Zillow Management Discusses Q3 2013 Results - Earnings Call Transcript

Nov. 5.13 | About: Zillow Group, (Z)

Zillow (NASDAQ:Z)

Q3 2013 Earnings Call

November 05, 2013 5:00 pm ET


Raymond Jones

Spencer M. Rascoff - Chief Executive Officer and Director

Chad M. Cohen - Chief Financial Officer, Principal Accounting Officer and Treasurer


Ronald V. Josey - JMP Securities LLC, Research Division

Neil A. Doshi - CRT Capital Group LLC, Research Division

Mark S. Mahaney - RBC Capital Markets, LLC, Research Division

Daniel L. Kurnos - The Benchmark Company, LLC, Research Division

Mark May - Citigroup Inc, Research Division

Christopher Merwin - Barclays Capital, Research Division

Heath P. Terry - Goldman Sachs Group Inc., Research Division

James Cakmak - Telsey Advisory Group LLC

Lloyd Walmsley - Deutsche Bank AG, Research Division


Good day, ladies and gentlemen, and welcome to the Zillow Third Quarter 2013 Earnings Call. [Operator Instructions] As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, RJ Jones, Investor Relations Officer. Please go ahead.

Raymond Jones

Thank you. Good afternoon, and welcome to Zillow's Third Quarter 2013 Earnings Conference Call. Joining me today to talk about our results are Spencer Rascoff, Chief Executive Officer; and Chad Cohen, Chief Financial Officer.

Before we get started, as a reminder, during the course of this call, we will make forward-looking statements regarding the future events and the future financial performance of the company. We caution you to consider the important risk factors that could cause actual results to differ materially from those in the forward-looking statements made in the press release and on this conference call. These risk factors are described in our press release and are more fully detailed under the caption Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2012, and in our other filings with the SEC. In addition, please note that the date of this conference call is November 5, 2013, and any forward-looking statements that we make today are based on the assumptions as of this date. We undertake no obligation to update these statements as a result of new information or future events.

During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. In our remarks, the non-GAAP financial measure adjusted EBITDA will be referred to simply as EBITDA, which excludes share-based compensation. This call is being broadcast on the Internet and is available on the Investor Relations section of the Zillow website at investors.zillow.com. A recording of this call will be available after 8 p.m. Eastern Time today. Please note that the earnings press release is available on our website. And after the call, a copy of today's prepared remarks and a historical exhibit of our business metrics will also be available on our website.

After management's remarks, we will host a live question-and-answer session. During the Q&A, we will entertain questions asked via Twitter and Facebook, in addition to questions from those dialed into the call. Individuals may submit questions by tweeting @Zillow using the #ZEarnings hashtag or to the official Zillow Facebook page. After the call, analysts from The Motley Fool will host a brief follow-up Q&A session with Spencer via Twitter.

I will now turn the call over to Spencer.

Spencer M. Rascoff

Thank you, everyone, for joining us today to discuss our third quarter results. The third quarter was an extremely strong one for Zillow. We continue to set new records in our business metrics and operating results. We also gained increasing momentum as the definitive home shopping brand for consumers. One indication of Zillow's clear category leadership was my August interview with President Obama. During that event -- viewable on zillow.com/whitehouse, President Obama answered housing questions directly from Zillow users. This first-of-its-kind conversation with the President provided him with access to the largest consumer audience in online and mobile real estate.

During the quarter, Zillow's total traffic exceeded 61 million average monthly unique users, peaking for the year at nearly 64 million unique users in August, smashing records in both overall uniques and real estate shopper visits. We continue to substantially widen our traffic leadership in the category.

Total revenue for the quarter was just over $53 million, up 67% year-over-year, a quarterly record that exceeded our outlook of $50 million at the midpoint. In Q3, Premier Agent net subscriber adds approached 6,000 for the first time. We now have nearly 45,000 subscribing real estate agent advertisers. This drove our Marketplace revenue category to a new record of almost $41 million.

Our Display revenue topped $12 million for the quarter and came in significantly ahead of expectations. Terrific execution by our Display team, strong advertiser relationships and our premium value proposition to advertisers drove these results, despite the challenging macro environment in display due to programmatic ad buying.

