zillowtrulianew1Now, this just seems odd. The NASDAQ OMX Group announced today that it plans to remove Zillow as one of the companies in the NASDAQ Internet Index, with a spokesperson for the organization telling the Puget Sound Business Journal that the Seattle online real estate company no longer was eligible because it is a real estate company, not an Internet company

That’s fine. One certainly could make the argument, and I’ve seen others do so. (I tend to disagree with that assessment since Zillow derives the bulk of its revenue from online advertising and other Web-based services, not from the real estate transaction itself as Redfin and other real estate companies do).

Nonetheless, you can make the case for Zillow being in the real estate bucket.

But here’s the part that I don’t get.

In the same press release that Nasdaq announced that they planned to drop Zillow from the Internet Index, they added Trulia.

That’s right. The same Trulia that competes directly with Zillow in nearly every aspect of the business. In fact, the two companies are so closely linked that I’ve routinely pointed out how similar their businesses are, including today’s earlier story: “Zillow shares top $50 as Trulia looks to add to war chest for acquisitions.”

How in the world can Trulia be classified as an Internet company, and Zillow as a real estate company?

Seems like a pretty bizarre choice. (We’ve got an email into Nasdaq for a more detailed explanation).

zillow-mobileCythnia Nowak, a spokesperson for Zillow, declined to speculate on why Zillow would be removed at the same time that Trulia was added. But she also stressed that Zillow is moving beyond the desktop Internet, focusing instead on mobile.

“Zillow is a mobile company. More than half our traffic comes from a mobile device; on weekends it’s 60 percent,” she said. “Consumers come to Zillow to get information and to connect with professionals throughout all stages of the real estate lifecycle, from renting, to buying and selling, to financing, to improving a home.”

That’s true. But that’s also why they are going to Trulia, whose stock market value is half of Zillow’s.

In addition to Zillow, Seattle-based RealNetworks is set to be removed from the Internet Index. But, in that case, it was tied to Real not meeting certain trading requirements.

The changes to the Index are set to take place on March 18th. Here are the 12 companies that are being added to the Internet Index: Bazaarvoice, Inc. (Nasdaq:BV), CoStar Group, Inc. (Nasdaq:CSGP), Demandware, Inc. (NYSE:DWRE), Global Eagle Entertainment Inc. (Nasdaq:ENT), E2open, Inc. (Nasdaq:EOPN), Facebook, Inc. (Nasdaq:FB), Responsys, Inc. (Nasdaq:MKTG), Overstock.com, Inc. (Nasdaq:OSTK), Bankrate, Inc. (NYSE:RATE), TripAdvisor, Inc. (Nasdaq:TRIP), Trulia, Inc. (NYSE:TRLA) and Zix Corporation (Nasdaq:ZIXI).

And here are the six that are being removed: Carbonite, Inc. (Nasdaq:CARB), Keynote Systems, Inc. (Nasdaq:KEYN), Limelight Networks, (Nasdaq:LLNW), RealNetworks, Inc. (Nasdaq:RNWK), XO Group, Inc. (NYSE:XOXO) and Zillow, Inc. (Nasdaq:Z).

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  • guest

    Yeah, doesn’t make much sense. And I assume Zillow knew about this in advance. Why didn’t they communicate it better?

  • http://twitter.com/kforeman1 Kevin Foreman

    hmmmmm. I’m with you, John. Makes you scratch your head.

  • http://twitter.com/chrisamccoy Chris McCoy

    Interesting. This is weird. Solid reporting (per usual).

  • Thomas R.

    Hi John, I think it’s because Zillow considers itself a “media company” not a technology company. Many of their executives have mentioned this before. See here: http://www.zillowblog.com/2007-03-20/really-we-are-a-media-co-really/ Also here: http://www.zillowblog.com/2007-11-28/online-advertising-poised-for-a-big-2008/

    • Thomas R.

      Also interview with Spencer Rascoff here stating: “We have been very clear with the industry that our grand vision is to be a media company, and not to be a brokerage.”
      Read more: http://www.businessinsider.com/zillow-chief-heres-why-we-can-be-a-billion-dollar-company-2012-4#ixzz2NIgHgsQa

      • johnhcook

        Yes, that’s true, but I’d call them an online media company, not a media company in the traditional sense of print, TV or radio. Also, Zillow is in the midst of a huge pivot, and while not abandoning the media business, they are diversifying with all sorts of technology tools (meaning software) to help brokers do their jobs better. In that way, they are trying to be the Salesforce.com of real estate. I still think the decision is odd, especially in the context of Trulia being added. I don’t get that.

  • http://blog.findwell.com Kevin Lisota

    I know Wall Street doesn’t always get tech, but all I can say is “ummm…”

    I don’t follow the stock market enough to know if this matters or not to stock price or market perception, but you can’t make the case to kick out one of these companies and add the other in the same motion. If Zillow is a real estate company, then so is Trulia. If Trulia is an internet company, then so is Zillow.

    Someone is asleep at the wheel at the NASDAQ.

  • Pam Miller

    Wow! This is… odd (as John said).

  • James C.

    How about adding CoStar to the internet group at the same time they determine Zillow is a real estate company. Couple that with the Trulia move, and it really makes one wonder who is in charge over at NASDAQ…

  • B. Myers

    Isn’t the goal of stock indexes to have them go up? The history of the Dow and NASDAQ indices are that companies are added and removed over time. The companies added are rising stars. The result is engineered so that the index is more likely to move upward. This acts as a PR/marketing effort to attract investors to the market as a whole. Perhaps the powers behind the curtain simply decided that Trulia has a brighter future than Zillow.

  • Seattle Tech

    Perhaps this is a welcome change for Zillow. A “coming of age” for their business model – moving from the little internet company to a media mogul.

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