Business Overview Zillow Group was founded in 2004 by Richard Barton and Lloyd Frink, the co-founders of Expedia. The company started as a real estate information portal, providing users with home valuations, property details, and market trends. In 2006, Zillow launched its first product, the Zestimate, an automated home valuation model aimed at providing consumers with greater transparency in the residential real estate market.
Over the years, Zillow has evolved into a comprehensive real estate ecosystem, offering a wide range of products and services to facilitate the entire home buying, selling, renting, and financing process. The company has built out its portfolio of real estate-focused websites and mobile applications, including Zillow.com, Trulia.com, and StreetEasy.com.
In 2011, Zillow completed its initial public offering and began trading on the Nasdaq exchange. The following year, the company launched its Premier Agent program to connect consumers with real estate agents. A significant milestone in Zillow's growth came in 2015 when it acquired Trulia in a $2.5 billion deal, solidifying its position as the leading online real estate marketplace.
The company's core business segments include Residential, Mortgages, and Rentals. The Residential segment encompasses the company's flagship Zillow platform, as well as its Premier Agent program. The Mortgages segment includes Zillow Home Loans, the company's mortgage origination and lending business. The Rentals segment focuses on serving both renters and property managers through a suite of advertising and transaction tools.
Zillow has faced various challenges throughout its history, including a high-profile lawsuit from rival Move Inc. alleging anticompetitive practices. The company also navigated changes in the real estate industry, such as the rise of iBuying. In 2021, Zillow made the decision to wind down its Zillow Offers iBuying business amid operational challenges and an unprecedented housing market.
In recent years, Zillow has focused on building an integrated "housing super app" experience, connecting consumers with real estate agents, mortgage lenders, rental providers, and other services throughout the home buying, selling, and renting process. The company has made key acquisitions, such as ShowingTime, Follow Up Boss, and Spruce, to expand its capabilities and offerings for both consumers and real estate professionals.
Financial Performance Zillow Group's financial performance has been noteworthy, particularly in the face of challenging market conditions. In the fiscal year 2024, the company reported total revenue of $2.2 billion, representing a 15% year-over-year increase. This growth outpaced the broader residential real estate industry, which saw a 6% increase in total transaction value during the same period.
The company's EBITDA margin expanded by 200 basis points in 2024, reaching 22%. This expansion was driven by Zillow's focus on cost discipline and strategic investments in high-growth areas, such as Rentals and Zillow Home Loans. The company's net loss for the year was $112 million, a significant improvement from the $158 million net loss reported in the previous year.
Breaking down the revenue by segment, the Residential segment generated $1.59 billion in 2024, a 10% year-over-year increase. This growth was driven by a 6% increase in Residential revenue per visit and a 4% increase in the number of visits. The Mortgages segment saw a substantial 51% increase in revenue to $145 million, driven by a 101% increase in total loan origination volume to $3.12 billion. The Rentals segment also performed strongly, with revenue increasing 27% to $453 million.
In the most recent quarter (Q4 2024), Zillow reported revenue of $554 million, representing a 17% year-over-year increase. This growth was driven by 15% growth in For Sale revenue and 25% growth in Rentals revenue. The company reported a net loss of $52 million for the quarter.
For the full year 2024, Zillow generated $428 million in operating cash flow and $257 million in free cash flow, demonstrating the company's ability to generate cash from its operations.
Liquidity Zillow's balance sheet remains strong, with $1.86 billion in cash and investments as of December 31, 2024. The company has minimal debt, with $419 million in convertible senior notes outstanding, which are expected to be settled by the end of the second quarter of 2025.
The company's debt-to-equity ratio stands at 0.14, indicating a conservative capital structure. Zillow also has access to $300 million in master repurchase agreements with lenders UBS AG and JPMorgan Chase Bank, N.A., of which $155 million was outstanding as of December 31, 2024. The company's current ratio and quick ratio both stand at 2.81, demonstrating strong short-term liquidity.
Strategic Initiatives Zillow Group's success can be attributed to its relentless focus on innovation and its ability to adapt to the rapidly evolving real estate landscape. The company has implemented several strategic initiatives to drive growth and improve its competitive position.
