Zillow Post Update

I was just searching through my “blog spam” and found this comment on my Zillow Post.  The “commenter” did not leave a website link…but I thought you may be interested in his take.  I happen to agree.

–start comment–

Here’s a little question that I think will be fun and interesting to answer… how many visitors will Zillow need to attract to generate the revenue, earnings, and market value that will satisfy their investor’s?

Assumptions
– $50M is all the VC money they raise
– 60% of the company is now owned by VC’s, giving them a current valuation of $83M
– 5 year time horizon to exit
– VC’s want a 75% IRR

This means this now $83M company needs to be worth $1.36B in 5 years for the VC’s to get their IRR.

Housevalues (SOLD) currently is worth $162M with a P/E of 14.7. So if the market values Zillows at the same P/E, it implies Zillow needs to be earning $92.6M in profits by 2011. Ok, so what does that mean for their top-line?

If you assume Zillow will be 2X as profitable as Move.com (3.5% net margin in Q2 07), Zillow need to generate top-line revenue of $1.32B in 2011 to get the requisite $92.6M that will give them the $1.36B market valuation.

So how many users must Zillow attract to get $1.32B in revenue?

Well, it depends on their average CPM (they do claim to be an advertising business do they not, so that’s a fair measure). Let’s assume they generate a very high CPM of $10 per 1,000 page views (Myspace is getting sub $1 CPM’s).

1.316B / 10 = 131 million ad units X 1000 page views per ad unit = 131,684,095,177 page impressions.

Assuming each visitor to their site views 10 pages, Zillow must attract 13.2B visitors to their site PER YEAR by 2011.

Considering their are 6.5B people on earth… every man woman and child on earth must visit Zillow 2.0 times EACH per year in order for Zillow to generate the profits, via an advertising model, that will create the profits to support the market value that will pay back the investors.

My take… Advertising is not really their model.

–end comment–

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12 Responses to “Zillow Post Update”

  1. Cliff Jacobson Says:

    With the recent purchase of YouTube by Google (another media company)for $1.65 billion, ($3 million dollars/day since its start 2/05) the idea that Zillow will be around for an IPO is getting slimmer and slimmer. Google is trying to solve many problems:

    1) Blog Search (Technorati)
    2) Social Networking (MySpace)
    3) Local Search (No one yet)
    4) Real Estate Search (Zillow)
    5)Internet Video (YouTube) – Done.

    If Zillow could deliver a Website for every street address and Google could deliver targeted, measurable and time (stage-of-sale) relevant ads on all those sites; how much would Zillow be worth to Google then? You wouldn’t have to narrow-cast your ad to “Homes-for-Sale”, Anywhere, NY. You could micro-cast or laser-cast your ads to any or every home in any or every location, location, location.

    Zillow could deliver on Google’s need for Real Estate Search and a whole other way to Local Search, by your own street-address-hooked Website.

  2. JF.sellsius Says:

    Step 1: Use public data as a way to list every home
    Step 2: Use zestimate as eye candy to attract visitors
    Step 3: Allow homeowners to supplement (correct) data
    Step 4: Allow owners to put a “for sale” sign on their home
    Result: A National owner driven MLS

    http://tinyurl.com/y3myt8

  3. Heard It Through The Blogline at sellsius° real estate blog Says:

    […] Mr. & Mrs. Too Much Home Buyer (video) [Chicago Metro Area Real Estate] Fran discovers the power of video and it’s darn funny too. Real Estate Chatter: The Rental market sucks ass [Property Grunt] As only a grunt in a trench coat can tell it. One Reason Why There are Thousands of Home Listing & FSBO Sites [Transparent Real Estate] Who’s behind the curtain waiting to snare you with lead bait. An great investigative post. PKitano should be on everyone’s blogroll. A Critical Assessmnet of the Standard, Traditional Residential Real Estate Broker Commission Rate Structure {AEI-Brookings Joint Center} Outsider Mark Nadel opened the can of worms in a way that didn’t stink up the place. Bring On Your Hybrid Fee Structure [True Gotham]. Doug is not afraid of worms. Starting a Discussion on Real Estate Commissions [Northern Virginia Real Estate Guide] Either is Merv. Whoohoo!! Merv’s Got It Down!! [Ardell via RCG] And Ardell uses them to bait her hook. 2010: A Real Estate Odyssey [sellsius] We like playing with worms too. PropSmart & Trulia, you’re cool and cuddly and cool, but you don’t know a thing about searching for homes [BloodhoundBlog]. Needles can’t be found in haystacks, even if you are a bloodhound. Is Blogging a job or a Hobby?[Blue Roof Blog] Haven’t we all asked ourselves this question. We admit a bias toward Greg because he rates us a favorite daily read. Greg, you can borrow our blog juice any time. All kidding aside, BlueRoof has an enviable user interface. Urban Digs In Daily News [Urban Digs]. Noah gets a client through his blog & some free press to boot. Blogging does pay. Commentary: All Eyes On the Bounceback [Matrix] Miller takes the heat but remains cool. CBGB Memorial Edition [Curbed] You had to be there.  Were you? A Real Haunted House Up for Sale [hismove.com]. We found some new friends so we’re giving them some link love. Zillow Post Update [Real Estate 2.X x=0] Somebody studied math in school. […]

  4. TRAILER PARK TRASH Says:

    ALAN DALTON GOES “SPRINGER” ON ZILLOW AT C.A.R. SHOW

    NEWS AND HIGHLIGHTS AFTER C.O.P.S. RE-RUNS FINISH….

    http://www.inman.com/blogger/2006/10/who-threw-chair-brad-inman-wont-give.aspx#comments

  5. A Business Predicated On A Lie Will Crumble When Exposed... | Realtor Genius Says:

    […] Real Estate 2.x said… “Considering their are 6.5B people on earth… every man woman and child on earth must visit Zillow 2… […]

  6. Matthew Freda Says:

    Interesting math facts. Very informative

  7. A Business Predicated On A Lie Will Crumble When Exposed… | agentgenius.com- national real estate opinion column Says:

    […] Real Estate 2.x said… “Considering their are 6.5B people on earth… every man woman and child on earth must visit Zillow 2… […]

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