It is drifting down on fundamentals. Z lost $12.5m in the last Fiscal Year and Sales & Marketing costs are increasing at a faster rate than incremental revenues from cold calling Realtor's in a desperate attempt to sign them up as Premier Agents. Also look at the $23 million share based compensation figure as a handful of executives benefit from low cost stock options that they dump at the first opportunity.
Interesting that prolific Twitter posting Zillow CEO Spencer Rascoff has only made a handful of posts in the last month depite having 10,700 Twitter posts on a dedicated computer screen for Twitter on his desk - he posted that.. There must be a reason why he has stopped Tweeting, even if it was that he fell off his Threadmill desk and hurt his Tweeting finger.
Two thoughts come to mind. First that he is negotiating the sale of Zillow to make himself even richer from cashing in the stock options that will vest immediately on acquisition. The second thought is maybe an acquisition timed to deflect poor 4th Quarter results as a result of slumping Unique User numbers since August, and a potential revenue and Earnings miss that will decimate the substantially inflated Zillow stock price. With an obsession for all things "Z" my money is on an international expansion to the UK where Zillow lookalike Zoopla announced last year that it has engaged Credit Suisse to explore various strategic options. With a potential valuation of $2Bn it wouldn't be beyond Zillows financing with a big share offering to fund the acquisition. Bottom line is that stock price will slump as it will be an ego based acquisition rather than a fact based value adding one.
Just my 2 cents as homeowner who suffers from Zillow imposing a nonsense Zestimate on my home and refusing all requests to correct or delete. In the circumstances it's fair game for me to express my opinion on Zillow and its business, thanks to the 1st Amendment as Spencer Rascoff explained why Zilow has a right to publish erroneous Zestimates.
So Benchmark Capital believes that Zillow could miss its Q4 Revenue estimate of $56M due to "moderating traffic trends". I guess that's one way of describing a 11.1% slump in Users from the previous quarter.
So what is their problem with correcting substantial errors when highlighted by homeowners? When Zillows accuracy is unacceptable by any standard (17% more than 25% incorrect) then one has to question the integrity of the company and what they hope to gain by imposing their nonsense they way they do. If they cannot be trusted to act in a fair minded way towards 100 million homeowners then regulation is the only answer.
It's no different than virtually every aspect of daily like being regulated - with banks, Insurance cos, Phone Cos, Airlines, Healthcare, Investments, etc all being regulated. Even Zillow highlight possible regulation of zestimates in their 10-K annual report filing with the SEC this week.
No doubt that Zillow will gloss over the lousy 4th Quarter Unique User numbers and only mention the January numbers, which will be better than December. Time that Analysts called Zillow out on the lack of transparency in how they gloss over any bad news.
So Zillow wins an award for being among the "best mid sized companies to work for" according to Glassdoor that gave Zillow a score of 4.2 out of 5. Interesting that Rich Barton is both Chairman of Zillow and Glassdoor, and that only a few weeks ago Zillow CEO Spencer Rascoff started responding to the very flattering employee comments. It all looks stage managed as part of Zillows ego based self publicity campaign. What with the timing of Rascoffs comments on employee posts, and also the way the posts are from Seattle, Lincoln NE, Irvine CA and Seattle as if they were posted specifically to boost the score with Zillow being advised by Barton how to win the award. Just my 2 cents opinion on how it appears to me.
Yes, I am a zillow cynic but nothing would surprise me from what I have observed the way Zillow operates. My experience is a homeowner with a substantially erroneous Zestimate, (there are millions of homeowners in the same boat when 17% of 100 million Zestimates are more than 25% incorrect), and even with such grossly inaccurate valuations Zillow refuse all requests by homeowners to correct or delete inaccurate Zestimates. For what purpose I cannot imagine but they obviously have a motive to behave in such a socially unacceptable way towards homeowners. It is time that our elected officials caught up with the technology and introduced some form of regulation on Zillow to protect homeowners from their Zestimate nonsense.
I wonder how the ex employees who posted the comments in this thread feel abput Zillow being an 'Employees Choice Company' for 2014?
Well it seems that 17% fewer people are using their Zillow gadget than they did 3 months ago despite a $8.4M nationwide TV Ad campaign.
The articles hit the nail on the head with comments about the differences between the US and Australian real estate market places. Spencer Rascoff also referenced the UK company Rightmove in the same Investor day presentation to substantiate the potential growth prospects for Zillow. Either he is unaware of the differences in the markets or ..... well draw your own conclusions. What does surprise me is that the major Australian investors in Zillow are not more aware of the differences explained by the author in the articles, especially James Packer who bought in at a substantially higher price than Caledonian Investments and must be showing a big loss on his investment.
The slump in Unique Users started in September when if fell 8.3%, and dropped a further 2% in October before the massive drop of 5.4 million Users in November. That is 3 months in a row that User numbers have fallen and it will be interesting to see how December fairs. However it does the 4th Quarter Unique Users will be substantially worst than the similar 4th quarter decline in previous years. Additionally according to Alexa only 89,6% of Zillow Users are in the USA and 3.8% are in India and Pakistan where there is no revenue earning potential for Zillow and it begs the question who these Users are?
