Real estate attracts New Yorkers like moths to a flame.
And when they are ready to buy or rent — or are just curious — consumers in one of the priciest housing markets in the country often turn to New York City's No. 1 real estate website, StreetEasy.com.
In August, the No. 1 national real estate website, Zillow (Z), paid $50 million to buy StreetEasy.
"New York City has always been a tough nut to crack," said Zillow's chief marketer Amy Bohutinsky. "StreetEasy spent seven years growing (the site) and built a better product for New York City than we did.
Since the housing market has come back to life, Zillow and chief rival Trulia (TRLA) have been working harder, and spending more than ever, to attract consumers, real estate agents and advertisers to their sites, which are packed with listings and other information on homes.
Zillow and Trulia got off the ground shortly before the housing market crashed, but they've been making up for lost or never-found business from those down years, especially since their public offerings — Zillow's in July 2011 and Trulia's in September 2012.
Feathering The Nest
Seattle-based Zillow has made six acquisitions since its IPO, including StreetEasy, its latest, and rental search site HotPads in 2012.
Zillow spent $40 million on advertising in 2013, including its first national TV spots, "Find Your Way Home" and "Long Distance." It plans to spend at least that in 2014.
In August, San Francisco-based Trulia paid $355 million for software-as-a-service firm Market Leader, which helps agents manage leads and marketing campaigns. It's a "salesforce.com of brokers," said Trulia spokesman Ken Shuman.
Both firms are spending to grow their user and advertiser base, and Zillow especially is willing to put profit second to revenue as it does so. Its earnings are expected to drop 89% for 2013 to 4 cents a share, but rise to 48 cents in 2014.
Both firms have been logging double- or triple-digit revenue growth per quarter. Trulia's growing at a faster pace from a smaller base.
A returning housing market and web shopping habits are "benefiting the whole category," Bohutinsky said. "Most agents will go out of their way to list on the largest sites." And many pay subscription fees to get prime real estate on the sites.
Even so, the top few real estate websites are still in the early stages of penetrating the $24 billion total addressable U.S. real estate advertising market, one that is "rapidly moving online," wrote RBC Capital Markets analyst Mark Mahaney.
Realtor.com, the third major player, was once the largest real estate website. It's the official site of the National Association of Realtors and run by San Jose, Calif.-based Move (MOVE). The site was founded in 1996 and grew fast during the dot-com boom. As Move CEO Steve Berkowitz told IBD, "We were in some ways ahead of the curve.
Realtor.com fell from its top perch after the housing crash and rise of Zillow and Trulia. As one Realtor said in a Web posting not long ago, "Realtor.com got passed by like a race horse stuck in the gate.
It's been attempting a comeback. And over the last few quarters sales perked up. In July the NAR board of directors voted to add listings of new homes and existing homes from non-NAR sources to "compete more effectively in an evolving online marketplace," the NAR said. Before, it held only NAR-member listings, still more than 90% of all homes for sale, Berkowitz noted.
Realtor.com is also increasingly cracking the New York City market, which lacks the usual multiple listing services. It recently won listings from the Corcoran Group, a unit of Realogy Holdings (RLGY). With it, Realtor.com covers 75% of the market, Berkowitz says, and Move is close to landing other brokers there too.
"Our audience has grown over 20% this year," Berkowitz said of Realtor.com's national scope, adding the site "is on the rise again.
Besides size, the three real estate Web players differ in other ways: 1. Zillow.com. The firm prides itself on a deep database of most homes in America, not just those on the market. "We call it a living database," said Bohutinsky, who notes it comes from public data and internal estimates, including home values and risk of foreclosure. Owners and agents also update such things as if bathrooms have been added.
Zillow also features more than 300,000 ratings and reviews of real estate agents by people who have used them in a transaction.
2. Trulia.com. Beyond the usual neighborhood maps offered by online sites, Trulia digs deep on certain details, homing in on crimes, commute times and natural hazard risks, such as whether a home is in a flood or earthquake zone. With "Find An Agent" it zooms in on details that may be overlooked, such as whether an agent in a certain ZIP code is an expert in, say, condos, townhomes or short sales, or speaks Spanish, Russian or Japanese.
3. Realtor.com. The site's operator says listings are updated every 15 minutes, making it the most "accurate" of the real estate sites. Since homes in some markets are selling quickly, "the importance of accuracy has come back again, as in the early 2000s when the housing market was hot," Berkowitz said.
Move gets a lot of its content from 800 multiple listing services. "We built relationships over years and spent millions to build infrastructure," he said. "Zillow and Trulia don't have the direct relationships.
Not all content on rival sites is current, he adds, noting that some sold homes are still listed for sale. "We know exactly when a home is sold, when a sale is pending and when to take it off the market," he said.