Zillow stock tumbled over 9% on Monday amidst concerns that the online real estate service may face a significant new rival: Google Search.
Google seems to be testing the integration of real estate sales listings into its search outcomes. Over the weekend, real estate technology strategist Mike DelPrete released mobile screenshots of Google Search results featuring real estate listings, seemingly supported by the data company HouseCanary. These listings allowed users to access full property details, schedule tours, and contact agents — akin to the features available on Zillow.com’s marketplace. Google’s residential searches currently operate in select markets and on mobile devices as they undergo testing.
The drop in Zillow indicates that investors are preparing for the future effects of Google’s entry into the real estate sector. The firm, which experienced a share decline of over 11% at one point during Monday’s trading session, lost approximately $1.6 billion in market capitalization. Zillow’s market cap now stands at around $16.26 billion.
However, Wall Street analysts swiftly highlighted that Zillow’s dependence on organic search is relatively minimal, limiting potential downsides, at least in the short term, as more information regarding Google’s product becomes available.
Wells Fargo analyst Alec Brondolo, who maintains an equal weight rating on Zillow, stated he would not “anticipate a significant financial impact from listings on Google transitioning from organic to paid” — considering Zillow’s limited reliance on organic search results for traffic.
“The listings feature appears analogous to Google’s Hotel Metasearch results; its introduction could increase traffic costs for Zillow, but disintermediation seems unlikely,” Brondolo noted in a Monday communication to clients. “In the hotel sector, Google showcases hotel rooms in search results as a metasearch ad product for OTAs. We would anticipate a similar strategy in real estate, with Zillow, Homes.com, Realtor.com, etc., vying for home listing advertisement units rather than Google directly trying to monetize through an ad product sold to agents.”
Yet some analysts perceive Google’s testing as a long-term challenge to Zillow and other online real estate platforms.
Goldman Sachs’ Michael Ng remarked in a communication to clients that he believes the search engine’s real estate listings, which he described as an advertising format for buy-side agents, directly rival Zillow’s Premier Agent program by “facilitating lead generation” for agents from potential buyers.
“While we do not anticipate an immediate direct effect on Zillow’s operations, considering that most of Zillow’s traffic is direct (e.g., Zillow.com, StreetEasy.com, mobile apps) and Google’s new offering is currently restricted to select markets and mobile browsers, we view this change as a long-term threat for real estate platforms like Zillow,” Ng, who holds a neutral stance on Zillow, stated in a note to clients.
Jason Helfstein of Oppenheimer mentioned that Google’s venture into real estate might affect the number of visitors to Zillow.com — which was 228 million in the third quarter — thereby impacting the firm’s capacity to monetize its platform. “The effects would likely take years to unfold and would require a nationwide rollout to significantly influence real estate portal traffic,” Helfstein noted in a recent communication.
Zillow shares have dropped by over 8% year to date.
Neither Google nor Zillow responded swiftly to CNBC’s inquiry for comments.