Enhanced Markets: Zillow has been methodically scaling its "Enhanced Markets" strategy, which provides consumers with a more integrated and streamlined home buying and selling experience. In these markets, Zillow leverages its technology and partnerships to connect buyers and sellers with real estate agents and mortgage professionals, resulting in higher conversion rates and increased revenue per transaction. The company expects to grow its Enhanced Market experience from 21% of connections in Q4 2024 to over 35% by the end of 2025.
Rentals Growth: The company has also seen significant success in its Rentals business, which has become a key growth driver. Zillow has built a comprehensive rental marketplace, with over 1.9 million active listings as of the end of 2024. The company's focus on multifamily properties and strategic partnerships, such as the recent agreement with Redfin, have contributed to the Rentals segment's 27% year-over-year revenue growth in 2024.
Mortgage Origination: Zillow Home Loans, the company's mortgage origination business, has also experienced strong growth, with a 51% increase in revenue in 2024. The integration of Zillow Home Loans with the company's Premier Agent program has been a key driver of this success, as it has enabled Zillow to provide a more seamless and comprehensive home buying experience for its customers.
Technological Innovation: Zillow Group has been at the forefront of technological innovation in the real estate industry. The company's proprietary Zestimate algorithm, which provides automated home valuations, has been a cornerstone of its business since its inception. More recently, Zillow has leveraged advancements in areas like artificial intelligence and computer vision to enhance its listing presentation and customer experience.
Risks and Challenges While Zillow Group has demonstrated impressive resilience and adaptability, the company faces several risks and challenges that merit consideration.
Regulatory Landscape: The real estate industry is subject to a complex and evolving regulatory environment, which can impact Zillow's operations. Changes in laws and regulations, such as those related to fair housing, data privacy, and mortgage lending, could require the company to adapt its products and services, potentially leading to increased compliance costs or operational disruptions.
Macroeconomic Conditions: Zillow's performance is closely tied to the health of the broader residential real estate market. Factors such as interest rate fluctuations, housing affordability, and overall economic conditions can significantly affect the company's revenue and profitability.
Competition: Zillow operates in a highly competitive industry, facing challenges from traditional real estate brokerage firms, online real estate platforms, and technology-enabled startups. The company's ability to maintain its market-leading position and continue to innovate will be crucial to its long-term success.
Outlook and Conclusion Looking ahead, Zillow Group remains well-positioned to capitalize on the ongoing digital transformation of the real estate industry. The company's strategic initiatives, including the expansion of its Enhanced Markets, the growth of its Rentals business, and the integration of Zillow Home Loans, are expected to drive continued revenue and margin expansion.
For Q1 2025, Zillow expects total revenue between $575 million and $590 million, representing a 10% year-over-year increase at the midpoint. Within this, For Sale revenue growth is expected to be in the mid-single-digits year-over-year, with residential growth in the low to mid-single-digits and mortgage revenue growth around 30%. Rentals revenue is expected to grow approximately 30% year-over-year. The company also expects Q1 2025 EBITDA between $125 million and $140 million, representing a 23% margin at the midpoint.
For the full year 2025, Zillow is guiding for low to mid-teens revenue growth, further EBITDA margin expansion, and the achievement of positive GAAP net income – an important milestone for the company. This guidance assumes the housing market will grow in the low to mid-single-digits. The company's strong balance sheet and prudent capital allocation strategy, including its share repurchase program, also bode well for long-term shareholder value creation.
Looking further ahead, in a mid-cycle housing environment with 6 million existing home sales, Zillow sees a clear path to $5 billion in annual revenue and a 45% EBITDA margin. This long-term vision underscores the company's confidence in its strategy and market position.
Zillow Group's relentless focus on innovation, its ability to adapt to industry changes, and its commitment to serving both consumers and real estate professionals have positioned the company as a leader in the rapidly evolving real estate landscape. As the company continues to execute on its strategic priorities, Zillow Group is well-equipped to navigate the challenges and capitalize on the opportunities that lie ahead.