Regional News

Zillow: Is profitability in sight?

By Mike DelPrete 0 Comments NEWS, Regional News

Real estate tech advisor and entrepreneur Mike DelPrete takes a look at Zillow's first quarter financial results for 2017.

What’s interesting in the Zillow Group results for Q1? Here are highlights, with charts and commentary. In a nutshell:

  • Zillow continues to edge toward profitability, with overall expenses coming in line with revenue.
  • Overall revenue growth is re-accelerating, matched by increased spending on sales and marketing.
  • Technology-and-development spend has slowed considerably, contributing to slower overall expense growth.

First: The profitability chestnut. Cutting out all the noise for a moment (including stock-based compensation), let’s focus simply on revenue and expenses.

One of the biggest questions for Zillow is: Can it turn a profit? Zillow has lost millions of dollars during the past few years and has yet to turn a profit, even though it’s on track to generate more than $1 billion U.S. in revenue this year.

So, any signs that give clues to whether Zillow can and will become profitable are quite relevant. Zillow has done a good job over the past three quarters; expenses are finally matching revenue.

Quarterly revenue growth has picked up steam as well, up from a relatively slow Q4. In Q1, revenue was up 8 percent from Q4, and 32 percent from Q1 in FY2016.

In particular, the sales and marketing expense is quite illuminating. While Q1 revenue was up 8 percent from the previous quarter, expenses were up 9 percent overall and the sales and marketing expense was up 18 percent.

In absolute terms, revenue was up $18 million U.S., expenses were up $19.7 million, and sales and marketing $15.8 million.

But, looked at over the past year, the story changes. Compared to the same quarter last year, revenue is up 32 percent, expenses up 10 percent and sales and marketing 7 percent.

Again, looking at year-over-year growth in absolute terms, revenue was up $60 million, expenses $22.6 million and sales and marketing up $6.8 million.

To read the full article: Visit Mike's blog: Adventures in Real Estate Tech.

Mike DelPrete is a tech entrepreneur and business advisor with broad expertise in online real estate tech. As head of strategy at the online real estate portal and classifieds firm Trade Me in New Zealand, he oversaw investments and acquisitions for the publically-traded firm. Now he travels the world engaging with leading property portals and real estate tech startups, gathering first-hand knowledge on emerging trends and industry themes.

 

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