The problem with Zillow and the nonsense Zestimates that it imposes on over 100 million homes is the fact that over 17% of Zestimates are more than 25% incorrect. If a typical home costs $240,000 that means that the Zestimate could be $60,000 wrong with a valuation of $180,000 published. An even bigger problem is that Zillow refuses to take responsibility for the accuracy of its Zestimates, and refuse ALL requests by homeowners to correct or delete these substantially inaccurate Zestimates.
The time has come for Zillow to be Regulated as it has demonstrated that it cannot be trusted to act in a fair minded way despite the misery and potential financial damage they they inflict on homeowners. As an absolute minimum there should be a DoNotZestimate website so that homeowners can opt out of Zillows nonsense in the same way as 'phone users can use DoNotCall to stop spam 'phone calls.
What Zillow relies on is that most homeowners make a handful of complaints then give up. The answer is NOT to give up but to persue your grievance with Zillow as the more people who do highlight their BS the more chance there is of getting the problem fixed.
Looks like the Zillow User slump is continuing in December as it slips from 56th to 62nd place on Alexa USA rankings. Even the number of Users in India and Pakistan has dropped from 3.8% to 3.6% - whatever the heck so many people there are doing using a USA only website.
It doesn't appear so, but it amazes me that some greedy class action lawyer hasn't taken Zillow to task. When you consider that 17% of Zillows 100 million plus Zestimates are more than 25% inaccurate. Think of the misery and potential financial damage that homeowners, suffering with an unwanted imposed erroneous Zestimate, and Zillow refuse all reasonable requests to correct or delete the nonsensical valuation that their flawed algorithm computes. When Zillow says that Zestimates are a "starting point" they are lying as when Zillow refuse to correct they become an "end point" too.
Even more interesting is that our elected representatives have failed to introduce any form of Regulation on Zillow and other AVM companies for the damage they cause to homeowners as well as the chaos and confusion that incorrect Zestimates create in the home sales business. At the very minimum there should be a DoNotZestimate website that homeowners can opt out of Zillows nonsense in the same way as phone users can register with DoNotCall to opt out of spam phone calls.
Just look at Zillows Investor Relations page and look at the Company Metrics section which publishes the data. I fully agree with your perspective that based on price /multiples that the User Numbers should be growing substantially instead of slumping on such a massive scale despite $40M being wasted on advertising.
Zillow Co-founder and Chairman Rich Barton is a 'Venture Partner' for Benchmark Capital so there is a substantial conflict of interest when Benchmark capital make such announcements without full disclosure of the relationship with Zillow. It is obvious to everyone that Zillows User Slump in the 4th quarter will put Revenue forecasts at risk, but to state that margins could surprise to the upside without any substantiation when connected to the Zillow Chairman is something that the SEC should be investigating. Bottom line is that Zillow is a pig wearing lipstick and Users are deserting in droves and this will impact on earnings as Zillow increases cost bases quarter after quarter.
Makes you wonder what the Analysts upgrading Zillow are thinking when there has been a substantial downward trend in Zillow Unique User numbers for each of the last 4 months. The December numbers were down 4.2% on an already low November user number. The 4th Quarter Unique User numbers are down 11.1% compared to 3rd quarter, despite Zillow spending $40M on advertising during the year (quote from Zillow CEO Spencer Rascoff in IBD interview by Kevin Shalvey dated Jan 6). The decline from the August peak is a massive slump of 11.5 million users a month or 18%. What a waste of money the Advertising was.
When 2.2% of these users are located in India, 0.9% in Pakistan, 0.8% in Canada and 0.7% in Netherlands it begs the questions about what these "users" are doing? are they real?
Looks like James Packer has bailed out of Zillow - or didn't file the required Sch13G by yesterdays reporting date. Largest shareholders are Australian Investment Co Caledonia Investments with 19.09%, Co-founders Barton & Frink with 11.3% and 9.3% respectively, TCV (Technology Crossover Management) with 3.0%, Citadel GP LLC with 0.5%, Wellington Management with 7.54%, T Rowe Price with 3.4% and Benchmark Capital with 0.8%.
You are absolutely right and when 17% of Zillows 100 million Zestimates are more than 25% incorrect it questions the validity of the "Zestimate brand". as CEO Spencer Rascoff refers to Zestimates. What other $3Bn Nasdaq listed company demonstrates such gross incompetence on a daily basis with its flawed algorithm and poor configuration control of 3rd party data that it purchases.
How do I know? Well Zillow had my home mapped to a city 6 miles away and admitted a 'geo mapping problem' with the 3rd part data provider, but still refused to correct or delete a substantially erroneous Zestimate. Irrespective of the circumstances they refuse ALL requests from homeowners to correct or delete nonsense Zestimates and one has to question their motive for such irresponsible actions that cause potential financial damage and misery for millions of Homeowners suffering from unwanted imposed Zestimates. The time has come for our elected officials to catch up with technology and introduce regulation over Zillows Zestimates to protect homeowners from this nonsense.
Interesting that Benchmark say a big reduction in marketing costs in 4th quarter will help Zillow earnings. So who told Daniel Kurnos of Benchmark Capital that marketing costs were reduced? Perhaps the SEC should be checking on this and the impact of such restricted information on the stock price, particularly as Benchmark Capital is close to Zillow and its chairman Rich Barton.
This is compared to a profit of $5.9M in 2012. Seems the one BIG item that contributed to this detiorating financial performance is Share Based Compensation which increased by $17M to $23M