Zillow CEO Spencer Rascoff started his day by ringing the bell on the Nasdaq stock exchange, setting off a flurry of buying activity for the online real estate company’s stock.
Even so, Zillow now boasts a healthy market value of $605 million.
That’s still quite a first-day pop. But Rascoff says that the real work is ahead of the company as it attempts to “delight” real estate consumers and advertisers.
In an interview with GeekWire, Rascoff discussed how a recovery in the real estate industry might impact the company’s growth moving forward and some of the inherent difficulties in pricing a hot IPO.
The 35-year-old tech exec also talked about his plans to continue using Twitter now that he’s a CEO of a publicly-traded company. Here are excerpts from the interview with GeekWire.
Did you expect this sort of reaction? “Over the long-term, what happens to the stock today is pretty much irrelevant. If we delight our tens of millions of users, and thrill our thousands of advertisers, then, over the long-term, the stock price will take care of itself.”
When you see a big first-day pop like this, there’s always a concern that the company left money on the table. Did that happen here? “IPOs are extremely difficult to price, particularly ones that are in extremely high demand. In our case, we are very pleased with where we priced and how much money we raised and the valuation that we raised at.”
How much did you raise at the $20 per share offering price? “We raised approximately $80 million. It was concurrent with a private placement with two of our VCs which bought $5.5 million.”
Zillow doesn’t have the revenue of a LinkedIn or even a Pandora. What’s driving the interest in Zillow? “I think investors are very hungry for companies with Zillow’s growth profile. Zillow is growing revenue at over 100 percent year-over-year. We are growing our consumer traffic at over 100 percent year-over-year. And companies with that kind of growth profile are very interesting to investors, particularly given the overall volatility in the overall market. Companies with high-growth profiles are very attractive.”
Were there other specific things that you heard from investors as you were on the IPO road show? “I believe that it is well understood that Zillow’s brand position, and in particular our mobile leadership, are many years ahead of even where our current revenue or profitability are. And so, investors are attracted to companies that have Zillow’s profile.”
What will change for Zillow now that you are public and what does this enable you to do? “Very little will change on a day-to-day basis. Our nearly 300 employees in Seattle and around the country will continue to be focused on delighting our tens of millions of users who use our Web site and mobile applications every month, and our thousands of advertisers. That focus will remain unchanged, post IPO.”
There’s also been a lot of chatter about whether Zillow is part of a bubble. What do you say to that? “Investors are very attracted to companies that are growing revenue and other user metrics at significant clips…. And I think that is what is driving the investor interest.”
Investors also look at profits, and you haven’t been driving those, so when will that change? “Zillow has been cash-flow profitable and EBITDA profitable for three quarters, and we haven’t given forward-looking guidance, so I can’t specifically answer when we might have net income profit. We will be reporting our first quarter as a public company in early August.”
What will you do on Twitter now that you are a CEO of publicly-traded company? “I intend to continue Tweeting and engaging social media as I always have. I find it an important way to stay up to speed on what millions of people think about my company and engage with them in discussions about Zillow and other things that are important to me. So, I will continue to engage social media while remaining cognizant of the restrictions that are sometimes placed on public company executives about what they can and can not talk about.”
We are still in the middle of a real estate bust, and the industry isn’t doing terribly well. So where can Zillow go if that market turns around? “I do think Zillow’s revenue is leveraged to a potential recovery. I believe that we would be even more successful in a more positive housing climate. However, the housing downturn has helped accelerate the migration of real estate advertising budgets from offline to online, and Zillow has been an beneficiary of that migration.”
Where’s the Zillow IPO party? “It is an exciting milestone for us as a company, and we are going to take it in stride, but what happens today is not that relevant to the long-term value of the company.”
Is there any surprise by this big stock pop today? “I am no stock market expert. I am an Internet entrepreneur, and I focus on making sure that my hundreds of employees focusing on delighting our users and advertisers and the stock price will do what the stock price will do.”
Previously on GeekWire: Shares of Zillow skyrocket in debut