Our EBITDA for the quarter was $4.1 million and exceeded our outlook of $1.75 million at the midpoint of the range. From top to bottom, we are very pleased with the results.

With another excellent quarter in the books, I'll now give you an update on our 3 strategic priorities for 2013: One, growing our audience; two, growing our Premier Agent business; and three, growing our emerging marketplaces.

Starting with our first priority. We are seeing tremendous audience growth driven by best-in-class product and advertising. Everything we do at Zillow begins with creating amazing and immersive products on mobile and web. With our product ship cycle of 2 weeks or less, we are constantly launching, iterating and improving our mobile apps and sites. In addition to major feature releases, we're constantly running dozens and sometimes hundreds of multivariate tests on both mobile and desktop, which drive repeat usage and improve site conversion.

Notable in the quarter is that we were spotlighted by Apple on stage during its iOS 7 launch. Our developers and designers completely redesigned the Zillow Real Estate App for the iPhone and iPad, resulting in a spectacular and visual product that makes home shopping even more intuitive and fun, and our thousands of glowing reviews in the App Store tell the story. Our app was 1 of only 4 chosen by Apple to be demoed at its launch event for iOS 7, and was heavily featured in the App Store for weeks afterwards. This type of recognition by Apple significantly impacts our downloads and usage and widens our mobile lead in the category.

One of our advantages on mobile is that as a technology company with a nationwide real estate footprint, we are uniquely able to take advantage of opportunities like this. Local real estate companies have neither the footprint nor the technology expertise to create and continually update apps with mass appeal.

Our category leading audience growth on mobile and web originates from great product, which in turn gets amplified by focused marketing. We are very pleased with the investment we've made in advertising this year, and we're seeing extremely positive returns all the way down our shopping funnel, from unique users, to unique home shoppers, to contacts, to Premier Agents.

We began this year as the category leader, and we've seen that lead widen substantially this year. First, on desktop. According to comScore, Zillow's audience market share grew from nearly 27% of the category to nearly 34% of the category year-to-date. The #2 and 3 brands in the category lost share during this same period. Over the past 12 months, Zillow has more than doubled its market share lead over the second brand in the category. Additionally, Experian Hitwise measures our mobile web presence as nearly twice the size of the #2 brand in our category and nearly 4x the size of the #3 brand.

To put these stats into concrete numbers, at the quarter peak, we gained 27 million monthly total unique users year-over-year, which is the equivalent of adding almost an entire Realtor.com or adding 3/4 of a Trulia. This is based on internal reporting from competitors' quarterly reports last week, including both mobile and web. The growth in our traffic consists of serious home buyers and renters. Continuing the trend we saw last quarter, as our traffic grew 69% year-over-year this quarter, our growth in contacts to agents again exceeded 80% year-over-year. Another metric, views of for-sale listings, is up 80% year-over-year as well. And we believe that Zillow is growing serious home shopper traffic faster than the category off a much larger base.

Advertising is working for us, and because we are in high growth investment mode, we expect that we will spend at least the same amount, if not more, in 2014. We will share more about our 2014 advertising plans when we report our full year results in February.

Another investment that contributes to our priority of growing our audience is our August acquisition of StreetEasy, the #1 online destination for real estate shoppers in New York City. StreetEasy draws more than 1 million monthly unique users and contains untapped potential to grow further as part of the Zillow family of brands. To understand what StreetEasy accomplished as a bootstrapped startup pre-acquisition requires a deeper dive into the New York metro market. There is no other real estate market like New York in the United States. New York is densely populated and expensive, with neither a consolidated multiple listings service for Manhattan nor one that spans the 5 boroughs. There are approximately $31 billion in resale transactions across the 5 boroughs annually, resulting in $1.9 billion in commissions earned by brokers in New York. This is about 60% of the commission amounts earned by agents in Australia and about 1/3 of the commissions earned by agents in the U.K. In addition, New York rental transaction volumes eclipse for-sale transactions.

To provide a comprehensive real estate site for consumers throughout the city, StreetEasy built a very specialized offering, leveraging data of particular interest to New Yorkers. Over the course of the company's 8-year history, its offering beat out the competition, and StreetEasy became the clear leader in online New York real estate. As a result of unique market circumstances and excellent execution, very powerful network effects reinforce StreetEasy's market position. We are thrilled to be combining forces to take the StreetEasy brand and product suite to the next level.

