Q3 2024 Summary
Published Feb 18, 2025, 5:23 PM UTC- Zillow's Rentals segment is demonstrating strong growth, with rentals revenue up 24% year-over-year and multifamily revenue up 38% year-over-year in Q3. The company's efforts in marketing and partnerships are contributing to increased customer awareness, positioning Zillow well towards the $1 billion-plus revenue opportunity in Rentals.
- The Enhanced Markets strategy is proving successful, with revenue per total transaction value in the oldest enhanced markets doubling since the beginning of 2023. This significant growth indicates the strategy's effectiveness in increasing transaction share and revenue.
- Residential revenue is outperforming the industry due to improvements in Premier Agent conversion rates, strong growth from Zillow Showcase—which now represents nearly 1.5% of all new for-sale listings in the country—and successful offerings like the new construction marketplace and software solutions such as ShowingTime+ and Follow Up Boss.
- Challenging Macroeconomic Conditions May Impede Growth: The company acknowledges that the macro environment has been "choppy" and expects this to continue, with high mortgage rates and affordability remaining challenges. This could impact their growth targets as the housing market remains "stuck" or "slow" and could affect variable costs relative to revenue growth. ,
- Increased Variable Costs Could Pressure Margins: Zillow plans to continue investing in variable costs such as marketing and sales teams, particularly for rentals and Zillow Showcase. These investments may outpace revenue growth, potentially pressuring margins if not carefully managed. The company is also considering expanding marketing efforts in 2025, which could increase operating expenses. ,
- Uncertainty Around Industry Changes Impact: While Zillow believes it and its partners will benefit from industry changes like the NAR settlement, they cannot speak to broad commission trends since 80% of their Premier Agent base is in the top 20% of producers. If commission rates decrease more broadly, it could negatively impact their Premier Agent business.
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Consistent Rentals Business Growth and Multifamily Expansion | In Q2 2024, Q1 2024, and Q4 2023, Zillow reported strong rentals revenue growth (29%, 31%, 37% YoY) and robust multifamily expansion with rising property counts and revenue drivers ( , , ). | Q3 2024 continued this trend with 24% YoY rentals revenue growth, a 34% increase in multifamily properties, and an expected $1B+ Rentals opportunity ( ). | Continued strong, positive growth with deeper multifamily focus and consistent performance. |
Enhanced Markets Strategy and Expansion | Q2 2024 and Q1 2024 calls highlighted plans to reach 36–40 enhanced markets and integration of Zillow Home Loans with agent networks, while Q4 2023 set the stage for expansion from 9 to 40 markets ( , , ). | Q3 2024 reported an expansion to 43 enhanced markets with compelling revenue-per-transaction gains and deeper market penetration ( ). | Accelerated expansion with proactive market deepening and confidence in integrated service delivery. |
Residential Revenue and Premier Agent/Listing Showcase Dynamics | Previous periods (Q2, Q1, and Q4 2023) demonstrated steady residential revenue growth (8%–9% YoY), increased Premier Agent conversion, and emerging benefits from Listing Showcase, which drives higher engagement and premium listing performance ( , , ). | Q3 2024 reported 12% YoY residential revenue growth and continued positive impact from Premier Agent partnerships and Zillow Showcase with nearly 1.5% share of new listings ( ). | Ongoing outperformance with enhanced product offerings and increasing contribution from AI-powered, agent-focused solutions. |
Macroeconomic Headwinds and Flat Housing Market Challenges | In Q1, Q2, and Q4 2023, challenges such as high mortgage rates, rate shocks affecting first-time buyers, and flat housing markets were noted; however, strategic cost management and execution enabled Zillow to outperform overall market trends ( , , ). | In Q3 2024, despite describing the macro environment as “choppy” with affordability challenges, Zillow still outperformed the broader industry, indicating resilience ( ). | Challenges persist but are being effectively managed, maintaining resilience amid a flat housing market. |
Rising Variable Costs and Margin Pressure | Q1, Q2, and Q4 2023 discussed investment-driven increases in variable costs—ramping up sales teams, marketing, and new hires—while emphasizing cost discipline and margin management to achieve EBITDA margin expansion ( , , ). | Q3 2024 noted increased variable costs due to strategic investments, yet achieved a 22% EBITDA margin, reflecting disciplined cost control despite growth spending ( ). | Continued rising costs offset by effective management, with margins expanding over time. |
Regulatory Environment Impact on Agent Commissions | Q1, Q2, and Q4 2023 consistently noted stable commission rates within a tight band, working primarily with top-performing agents, and highlighted industry changes with increased transparency ( , , ). | Q3 2024 reaffirmed that commission rates remain within a narrow range and stressed consumer-friendly agreements that benefit top agents ( ). | Steady regulatory impact providing an advantage for top agents, with consistent positive outlook. |
Reduced Emphasis on First-Time Homebuyer Dependency | Q1 and Q2 2024 earnings calls detailed significant challenges for first-time homebuyers due to rate shocks and underperformance, explicitly emphasizing the temporary setback ( , ). | Q3 2024 did not mention first-time homebuyer dependency, suggesting a shift away from reliance on this segment in current discussions. | A notable de-emphasis as focus shifts away from first-time buyer dependency. |
Execution and Operational Risks in Aggressive Market Expansion | Q1 and Q2 2024 mentioned operational readiness, strong leadership, and execution capabilities in pursuing aggressive market expansion ( , ). | Q3 2024 and Q4 2023 did not explicitly highlight operational risks, with discussions focusing more on successful execution and expansion performance ( , ). | Reduced emphasis on risks, indicating increased confidence in execution and operational stability. |
Shifts in Customer Engagement and Brand Awareness | Q1 and Q2 2024 demonstrated strategic investments in brand awareness (e.g., national Rentals campaign) and technologies to enhance engagement; Q4 2023 underscored organic traffic strengths ( , , ). | Q3 2024 reported record engagement with 233 million average monthly unique users, high organic traffic (80%), and strong brand positioning across platforms ( ). | Increasing engagement and robust brand strength, with metrics showing expanded consumer reach. |
Emerging Product and Technology Initiatives | Across Q1, Q2, and Q4 2023, Zillow detailed innovations like Listing Showcase, Follow Up Boss, ShowingTime+, and real-time touring—with positive early results and integration of Zillow Home Loans into the ecosystem ( , , ). | Q3 2024 continued to emphasize these initiatives, highlighting nationwide rollout of Listing Showcase, improved software solutions, and integration improvements driving growth ( ). | Steady innovation and integration, driving scalability and long-term growth through digital transformation. |
-
Revenue Guidance and Growth
Q: Does guidance imply Premier Agent revenue decline?
