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Zillow files SEC amendment, notes reliance on Realtor ad dollars

Zillow going public

Just two months ago, real estate search company filed for IPO status with the U.S. Securities and Exchange Commission and immediately entered what is commonly referred to as the “quiet period” during which the SEC reviews their filed S-1 papers and Zillow cannot influence the market, thus must remain quiet.

Today, Zillow filed “Amendment 5 to the S-1” which outlines the basics of their pending IPO. 3,462,000 shares under the NASDAQ symbol “Z” will start at $12 to $14 per share meaning the total valuation is $378 million.

Zillow seeks to raise upward of $55 million in the IPO. Zillow’s traffic has increased substantially between 2010 and 2011 and they claim 1.7 million homes are viewed via mobile devices every 24 hours. Revenues have also grown since 2008 although income has been on the decline. Thus, the seeking of funding through IPO.

Given that tech companies that have recently gone IPO do not have consistent performance, it will be interesting to see how Zillow performs when the SEC grants them public status.

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Zillow is relying on you, Realtors

The filing does, however, admit that Zillow has “incurred significant operating losses in the past and we may not be able to generate sufficient revenue to be profitable over the long term.” The Amendment also notes that one risk is “if real estate and mortgage professionals or other advertisers reduce or end their advertising spending with us and we are unable to attract new advertisers, our business would be harmed.” Zillow is reliant upon you to buy advertisement, but if you stop, so does their business.

Meanwhile, during the quiet period, Zillow cannot defend itself when competitors speaks out against them publicly, nor can they make comment to any news outlet about the filing, rather must point to the public filing. They do, however, note in the filing that there are three primary industry challenges they must contend with: (1) a “highly fragmented, local and complex market,” (2) “absence of consumer orientation,” and (3) “increasing role of the internet and mobile technologies.”

Zillow’s Amendment 5 filing is subject to change, however, as it is a preliminary prospectus not meant to be an offering for sale (in other words, the SEC has not yet approved the filing).

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  1. Dan - BankVibe

    July 6, 2011 at 7:06 pm

    "will start at $12 to $14 per share meaning the total valuation is $378 million"

    The potential is definitely there. was taken private AFTER the bank collapse of 2008 for a price tag at almost double that. BankRate and Zillow operate in similar markets with tons of revenue stream overlap (ie mortgage leads, home refinancing and purchasing leads etc.) Also, if you check out (the industry standard for measuring website web traffic) here…

    you'll see zillow is winning that battle hands down.

    Zillow's stock price will definitely be interesting to follow (esp when/if the housing market recovers…)

  2. Drew Meyers - Virtual Results

    July 6, 2011 at 7:57 pm

    Obviously I'm biased on this one, but I think Zillow is worth a billion dollars on the power of their brand alone.

  3. Drew Meyers - Virtual Results

    July 6, 2011 at 8:02 pm

    In terms of Zillow being reliant on realtor ad dollars — of course thats the case. But, at the end of the day, if the ROI of advertising on zillow makes sense…agents should advertise. If not, they shouldn't. It's pretty simple equation for those who actually run their business based on numbers. If Zillow isn't producing value for their advertisers, then the model won't work. But I happen to think (know) there are enough smart people at Zillow to figure out how to deliver that needed value to advertisers.

  4. sfvrealestate

    July 6, 2011 at 9:18 pm

    I used to advertise on Zillow, and may do so again some day. I stopped because Zillow's rates went up at the same time the market started to go down, and I stopped being able to afford it. I believe in the brand (even though I often knock the zestimate) but in the long run, I think they are going to have to add something more of value to attract maximum Realtor dollars.

  5. Jake

    July 7, 2011 at 10:40 am

    I think this is the moment for Realtors to walk away from the MLS model, walk away from paying sites like Zillow for ads and start RECLAIMING their own data and internet presence!

  6. Joe

    July 7, 2011 at 1:26 pm

    Interesting, Jake. And what are your thoughts on how we(Agents) would do this("start RECLAIMING their own data and internet presence")? IDX sites, our own SEO/SEM campaigns, etc.?


  7. Dan - Naples Homes

    July 10, 2011 at 7:54 pm

    I agree with Jake. I would think it would be in the interest of the MLS and it's members to control the data better.

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