As a small first step, next week, StreetEasy will be integrating Zillow Mortgage Marketplace onto its site. We have many more opportunities, especially on mobile, and together, we are just getting started. Now we turn to our second strategic priority of growing our Premier Agent business, which continues to outperform.

I've met thousands of Premier Agents at local Zillow events over the last few months around the country, and their feedback has been both inspiring and validating. Our Premier Agent business continues to gain momentum with more and more agents finding success with us. One way we are working to help more agents is through our just announced and just launched Zillow Tech Connect program, where leading CRM software providers can directly integrate with Zillow to help brokers and agents convert contacts they receive from Zillow into sales. Many of our successful Premier Agents leverage a CRM, whether it's from us or one of our launch partners, Zurple or BoomTown or one of the legacy industry providers. Our open ecosystem approach for productivity will help more of our Premier Agents be successful in the system they choose and enable them to buy more advertising from us. Our strategy is to provide our own lightweight and free agent CRM, but to remain an open system that integrates with other more sophisticated enterprise-class CRMs.

At the end of the third quarter, the annual run rate in the Premier Agent business was about $132 million compared to an $80 million run rate a year ago. September was a record month for Premier Agent revenue and almost for net additions of new premier ad -- Premier Agents. We're adding Premier Agent revenue at a faster pace than in any point in our company's history.

To gauge our long-term potential in the Premier Agent business, international online real estate companies provide a template on how we might advance. Rightmove in the U.K., REA in Australia and SeLoger in France all lead in audience in their respective countries. These models show the possibilities for pricing, revenue and margin structure for the leading company in a market over the long term.

Today, we believe we connect consumers and agents in perhaps 2% of homes for-sale transactions in the U.S. Because of the industry structure in the U.S., the path to realize the potential to lead the domestic market runs through audience leadership. Advertisers follow audience.

Over the long term, we anticipate the total addressable market for ad revenue from agents to evolve as the category winner extends its lead. While we believe agents today spend 10% to 20% of their $60 billion in commissions on advertising, we believe ad dollars will shift to more of a revenue generation practice, similar to search engine marketing, where some advertisers spent nearly up to their marginal revenue. In other words, we think that agents will view online impression-based advertising in the same way they have traditionally viewed lead referral economics, which is to say that they're willing to pay up to 40% of their commission to the channel that provides them with a customer. Hence, it is possible that the total online advertising pie in our category could grow from its current $10 billion range to something 2 to 3x larger, and this is consistent with international comps.

We're hearing stories from Premier Agents across the country that validate this. They start small and they keep buying more impressions from us and hire more agents to work for them. They keep spending money on the margin because they're making money on the margin. And the TAM, the total addressable market, expands. We believe that as the breakaway leader in mobile audience and the clear leader in desktop audience, we have a very exciting future in this one business line. There is plenty of juice left in this orange. But we have also planted other seeds that are starting to bear fruit.

So turning now to our emerging marketplaces. First, in our mortgage marketplace, we received another record level of loan requests in the quarter, almost 6 million, and mortgage revenue grew over 100% year-over-year for the fourth quarter in a row. Still, consumer awareness and usage of Zillow Mortgage Marketplace represents a tremendous opportunity for us. This quarter, we increased our PR and marketing efforts for Zillow Mortgage Marketplace, with a primetime feature on ABC World News with Diane Sawyer, and early last month, we hosted a Google+ Hangout with the Federal Housing Finance Agency on the Home Affordable Refinance Program. Zillow Mortgage Marketplace also had favorable coverage this quarter in The New York Times, The Wall Street Journal, Bloomberg, Forbes and The Washington Post.

Additionally, we recently revamped our mobile web experience for mortgages, which is showing terrific usage stats similar to our standalone apps. And during the quarter, we opened the new Lincoln, Nebraska office for the Mortech business, which was attended by local government and press. All in all, great strides are being taken with our mortgage marketplace.

In the Zillow Rentals marketplace, we're gaining traction in our initial monetization efforts via paid inclusion, which we started just a few months ago. Our value proposition to property managers competes extremely well on price and value versus competitors. When considering that we deliver more than twice as many rental contacts as for-sale contacts, albeit with a lower potential value per lead, our rentals business is a "gusher" that has not had a pipeline setup for it yet.

