In its first financial report after going public, real estate search and valuation site Zillow announced it hit profitability for the first time in the second quarter.
Zillow’s net income for the quarter was $1.6 million, compared to net losses of $2 million in second-quarter 2010 and $800,000 in first-quarter 2011. Zillow posted $3.9 million in earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter — the fourth straight quarter the company was in the black using that yardstick.
"The second quarter was outstanding for Zillow with record revenues, traffic and mobile usage," said Spencer Rascoff, Zillow’s CEO, in a statement.
"We’re extremely pleased with our progress and rapid growth, yet we believe we’ve only scratched the surface of our opportunity."
The company’s total revenues jumped 116 percent year-over-year to a record $15.8 million in the second quarter, driven by a 269 percent jump in "marketplace revenues" to $9.7 million. Marketplace revenues include revenues from Zillow’s Premier Agent program, which allows local real estate agents to purchase ads that appear alongside home profiles and home listings within each agent’s ZIP code, and revenue collected from mortgage lenders that participate in the Zillow Mortgage Marketplace. Display-ad revenue grew by 30 percent year-over-year to $6.1 million.
"Marketplace is our fastest-growing revenue category," Rascoff said in an earnings conference call.
The number of Premier Agent subscribers, which account for the majority of marketplace revenues, jumped 180 percent year over year in the second quarter, to 13,385.
Rascoff said real estate agents spend about $6 billion on advertising annually — and that Zillow currently makes up less than 1 percent of that spending. "So we think we are dramatically under-penetrated relative to our market and importance in the industry," he said.
In February, Zillow flipped the switch on a partnership with Yahoo Real Estate, in which Zillow provides real estate listings to the site and has exclusive rights to sell subscription advertising and certain display ads throughout Yahoo Real Estate.
"The partnership is quite important to us," because Zillow can tell its customers that, when the market shares of Zillow and Yahoo Real Estate are combined, they are advertising on the largest real estate portal on the Web, Rascoff said. However, the alliance is "not material" in terms of revenue, he added.
The company’s total costs and expenses totaled $14.3 million in the second quarter. About $5.6 million of that total was devoted to sales and marketing, followed by technology and development ($3.3 million), cost of revenues ($2.7 million), and general and administrative costs ($2.6 million).
The company ended the second quarter with $16.2 million in cash and cash equivalents and no debt, according to Chad Cohen, Zillow’s chief financial officer.
Cohen stated that he expects total third-quarter revenues for the company will be between $16 million to $17 million.
Between the first and second quarter, the employee count at Zillow rose from 252 to 264, Cohen added. The company is also currently looking to fill more than 40 open positions in sales, technology and general and administrative departments.
Zillow raised $75.7 million in its initial public offering July 20 and since then its share price has fallen from a high of around $36 to about $26 on Aug. 24 — still above the initial offering price of $20 per share.
The company nearly doubled the number of average monthly unique users to its websites and mobile applications in the second quarter, to a record 20.8 million from 10.8 million in second-quarter 2010.
Zillow announced several product developments in the second quarter, before going public. In April, the company announced it had acquired listings syndication platform Postlets, and subsequently made the premium version of the tool free in July.
In May, the company rolled out free Facebook tabs to integrate listings, local market data, and Zillow ratings and reviews into agents’ Facebook business pages.
In June, Zillow teamed up with builders to introduce a search function for new homes and planned communities on its website, allowing users to see interactive floor plans and choose home styles. The site also launched its first Zillow Mortgage Marketplace mobile application on the Apple iPhone.
Also in June, Zillow expanded its property database to about 100 million homes, and improved the accuracy of its ‘Zestimate’ home valuations by a third, to an 8.5 percent margin of error nationwide.
Most recently, in July Zillow launched a mobile app compatible with Windows Phone 7, adding to its suite of apps for the Android, iPhone, BlackBerry, and iPad mobile devices.
