impressive 14 percent this quarter compared to the same quarter a year ago. We also delivered strong net new bookings of $65 million in the third quarter, with CoStar sales improving sequentially and coming off a seasonally strong sales record they set in the second quarter.

We’ve now reported 50 straight quarters of double-digit revenue growth, stretching all the way back to the first quarter of 2011 as we came out of the great financial crisis. This is a remarkable achievement. Over the past 12-plus years, we’ve generated 21 percent compound annual revenue growth, increasing revenue tenfold from $230 million to over $2.3 billion on a trailing 12-month basis.

As we move into the fourth quarter, we are generating almost $1 billion of adjusted EBITDA annualized from our commercial real estate business. We have diversified our revenue across countercyclical marketplaces such as LoopNet and while diversifying CoStar product revenue into broader vertical markets such as owners and lenders. Alongside our diversification efforts, we remain committed to building a subscription-only revenue portfolio across the business.

The result we see today is an extremely resilient and steady growth business, even during a time when the property markets are in a hard down cycle as they are now. To produce these exceptional results, we made big investment bets on expanding our geographical footprint or entering new adjacent segments. These investments, for example, such as expanding CoStar into all the U.S. cities, Canada and the U.K. or entering the apartment marketplace business though clear to us, were not universally popular at the time when we were in the investment phase they required.

We pursue growth investments regardless because we are singularly focused on the enormous value creation we see in meeting the demand for digital information, analytics and marketing of the $300 trillion real estate asset class globally. Digitizing real estate is unlocking major value, and we are absolutely in the earliest innings of this opportunity. I believe that CoStar’s Group’s revenue will grow tenfold again over the next 12 years because of the careful significant calculated investments we’re making that optimize our competitive advantages and capabilities.

We firmly believe that can compete and win in the residential opportunity. Just as we lead today in all the prior asset classes we have entered in the past, including office, industrial, retail, hospitality, multifamily, land, etc. delivered over 100 million unique visitors in the month of September, according to Google Analytics. That’s an increase of 1,290 percent over the same period a year ago, making the fastest-growing residential marketplace in the United States.

Our residential network traffic, which consists of homes and apartments, reached over 140 million monthly unique visitors in September which is more than and Redfin combined based on the traffic reported in their most recent earnings announcements. According to Comscore, we are clearly now the second most heavily trafficked residential network by a wide margin with monthly unique visitors, 35 percent higher than and 90 percent higher than Redfin in September. Looking at the trend lines, we are on a convergence path with the historically most traffic site.

Two short years ago, when we acquired we set out to deliver an agent-friendly site that homebuyers love. I believe that reaching over 100 million monthly unique visitors in September to is evidence that we are achieving that goal. Our returning users have increased almost 900 percent over September of last year, which is a testament to our success of building rich content and providing a great consumer experience.

The traffic generation plans for are still in the early stages, and we’ve already delivered double the 50 million monthly unique visitors that we initially targeted. In the Apple App Store, has climbed from 136 under lifestyle to now become No. 19. is now ranked above Realtor, Redfin, Trulia and even in the App Store. When we announced that we were going to build into a leading residential portal, the No.1 risk factor called out was skepticism that we could build the traffic required to compete.

Earlier this year, media reports speculated that CoStar Group was in talks to acquire for approximately $3 billion. If that was true, the primary objective in acquiring could have been to take the No. 2 traffic position in the United States. Given that speculation did not come to pass, we might have been good stewards of our shareholders’ $3 billion that we saved by building the traffic to for a fraction of the cost of buying it.

Clearly, successfully building traffic is no longer’s primary risk factor. At this point, shrewd investors seeking a new risk factor to replace the now reduced traffic risk factor will now need to turn to monetization as the next key risk factor. Unlike its competitors, has never invested in any material brand marketing. Because of that,’s unaided awareness is in the low single digits, while our competitors’ unaided awareness is in the mid-to-high double digits.

When we acquired, it similarly had a single-digit unaided awareness problem. But through persistent creative branding, we’ve grown’s unaided awareness to the industry-leading unaided awareness of 53 percent. Achieving significant unaided awareness is important because it improves [search engine optimization], optimizes [search engine marketing] investments and facilitates sales of advertising products to prospects.

