Diving Deep Into Zillow’s Business Model

The US is the world’s second-most valuable real estate market, with a projected residential real estate transaction value of $2.9 trillion for 2024. While the growth can be attributed to favorable remote and hybrid work models and a surge of first-time home buyers, user-friendly digital marketplaces like Zillow are changing how individuals buy, rent, and sell homes.

What is Zillow?

Zillow is an American real estate marketplace founded in 2006 by Rich Barton and Lloyd Frink. The founders wanted to change how individuals looked for, bought, and sold homes. So, they assembled a team in April 2005 and sought to remove ambiguity and empower all parties involved with enriching information.

When they launched the company in February of the next year, the website witnessed a million visitors within three days. Currently, Zillow is the most trusted real estate brand in the US, and around 70% of home sellers and buyers use the platform at least once during their real estate journey.

Zillow Customer Segmentation

Zillow primarily caters to four types of customer segments:

Shoppers: Individuals shopping around for their next house or forever home can use Zillow’s tech tools, including realistic (3D) Home tours. They can also look at immersive floor schemes, shop with their partners, friends, or family, and use natural language searches to make shopping easier.
Sellers: With over 160 million homes in Zillow’s live database, the platform is a hit among sellers. It gives them the freedom to sell their house their way and leverage Listing Showcase (a Zillow brand) to attract more buyers.
Renters and landlords: Zillow isn’t just an innovative app for renters looking for their next house and landlords looking for dependable tenants. The solution helps landlords and property managers manage their listings, screen applicants, sign leases, and keep track of payments. On the other hand, renters can pay their rent on time through the platform and build credit on the side (without paying extra).
Buyers: Buyers can browse the listings on Zillow to find a house within their set budget or collaborate with an agent to find their dream home. They can also book a tour of the house they like and determine the accurate mortgage via Zillow Home Loans.

Zillow is a leading US real estate marketplace with a growing footprint in Canada. Moreover, the brand welcomed 214 million unique users in a month in 2023, but why do individuals trust Zillow? Let’s find out.

Zillow’s Value Propositions

Zillow’s unique value propositions for its customers include the following:

1. Premier Agent partners

According to Zillow Group’s internal data, in 2023, one in three US homebuyers decided to collaborate with a Premier Agent to finalize the home of their dreams. The primary reason is that local agents understand the locale and often have insider information. They serve as a guide, and their expertise helps buyers make the right buying decision.

2. Zillow Home Loans

Buyers can use Zillow Home Loans to finance their home purchase. The brand offers low down payment options, connects buyers with top-rated (and empathetic) loan officers, and champions transparency regarding rates and fees.

3. Zestimate

Through Zestimate, Zillow provides home valuations for around 104 million houses across America. It leverages statistical analysis and advanced machine learning models to sift through and make sense of public, MLS, and consumer-shared data. Additionally, it calculates home’s market value from home’s location, property details, and market trends.

Although the estimated value can’t be substituted for an appraisal, Zestimate’s median error rate for on-market and off-market homes is 2.4% and 7.49%, respectively.

4. ShowingTime+

Listing agents and sellers can stand out through Zillow’s ShowingTime+. They can attract more quality buyers through simulated listings that include scrollable hero images, immersive floor plans, and rich photos for each room. That’s not all. The solution helps agents and sellers seamlessly book showings. The solution also allows them to manage transactions and digital offers.

5. Zillow Rental Manager

Zillow Rental Manager is a comprehensive solution for landlords and property managers. Through the platform, they can list their properties, manage multiple rental properties, screen interested applicants, sign a rental lease, and collect rent, utilities, and move-in fees. First-time landlords can also use the solution to determine their property’s rental fees.

Who are the Key Partners of Zillow?

Zillow’s partners have helped the company become the leading US real estate marketplace. Its key partners include:

Real estate partners: The real estate marketplace has lucrative partnerships with thousands of mortgage professionals, real estate agents, brokers, landlords, property managers, local MLSs, and home builders.
Marketing partners: They play a huge part in keeping Zillow relatable and ensuring its significant marketing budget is spent judiciously.
Developers and IT partners: Technology partners ensure Zillow’s website and app run smoothly without glitches.
Real estate companies: Zillow has a multi-year partnership with OpenDoor to make it easier for sellers to sell their listed properties and get a cash offer in 45 US markets.

What are Zillow’s Key Resources?

Zillow’s key resources include:

Zillow’s user-friendly website and intuitive app are its most significant resources.
Living database of over 160 million homes and 1 million rental listings across the US.
A dependable brand name that allowed it to draw in 10 billion visitors in 2023.
Profitable partnerships with leading real estate professionals and companies.
Zillow’s ecosystem of 6,263 employees.
Proprietary technology and data, intellectual property, trade secrets, and contractual agreements.
Strong and flexible cash flow.
Impeccable brand image in the real estate sector.

What are Zillow’s Sales Channels?

Shoppers, buyers, sellers, property managers, and other real estate professionals can access Zillow through its website. It also has dedicated apps to serve iOS and Android users, which can be downloaded through Google Play and the App Store.

Additionally, the brand is active on multiple social channels, including Facebook, Instagram, and TikTok, and leverages them to connect with its existing customers and acquire new ones.

How Does Zillow Maintain Customer Relationships?

Zillow customers can visit its Help page to resolve their queries regarding agents, lenders, Zillow Home Loans, rentals, homebuyers, homeowners, home sellers, privacy, and mobile apps. There’s an entire section dedicated to Zillow Canada. They can also chat with Zillow’s virtual assistant to get their questions answered.

What is Zillow’s Cost Structure?

Zillow’s cost of revenue was $421 million for the year ended December 31, 2023. Additionally, it spent $1.79 billion on operating expenses.

How Does Zillow Generate Revenue?

Zillow’s revenue was over $1.9 billion for the year ended December 31, 2023. While residential revenue and mortgage revenue dipped last year compared to 2022, the company saw an $83 million increase in rental income. But how does this real estate marketplace make money? Let’s find out.

Zillow consolidated statement of operations

Zillow’s revenue streams can be categorized into four sections:

1. Residential

This includes income from Premier Agent and new construction business. Moreover, income from advertising and selling business technology on StreetEasy, ShowingTime+, and Follow Up Boss falls under this category.

2. Rentals

Rental income includes revenue generated through advertising and selling tools to landlords, property managers, and other rental business people on a cost-per-leave, listing, lead, or impression basis. Sometimes, the fee is fixed for specific advertising packages, including income from rental applications.

3. Mortgages

This category primarily includes income earned through Zillow Home Loan mortgages. It also includes the sale of mortgages on the secondary market and advertising income from mortgage businesses on a cost-per-lead basis.

4. Other

Income generated through display advertising is recorded under this category.

The Bottom Line: Zillow is transforming the real estate market in the US

Zillow is changing the way individuals shop, buy, sell, rent, or lease real estate. Its proprietary technology and cornucopia of brands help all parties involved make informed decisions.

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