Zillow Group’s shift into home sales and mortgages is just the beginning of a grander vision to control every aspect of the real estate transaction.
Zillow CEO Rich Barton said in an interview with GeekWire that he wants to see a reimagined Zillow eventually become “Microsoft Office for real estate.” To achieve that vision, Zillow is investing in and looking into several new businesses such as title and escrow, insurance and moving.
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“We think the real consumer magic for the seller and for the buyer is when all the disparate, complex, expensive elements are brought together into an integrated seamless package,” Barton said. “We want to build Microsoft Office for real estate. We want it all to work together, and you get it all together.”
The comparison to Microsoft is interesting, given Barton’s history. He worked at Microsoft in the 1990s before spinning Expedia out from the tech giant. He went on to start Zillow and Glassdoor.
Barton said on a call with analysts Thursday that Zillow is “planting the seeds” in the second quarter to integrate title and escrow services into Zillow Offers, the backbone of its new home sales business. Some of these potential new businesses, such as moving services, are things Zillow is just looking into.
Were the real estate giant to branch out into moving, it would create an unexpected new competitor for Seattle on-demand moving startup Dolly. The startup just raised a $7.5 million funding round to expand around the globe.
Zillow has made a major bet on home sales, reorganizing around the company’s Homes segment, where the financials for Zillow Offers and other parts of home sales live. Zillow reported quarterly financials for the first time since the shift today, and the company is off to a good start, reporting 51 percent year-over-year revenue growth to $454 million in the quarter.
Zillow is even more bullish on its prospects going forward, projecting 79 percent revenue growth in the next quarter, powered primarily by growth of upto 90 percent in the Homes segment.
Investors liked what they saw from Zillow’s financial update, sending the stock soaring nearly 17 percent in after-hours trading.
The only black mark on the company’s balance sheet was a net loss of $67 million for the quarter, triple its losses from a year ago, primarily due to losses in the Homes segment. Barton previously said in February when he took the CEO job as part of the overall shift that the company’s legacy businesses would subsidize its push into home sales.
“Startups require investment, and we are a startup again, so what we decided to do is take the bulk of the profits that are generated by our Zillow 1.0 businesses, and invest them in the Zillow 2.0 businesses,” Barton said.
Barton anticipates that the “ancillary transactions that surround the real estate transaction,” such as mortgages, title and escrow and moving, will boost profitability of the Homes business.
Within three to five years, Zillow expects home sales to be a $20 billion business. To get there, the company aims to buy 5,000 homes per month, or 15,000 per quarter. In the first quarter, Zillow bought 898 homes, up 80 percent over the last quarter.
Barton acknowledged that the company has to convince investors that its big bet will be successful in the long-term, and part of that is making home sales more profitable.
“I know we still have much to prove to you before the fog is fully clear on Zillow Offers,” Barton said on a call with analysts. “We must show you that we are not just buying dollars for $0.95. The unit economics of Zillow Offers are justifiably under the microscope, but even at startup scale the economics show promise.”