Zillow [Z] was born as a search marketplace for anyone to find their perfect home, originally pursuing a profitable advertising angle to scale its brand and notability in real estate.
But with success came overconfidence, and it got a little too big for its boots when it entered the iBuying market.
This article was originally written by MyWallSt. Read more insights from the MyWallSt team here.
Saying no to iBuying
Most of us by now know that Zillow took on a little bit more than it could handle when it came to home flipping. The iBuying fiasco was the cherry on top for a high-growth name that was subsequently hit by a simultaneous market correction, causing shares to drop more than 60% over the last several months.
On the bright side though, more than 8,300 of its home stockpile got the boot in the most recent quarter, and the company actually suffered far less than originally forecast. The loss for its Home segment was $206 million in Q4, considerably better than the loss of $330 million – $365 million estimated. CEO Rich Barton notes that homes are selling “faster than we anticipated at better unit economics than we projected.”
All of this is to say, the Zillow downfall might have been a tad overblown, and the opportunities are still extremely lucrative for a relatively young company targeting what it sees as a $300 billion market opportunity for transaction fees alone.
Poor judgment has been an important learning curve for the company too, and it’s now moving back to its lean business model roots with a brand new “super-app” designed to take the hassle out of renting, researching, buying, and financing.
67% of U.S. homebuyers are now using Zillow, illustrating the magnitude of how intertwined its name has become with real estate planning. It may be down, but it’s certainly not out.
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