It is essential to build unaided awareness before we begin monetizing. We do not believe that building unaided awareness is our most significant risk factor. We anticipate selling memberships in the second quarter of 2024. CoStar Group has created dozens of successful monetization strategies, and we believe that our planned monetization strategy for will become [a] dozen plus one of our successful monetization strategies.

When we acquired Homesnap, we quickly built a centralized sales team to sell their Facebook ads. While we did not believe in the long-term value of reselling low-retention low-margin Facebook ads, we did very quickly scale a sales force and sold tens of millions of dollars worth of ads. We look forward to doing it again with, which we will believe will be a much better product with higher margin and higher retention.

[Investment bank] William Blair recently published a paper on October 20, titled “Competition Intensifying Among Home Search Portals.” There are some interesting call-outs from their survey of residential agents that are worth noting.

Combined spend and potential efficiency gained from agents marketing their properties and services is $15 billion to $20 billion in the United States. Most of the agent’s marketing spend today is not on our competing portals. It’s like print. Most agents do not spend marketing dollars with Zillow. Most agents do not spend marketing dollars with Most of Zillow’s clients feel that Zillow will become less important to their lead generation efforts in the next one to two years.

Sixty percent of Zillow’s Premier Agent client surveys stated that the value of the product is declining, and 5 percent said it’s improving. Ninety-four percent of Zillow’s Premier Agent customers said that they’re very open or somewhat open to alternative sources for lead generation. Sounds good to me.

Even before we begin selling premium services, we’re creating real value for agents. As a result of our traffic growth and [the] superior ‘your listing, your lead’ business model, I believe we are already generating millions of leads for agents that are converting to commissions for them. I’m encouraged by the feedback with one agent saying that 85 percent of their total sales come from being able to build their brand and collaborate with sellers and buyers on the network. From these leads, we estimate that is helping agents generate billions and billions of dollars in annual commissions already while saving them billions in referral fees.

Last week, the Sitzer | Burnett versus National Association of Realtors lawsuit went to trial. We could be seeing the biggest change to the residential real estate industry in recent or even intermediate history or long-term history. Sitzer | Burnett and other class action lawsuits are challenging the legality of the buyer-broker commission rule, which requires the homeseller to pay the homebuyer’s agent fees. Plaintiffs are seeking damages of more than $40 billion, implying nationwide damages of more than $400 billion. Several defendants have already agreed to collectively pay $138 million in settlements and to changes to the rule.

The first-generation real estate portals leverage this threatened buyer-broker commission rule to divert listing leads from all the agents in the market to a small handful of agents who are then required to split their commissions with the portal. Often, that’s the model. Many agents and brokers strongly resent that model. Now that is one of the most heavily trafficked portals, there is a strong and viable alternative for lead generation available to agents that does not require various commission splits.

Unlike the first-generation portals,’s business model is not negatively impacted by the potential end of the buyer-broker commission rule. Momentum around our residential strategy is clearly building with the early successes of and there is potential for dramatic change in the industry soon. Our confidence in the success of… is increasing the need to time the movement that we see happening. For these reasons, we have decided to slightly accelerate the pace and level of our investments into

Turning to the real estate economy… The residential sector continues to face challenges from still-rising mortgage rates and associated declining home sales, down 15 percent year-over-year in September. More than 90 percent of the [existing] loans [have interest rates] below 6 percent, [and] more than 60 percent [of existing loans have rates] below 4 percent, leading to very low levels of inventory. The combination of rising prices and rising mortgage rates has pushed affordability to its lowest level since July 1985.

In conclusion, for my part, CoStar Group continues to deliver both double-digit revenue growth and accelerate our performance against our residential strategy. I’m very proud of our residential team for hitting a record milestone of 100 million monthly unique visitors to in September, achieving the No.2 position in the residential marketplaces in the United States and climbing. I’m also very proud of the success our commercial real estate teams have had increasing our revenue tenfold over the past 10 years — 12 years and generating 14 percent year-over-year revenue growth in a downturn while growing our commercial property adjusted EBITDA to approaching $1 billion annualized as we move into the fourth quarter.

Email Marian McPherson

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