If you are one of the 6.9 million people that bought a home in 2021 (and even if you aren’t) you likely are very familiar with Zillow.com. Zillow is a free site where users can list homes and properties for sale or rent. Zillow gets roughly 36 million unique monthly visitors and ranks as the most popular real estate website in the US. But it’s free to use, so how does Zillow make money? Does it make money?
According to Zillow’s parent company, Zillow Group, the company’s consolidated revenue for 2021 was $8.1 million. So yes, Zillow makes money.
But the question remains, how does Zillow make money?
First, Zillow Group is made up of a handful of subsidiaries including Trulia, StreetEasy, and HotPads. They use these services to collect revenue from three main groups: real estate agents, property management companies, and (some) home buyers.
1. Selling Ads on Their Site
A large source of revenue for Zillow is its IMT segment. IMT stands for Internet, Media, and Technology and drove $1.9 million in revenue in 2021. This money comes in from sales of ads and marketing services as well as software and other technology.
Zillow is basically a real estate search engine that has more than 110 million homes across the United States on its site. With roughly 142 million total housing units in the US reported in 2021, that is a large chunk of the total market.
Real Estate Agents Pay to Be Premier Agents
One of Zillow’s main sources of revenue is from real estate agents. Real estate agents can get special perks from Zillow by becoming a Premier Agent. This includes Premier Agent branding on their website, multiple listing service search, bio, photos, videos, client reviews, and past sales. Agents can also run ads targeted at potential clients in their area.
As far as payment goes, real estate agents pay Zillow for ad impressions as well as for client leads. It’s a great way for agents to get new clients and for Zillow to make money on all the users they have coming to their site.
Property Management Companies Pay to Find Renters
Another way Zillow makes money is by charging a fee to property management companies to run ads for their listings. These ads can show on Zillow, Trulia, and HotPads. Through this property management companies pay Zillow a fee for tenant leads to fill their empty rentals.
These advertising services can also be used by other professionals like general contractors, inspectors, builders, and photographers.
2. Interest from Home Loans
In 2018, Zillow acquired Mortgage Lenders of America which was rebranded as Zillow Home Loans. This allows borrowers to either take out home loans from Zillow or refinance existing ones.
Zillow makes money through this service the same way any lender does, by charging interest on the mortgage.
3. Lenders Pay for Leads
They also work with over 50 lenders nationwide. These lenders pay for leads from Zillow on a cost-per-lead basis. For every potential borrower, Zillow sends to a lender they are paid a fee. Lenders can also advertise their services on the site for an additional cost.
In 2021, Zillow’s mortgage segment drove about $250k, up 41% from the previous year.
4. Selling Flipped Homes
In February of 2021, Zillow announced that it would no longer just showcase homes for sale, it would also start flipping them. The offering was called Zillow Offers and would make cash offers to homeowners based on their “Zestimate” tool (Zillow’s estimate of how much a home is worth).
The selling process was quick and relatively easy with the majority of it done online. The company made money anytime they were able to sell a home they purchased for more than they paid for it.
According to their financial report, Zillow Offers became the biggest revenue segment for Zillow in 2021. This segment grew by 250% in 2021 compared to the previous year.
The program started in 2018 but was significantly ramped up after the announcement in 2021. Unfortunately, later that year they threw in the towel on this aspect of the business citing issues with labor and supply shortages. Zillow disclosed that it lost about $304 million in the third quarter. They are still working to sell off the existing inventory throughout 2022.
Despite Zillow’s hit from the failed home flipping venture, they continue to make money in their other segments. Much of its current revenue comes from advertising, which should be no surprise for a site with such a large internet presence. Property managers, landlords, real estate agents, and lenders can all advertise and pay for leads on Zillow’s platform. Zillow also continues to provide home loans and makes revenue from the interest paid on those.
Zillow is a company that is always looking for new opportunities and is pushed by investors to find new ways to grow profits. It may be a free service to users but with more than 6,400 employees, it is able to drive a lot of revenue.