For perspective, our mortgage business took 3 years once we began iterating on monetization to reach $10 million in annual revenue. Rentals can ramp faster because: One, the Zillow, StreetEasy and HotPads brands are widely known among rentals advertisers; two, our experience with Premier Agent has educated us on how to build out this business; and three, we already have the renter audience.

In our nascent home improvement marketplace, Zillow Digs, we continue to make progress in usage and engagement. Last month, we launched our first ever Zillow Digs App for iPhone, which was heavily featured in Apple's App Store at launch.

Before concluding my remarks today, I want to take a moment to highlight the efforts of our housing research team, led by our Chief Economist, Stan Humphries. Zillow's housing research team just hosted our fourth successful housing forum in Washington D.C., focused on solving the lingering issues of the housing recession. The event included keynotes by Carol Galante, the Federal Housing Administration Commissioner and Assistant Secretary for Housing; and Edward DeMarco, Acting Director of the Federal Housing Finance Agency, the regulator for Fannie Mae and Freddie Mac. Other speakers included Senator Mark Warner, Democrat from Virginia, who is the co-sponsor of the leading Senate bill on mortgage finance reform; and Congressman Randy Neugebauer, Republican from Texas, who is a co-sponsor of the leading House bill on mortgage finance reform. Richard Smith, the CEO of Realogy, was also a featured speaker, in addition to speakers from CNBC, The Wall Street Journal and The Washington Post. The forum generated extensive media coverage when DeMarco of the FHFA announced a highly anticipated decision to maintain higher conforming loan limits for another several quarters.

Events like these highlight Zillow's data and our unbiased objective voice for the consumer in Washington and nationwide, as well as our real estate and mortgage industry leadership.

In conclusion, Zillow's growing separation in usage on mobile and web against the other category participants clearly indicates we are executing our strategy effectively. Whoever wins with consumers will likely end up taking most of the revenue and profits in the category.

With that, I will turn the call over to Chad.

Chad M. Cohen

Thanks, Spencer. As Spencer mentioned, this was an extremely strong quarter, with traffic growing 69% year-over-year to 61.1 million average monthly unique users, cresting in August with approximately 64 million. To put this in perspective, at our seasonal peak in August, we added 27 million monthly unique users from the same period in 2012. You should take note that it took us nearly 6 years to attract our first 27 million monthly unique users.

Turning to our financial performance, third quarter revenue totaled a record $53.3 million, up 67% year-over-year. Compared to our outlook, we exceeded the $50 million midpoint of our range by $3.3 million, primarily due to outperformance in our Display revenue category, with a very small contribution from StreetEasy, as the results of their operations were only included in 1 month of the quarter.

Marketplace revenue reached $41 million, representing 73% year-over-year growth and 77% of total revenue. Taking a closer look at our real estate Marketplace revenue subcategory, which is made up of our Premier Agent, Diverse Solutions, Rentals and now StreetEasy product lines, revenue was $35.1 million in the quarter and grew 67% year-over-year. The primary driver of growth was our Premier Agent business, where we added a record 5,942 Premier Agents in the quarter, with a net increase of 18,046 Premier Agents from this time last year. Average monthly revenue per user, or ARPU was $264 in the quarter for the Premier Agent business and represented a 2% decrease from last year and a 1% decrease sequentially from the prior quarter. The decrease in ARPU is a function of timing of new agent additions, as well as more agents becoming Platinum subscribers at initial impression levels that are lower than the average.

Upsells to existing agents who purchased additional impressions represent about 50% of our new bookings during the quarter, and naturally counterbalanced against new subscribers who initially come on board at lower levels of spending. This dynamic reflects agents, over time, proving out the ROI for themselves and wanting to increase their marketing activity with us. These trends have been consistent since launching impression-based pricing last year. As a reminder, the ARPU figure is an output that is neither a proxy for pricing nor a metric we use to run the business. Our inventory model allows agents to purchase available impressions at prices that are determined by local market conditions.

