Industry expert Mike Delprete writes that despite the traffic debate, the bottom line in the portal wars comes down to revenue.
This article was shared here with permission from Mike Delprete of Inman Intel, Inman’s data and research division, providing deep insight and market intelligence into the business of residential real estate and proptech. Subscribe now.
Among the leading portals in the US, there are significant differences between the amount of leads generated, how those leads are converted, and the number of customers who pay for those leads.
Why it matters: Behind the headline traffic numbers are real metrics of success that reflect value, business potential, and product/market fit.
Data on leads from over 2.5 million portals from Inside Real Estate, which operates one of the largest CRMs in Japan used by over 400,000 agents, reveals the percentage of leads generated by each portal in 2021 and beyond. . By 2024, Zillow will be the top platform by 50x. Generated more leads than Homes.com. Realtor.com is 15 times more powerful than Homes.com.
Measuring lead quality is difficult, but perhaps the most accurate measure is “lead conversion,” or the rate at which raw leads convert into trading customers.
This metric will be measured across more than 300,000 portal leads in 2024 within Inside Real Estate’s CRM platform. Zillow is once again the leader, converting leads at twice the rate of Homes.com.
The number and quality of leads should roughly correlate to customers and revenue over time.
Homes.com signed on with more than 10,000 new customers in the first half of 2024, but its growth slowed dramatically in the most recent quarter, with net additions of just 800 paying customers. As a result, revenue growth from Q2 to Q3 has been relatively flat.
As a result, Homes.com’s revenue for the quarter was $17 million, which is lower in size than comparable lead generation businesses at Zillow and Realtor.com.
Revenue reflects product/market fit and is earned by providing valuable services to paying customers. So more value -> more customers -> more revenue.
There’s a timing issue. CoStar acquired Homes.com in 2021, relaunched it in 2022, launched an advertising campaign in 2023, and began selling subscriptions in February 2024.
This means the business is still in an expensive growth mode, which is why the recent slowdown is concerning. If you invest $1 billion in the “biggest marketing campaign in history,” $60 million in annual revenue is clearly not enough. It takes 16 years to recoup one year’s investment.
The counterargument is that it’s not the leads that matter, it’s the visibility.
Homes.com seems to be more focused on listing and agent visibility, a benefit similar to billboard, radio, and TV advertising. But even so, success is still measured by paying customers and revenue.
Bottom line: It’s all about product-market fit, baby.
It can be exhausting to discuss traffic: how to measure it, the value of organic vs. paid, and the size of your marketing campaign. But at the end of the day, these portals are in the business of making money, and that comes from providing valuable services to paying customers.
Mike DelPrete is a strategic advisor and global expert in real estate technology, including Zavvie, an iBuyer offer aggregator. Connect with him on LinkedIn.