A: Jeremy Hofmann stated that Zillow expects 12% growth at the midpoint for Q4. Despite challenges in the housing market, they anticipate double-digit growth and margin expansion in both Q4 and full year '24, with revenue projected to grow 14% year-over-year in 2024. They also mentioned 22% EBITDA margins, implying 200 basis points of margin expansion. Premier Agent is gaining share, up 800 basis points year-over-year in Q3 and 2,000 basis points since early '23. -
Regulatory Changes Impact
Q: How do regulatory changes affect conversion and market share?
A: Jeremy Wacksman explained that mandated buyer agreements are a healthy evolution, improving buyer education and preparing them to meet agents. They haven't seen concrete data on structural changes to conversion but view it positively. Regarding the NAR settlement impact, Jeremy Hofmann noted that commission rates have stayed in a tight band, and Zillow and their partners are expected to benefit from industry changes due to having the most customers, best partners, and providing the most technology. -
Stock-Based Compensation Outlook
Q: What's the plan for managing stock-based compensation?
A: Jeremy Hofmann stated they plan to leverage stock-based compensation going forward. With a fixed cost base of about $1 billion annually, and 90% of SBC within that, as they grow revenue while controlling fixed costs, they'll get more leverage on the SBC line, driving greater GAAP profitability over time. -
Drivers of Revenue Outperformance
Q: What's driving better overall outperformance?
A: Jeremy Hofmann highlighted double-digit growth across residential, rentals, and mortgages, with total growth of 17% year-over-year. Residential growth is driven by continued conversion improvements, particularly in enhanced markets and contributions from Real Time Touring. Zillow Showcase, now nearly 1.5% of all new listings, along with strong performance from new construction marketplace, ShowingTime+, and Follow Up Boss also contributed. -
Zillow Showcase Demand
Q: What is the demand and pricing outlook for Zillow Showcase?
A: Jeremy Wacksman stated that Zillow Showcase has reached nearly 1.5% share of new listings, with pricing variable by home price and geography landing well with agents and teams. They aim for a medium-term target of 5% to 10% of total active listings, translating to a $150 million to $300 million annual business. The product is engaging buyers and sellers, and agents are winning more business, fueling confidence in reaching and potentially surpassing their goals. -
Follow Up Boss Growth
Q: How has Follow Up Boss adoption progressed?
A: Jeremy Wacksman noted great success, with 80% of connections in Enhanced Markets now flowing through Follow Up Boss. The strategy includes growing efforts to attract more agent teams and integrating Zillow customers with Enhanced Market partners. Feedback from agent partners is positive, and the integration is helping power their business. -
Clear Cooperation Risks
Q: Are there risks from changes in clear cooperation policies?
A: Jeremy Wacksman emphasized that changes pulling listings off MLSs would not be good for buyers, sellers, or agents. Zillow supports strengthening policies that promote transparency and access, as restrictive changes could harm the consumer experience and the industry's overall transparency. -
Rentals Growth Opportunities
Q: Can you expand the rentals marketing campaign?
A: Jeremy Wacksman expressed satisfaction with demand efforts, noting that Zillow has the largest audience of renters in the country, up 20% year-over-year. Multifamily revenue grew 38% year-over-year. They see continued growth potential, aiming beyond the $1 billion revenue milestone, with marketing being part of the mix to accelerate growth. -
Expense Growth Outlook
Q: Will expense growth trends continue if the market remains slow?
A: Jeremy Hofmann indicated they plan to continue their strategy, expanding enhanced markets and driving revenue across segments. They'll remain disciplined on costs, expecting the macro environment to stay choppy, and will plan the cost structure accordingly. They feel comfortable with the fixed cost level to achieve their 2025 share targets.