Turning from real estate to our mortgage business, which consists of our Zillow Mortgage Marketplace and our Mortech software businesses, revenue reached $5.7 million and grew 120% year-over-year. During the third quarter, 5.9 million loan requests were submitted to Zillow Mortgage Marketplace, growing 88% over last year. In 1 quarter, we now receive more loan requests than we did in the entire 2011 year. The vast majority of these loan requests submitted continue to be for purchase loans as opposed to refis.

Looking at our Display category, revenues were $12.4 million and increased 50% year-over-year, which is the fourth consecutive quarter of accelerated growth. We experienced significant growth across most of our primary Display verticals, including builders, banking and brokerages. Our Display business represented 23% of total revenues for the quarter and continued to deliver strong contribution margins.

Moving now from revenue to our expenses. Total operating expenses were $58.8 million in the third quarter as compared to $29.6 million in the same quarter last year. The $29.2 million increase in expenses versus last year was primarily due to 2 factors: First, increased headcount-related expenses reflecting growth from nearly 500 employees to more than 780 employees, with approximately 70 of those 280 employees coming via acquisition; and second, increased advertising investments to grow our audience.

Our operating expense increase, year-over-year, would've been closer to 65% or $19.1 million if we were to exclude the investments we're making to grow audience.

Now I'll go into a few details briefly on each major expense line item, starting with cost of revenues. In the third quarter, our cost of revenue was $5.1 million or 10% of revenue as compared to $3.6 million or 11% of revenues in the same period last year. Higher levels of engagement with Zillow-owned and operated properties versus our revenue-sharing partners drove cost leverage. Absolute dollars grew as a function of higher revenue levels and data center costs to support both product investments and audience growth across our platform.

Next, sales and marketing expenses, which include our Premier Agent sales team, marketing team and advertising activity, were $31.2 million or 59% of revenue as compared to $14.1 million or 44% of revenue in the same period last year. The variance from last year resulted primarily from our increased investments across advertising channels to support our long-term growth objectives. Compared to last year, advertising expense -- expenses increased $10.1 million. Excluding the investment increase, sales and marketing expenses increased approximately 50% year-over-year and represented 40% of revenues.

Technology and development costs were $12.2 million or 23% of revenues as compared to $6.7 million or 21% of revenues last year. Consistent with prior quarters, the increase in expenses was primarily driven by the growth of our engineering team, both organically and through acquisition, to support product initiatives and higher -- as well as higher amortization of intangibles year-over-year related to acquisitions.

On an absolute basis and as a percentage of our revenue, we continue to invest more in technology than any other public real estate media company, which helps us extend both our audience lead and increase our overall value to our real estate advertisers.

Lastly, G&A costs were $10.4 million or 19% of revenue as compared to the same period in the prior year at $5.2 million or 16% of revenue. This increase was driven by higher headcount-related costs combined with increased professional services and facilities costs to support our growth.

Turning now to probability. Our EBITDA for the quarter was $4.1 million, representing 8% of revenues. This result exceeds our guidance midpoint by $2.4 million, primarily due to the higher revenue than we projected flowing through to the bottom line. On a GAAP basis, net loss for the quarter was $1.2 million, representing a GAAP loss per share of $0.03 for basic and fully diluted shares of 36.7 million. We recognized a onetime tax benefit of $4.3 million in relation to the acquisition of StreetEasy.

On a non-GAAP basis, which excludes share-based compensation, as well as the onetime tax benefit, the adjusted loss per share was $0.05 for basic and fully diluted shares. Post our capital raise, we ended the quarter with approximately $425 million in cash, cash equivalents and investments, and we remain debt-free.

Now I'll discuss our outlook for the rest of 2013. As we close out the year, we expect to see continued strong momentum in our Marketplace businesses and a sequential decrease in Display revenues, which follow typical seasonal patterns that impact our traffic results. For the fourth quarter, our revenue is expected to be in the range of $55 million to $56 million, representing 62% year-over-year at the midpoint of the range. Looking at the sales and marketing line item in the fourth quarter, we anticipate recording total expenses of $25.5 million to $26 million for the period, a planned decrease from the third quarter as we pull back our media spending in the seasonally slower home shopping period.

