Zillow's Next Massive Growth Opportunity

Shares of Zillow  have tripled since the company's IPO in 2011 as the company continues to be the dominant online real estate platform. Now, Zillow is turnings its focus to its next growth area: Rentals. 

Roughly 13 million people use Zillow every month to shop for a rental, making it by far the largest rental audience on the web. In the following video, Motley Fool analyst Brendan Byrnes sits down with Spencer Rascoff, CEO of Zillow, to discuss the huge opportunity and how the company plans to make more money in the long-run by making some features free in the short-run. 

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A transcript follows the video. 


How about rentals? I know when we spoke last time, you guys had just started to monetize rentals. Could you give us a sense of how that's going and the overall strategy there?


Rentals is a huge opportunity for us. We have about 13 million people that use Zillow every month to shop for a rental — so we're by far the largest rental audience on the web and we just started to monetize it a couple of months ago. Now we're charging multi-family — so people that operate large apartment buildings — we're charging them to list on Zillow and HotPads. It's very early. We've told investors to benchmark the growth of our rentals business relative to the growth of our mortgage business, which took about three years to get to a $10 million revenue run rate ... and we think we can do it faster in rentals.


Talk about more of that overall size. You said you can do it faster in rentals — and also how StreetEasy fits into that — because StreetEasy has the rental aspect, as well. What does it look like as far as monetizing it? Is it the same type model?


Well, the monetization for multi-family rentals on Zillow and HotPads is paid inclusion, so we charge a couple of hundred dollars per building per month to be listed on Zillow and HotPads. StreetEasy is a slightly different animal. We acquired StreetEasy in the late summer of 2013.

We have so much potential at StreetEasy. Actually, we took a step backwards in terms of monetization recently. We made it free. We removed the paywall. We did that because we're following the Zillow playbook with StreetEasy — which is to say we're making it free, we've got a great product and now we're taking it to mobile. So, StreetEasy has so much potential on mobile. Only about one-third of StreetEasy's usage is mobile whereas about two-thirds of Zillow's usage is mobile.

So, we're building out dedicated StreetEasy apps across all major mobile platforms. We're improving email marketing and search engine optimization, as well as making it free. We think that by following those tenets of the Zillow playbook, we can grow the StreetEasy audience quite significantly. Then we'll focus on monetization. Full StreetEasy monetization is not a near-term priority. Audience growth is the priority.


How about Zillow overall? Is it fair to say that audience growth is still the number one priority?


Audience growth is the number one, two and three priority for Zillow. Advertisers follow audience — and if you look at any other media category, online or offline — eventually ad dollars flock to where the audience is. Take the real estate category, for example. In two newspaper towns, whichever newspaper had 60-70% circulation ended up with 80-90% of the newspaper classified revenue. We think the same thing is going to happen in real estate — so audience primacy is key.

The article Zillow's Next Massive Growth Opportunity originally appeared on Fool.com.

Brendan Byrnes has no position in any stocks mentioned. The Motley Fool recommends Zillow. The Motley Fool owns shares of Zillow. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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