What Can Zillow’s Story Teach Us About Brand Growth?

Zillow Group, Inc. (or just Zillow) is one of the world’s biggest real-estate marketplace companies, dating all the way back to 2006. It was founded by entrepreneurs Rich Barton and Lloyd Fink, who were also behind the online travel company Expedia (at the time, a subsidiary of Microsoft).

Barton also co-founded Glassdoor, so it’s safe to assume he knows a thing or two about successful online search engines and marketplaces.

Zillow has had plenty of ups and downs over the years, but it never stopped innovating and looking for new ways to grow. But how did they do it? Well, it all boils down to brand growth through clever data management and advertising.

A Brief History of Zillow

Rich Barton was already a very wealthy man when the idea of Zillow came to him. His family was growing, his needs were changing, and he was looking to buy a new house. But all the information Barton required to make an informed decision just wasn’t readily available:

“What other categories could we turn on the lights in the room and empower everybody to make better decisions about something really important to them, emotionally and financially? I was shopping for a house, I was having more babies, and I needed a bigger house. And I was kind of appalled at how hard it was to get the stuff, the information.”

Contacting real estate agents and getting all this information was a real pain. And that’s the problem Zillow was made to solve. When the platform went live in February 2006, its database included more than 40 million listings. It took only about three days for Zillow to hit its millionth visitor.

Over the next 17 years, Zillow kept growing, reaching more people and acquiring several smaller companies (including top competitor Trulia in 2013). As you’ve probably already guessed, Zillow’s biggest strength is data. Let’s look at how it’s worked out for them.

The Power of Ads

Zillow relies on the accuracy of its data as a means of attracting more people to the platform: home buyers, homeowners, and real estate professionals. It displays ads to bring in revenue and fuel growth.

Here’s just how much money Zillow generated in the past three years:

• In 2019, Zillow’s annual revenue was $2.743B.

• In 2020 it brought home $3.34B – a 21.77% increase.

• In 2021, it made $8.147B – a 144% increase from 2020.

• For the twelve months ending on the 30th of September 2022, Zillow's revenue was $10.818B – a staggering 180% increase year-over-year.

With more than 300 million visits per month, Zillow is the number one real estate platform in the U.S. If you’re in the market to buy a new house, sell your home, or rent an apartment, chances are, you’ll visit Zillow. With its enormous reach, it’s no surprise that realtors, property managers, and real estate agencies all want to have their profiles displayed on Zillow.

An Array of Useful Tools

The company’s goal is to create a map containing information about every U.S. property — and Zillow is almost there. By collecting all kinds of data from its users, Zillow has built an impressive ecosystem of real estate management tools.

The “Zestimate” tool can help homeowners quickly come up with an estimated value for their property. Although not 100% accurate, Zillow’s estimates are a great starting point for people entering the real estate market. Zillow also has tools to help users calculate mortgage costs, compare mortgage rates in an area, and connect with local mortgage brokers.

Zillow’s mobile app allows users to access these tools with a few taps. There’s also a Premier Agent app that helps agents stay on top of their leads and connections on the go.

Zillow Premier Agent

Zillow Premier Agent is a premium service that makes the lion’s share of Zillow’s profit. It’s a paid feature that connects buyers to sellers within their chosen zip code.

Paying customers can have their agent profiles pop up when potential clients search for property in their area. It doesn’t really cost Zillow anything to add a small feature like this with real estate listings, but agents are willing to pay quite a bit to use it to reach their target audience.

Zillow Offers — a Minor Setback

Since 2006, Zillow has used ads as its main source of revenue. Agent advertising had been a driving force for the company, but they were looking for ways to break into other emerging real estate markets, such as iBuying.

You can think of iBuyers as institutional house flippers. Companies such as Offerpad and Opendoor use algorithms to determine a home’s value, buying it directly from the owner for slightly less than market value. They then sell those properties at (or slightly higher) than market value and make a profit.

Zillow attempted to enter the iBuying industry in 2018 as it began using a complex algorithm to purchase homes all around the country. Zillow Offers had all the data needed to thrive, but the program was abruptly shut down in 2021. Zillow admitted heavy losses, sold its existing inventory, and laid off 25% of its employees.

The company reported losses of approximately $420 million in Q3 2021, and its share price has since plummeted from a high of $203 to a low of $27 in October 2022. The pandemic brought with it labor and supply shortages, leading to operating inefficiencies. Zillow was buying too many homes way too quickly — and wasn’t selling them fast enough to make a profit (or break even).

By Q1 2020, the housing market had begun to cool off, but Zillow refused to slow down its iBuying operations. We could blame it all on the algorithm, but it certainly seems that Zillow’s business management didn’t properly prepare for the changes that come with a global crisis.

Besides that recent hiccup, Zillow is still growing, bringing in billions of dollars in revenue each year. However, the Zillow Offers failure will probably force management to zero in on advertising for the next few years.

How to Use Your Platform to Grow Your Brand

Source: Zillow Press Kit

Zillow is one of the biggest brands in online real estate and boasts incredibly impressive brand awareness. While it has hit some rough patches lately, the company’s marketing strategy remains simple — and it’s all about constant growth.

Here’s what we can learn from Zillow’s story.

1. Learn your audience and give them what they need

Zillow invested a lot in acquiring crucial data, and it all paid off in the end. They used data to give back to their users and earn their trust, designing helpful tools such as Zestimate, as well as a range of management tools and calculators. They built an ecosystem that slowly took more and more control of the user’s lifecycle.

Zillow is the real estate website at the front of most customers’ minds — a real brand awareness success story. The key here is to create a constant flow of incoming data: Users tell you about themselves to make use of your tools and services, and you use that information to design better products and draw in even more users.

2. Leverage data to increase your revenue

Zillow focused on growing the platform from day one. Once it had established a large enough audience, it was easy to offer lead-generation opportunities to realtors through ads. You don’t need 300 million visitors a month to make this work, but the larger the audience, the easier it is to attract professionals willing to pay to promote their profiles.

Marketing is a numbers game. But if you don’t have the numbers and want to make money from advertising, you need to make sure your audience is highly engaged. If there’s anything we’ve learned from social media over the past few years, it’s that small, super-engaged audiences can be just as valuable, if not more, than massive followings.

3. Try new things but don’t take unnecessary risks

For almost 15 years, Zillow depended on advertising to keep the platform growing. Relying on one revenue source is never ideal because it can leave you vulnerable to the unexpected twists and turns of the market. It’s no secret, for example, that many companies reduce their advertising spend during a recession.

When Zillow decided to future-proof the business by entering the iBuying market in 2018, the move made sense from a business perspective. No one could’ve predicted that a pandemic would soon unsettle the world economy or that the real estate industry would suffer due to supply chain disruptions and labor shortages. We can perhaps fault Zillow for not pulling the plug on Zillow Offers sooner, though.

It was estimated that Zillow’s iBuying venture would make the company more than $20B by 2025. Instead, it led to heavy losses and a 25% workforce reduction. Diversification is good, but it should be closely monitored — especially during the early stages.

It’s okay to try new things, but don’t get carried away. If something’s not working, it’s okay to scrap it and move on.

Final Thoughts

Zillow is undeniably one of the biggest marketplaces in the online real estate world. Although it’s now the go-to search tool for anyone looking to buy/sell/rent property in the U.S., from a business perspective, the road recently did get quite bumpy.

However, Zillow has so far managed to remain afloat by falling back on its main strength: the insightful use of customer data. While iBuying didn’t pan out for the brand, it’s sure to find another bold way to stand out from the crowd in 2023.

And if you'd also like to tap into the power of consumer insights, then we recommend checking out brand monitoring software. With access to reliable, accurate data, you can rest assured you'll make better, more data-driven marketing decisions.