Our EBITDA for the fourth quarter is expected to be approximately $8.5 million to $9 million. Looking at the projected reconciling figures to EBITDA, total share-based compensation in the fourth quarter is expected to be in the range of $4.5 million to $5 million, and depreciation and amortization expenses are expected to be in the range of $6.5 million to $7 million. And although do we not provide a GAAP EPS outlook, we expect a basic and fully diluted weighted average share count of approximately 40 million shares for the quarter.

Now looking at full year 2013, we are raising our revenue guidance from the prior range of $186 million to $188 million to a range of $194 million to $195 million for the year, representing 67% year-over-year growth at the midpoint of the range. Just to give some perspective on the momentum through the year, when we started in 2013, we projected revenue between $165 million and $170 million for the year. We are closing out strong, with a projected annual revenue growth rate that is 23 percentage points higher than what we anticipated at the beginning of the year.

Regarding full year sales and marketing expenses, we now project nearly $110 million in total expenses for the year in the P&L. This figure includes approximately $3 million to $4 million of share-based compensation and a onetime $7 million accelerated share-based charge we recorded earlier in the year. Due to revenue outperformance in the third quarter, we now expect approximately $23 million in full year EBITDA, which is $3 million above our previous outlook.

Looking at the reconciling figures, we anticipate total depreciation and amortization expenses for the year to be in the range of $22.5 million to $23 million and share-based comp to be in the range of $22 million to $23 million. Total CapEx and capitalized data content we expect to be in the range of $12 million to $13 million for the year. We also project full year 2013 basic and diluted share counts to be 35.5 million and 39 million of weighted average shares, respectively, though we are not predicting positive net income for the year, so only basic shares would apply.

In conclusion, we continue to gain traction against our long-term objective of becoming an enduring household brand. We achieved record results in traffic and revenues in the third quarter, continue to separate ourselves from the competitors in terms of audience and remain focused on our priorities of growing our audience, growing our Premier Agent business and growing our emerging marketplaces on mobile and on the web, and we remain tremendously excited about executing against our massive market opportunities in the lifecycle of homes.

Thanks for your time today. With that, we'll open up the call to questions, and remind you that we'll be considering questions submitted via Twitter and Facebook with the hashtag #ZEarnings.

Question-and-Answer Session


[Operator Instructions] Our first question comes from the line of Ron Josey from JMP Securities.

Ronald V. Josey - JMP Securities LLC, Research Division

A little more into your comments around the potential for Premier Agent to shift to more of a lead gen model. Just a question in terms of timing and, more importantly, what do you think needs to happen for this to be a reality in terms of, is the tech platform ready to go? Or what needs to be done there? And importantly, are you getting requests for things like this already?

Spencer M. Rascoff

Hey, Ron. So thanks for the question. And let me clarify what I'm referring to. I'm not saying that we're going to change our business model to shift -- to charge on a success-based referral basis, not at all. That is not our intention. We do not plan to do that. The comments were really with respect to TAM. We frequently get asked by investors, "Okay, you have almost 50,000 premier agents, how many can you have? How big can this business get?" And the point that I'm trying to make is that the current ad spend of $6 billion to $10 billion a year that agents spend on advertising, we are a tiny fraction of that, around $130 million revenue run rate, which is a tiny fraction of what they currently spend. But what they currently spend on advertising is not the right way to look at it. That would be like asking in 3 years ago what do e-tailers currently spend in online advertising. The e-tailers keep buying more and more AdWords from Google because it's profitable for them on the margin. And so the TAM expands as long as there's still ROI there. And that's what we hear from agents over and over and over again. If I ask agents who are spending $50,000 a year with us, "Where were you spending $50,000 a year last year?" They look at me like I'm crazy. "I wasn't spending $50,000 anywhere last year, what are you talking about? But the reason I spend $50,000 with you is because I make a lot more than $50,000 on the margin." So it's really a TAM expansion point. It's not a business model point. So to answer your question specifically, all the pieces are in place. We have an impression-based selling model. We have a great sales team. We have great relationships with advertisers. And I do think that the way agents are starting to think about buying online advertising is already starting to change, it's "is this profitable for me on the margin?" Rather than, "I'm going to remove budget from the newspaper and bring it onto the Internet so I have a finite amount of money to spend." That's not the agent spend mentality anymore.


Our next question comes from the line of Neil Doshi from CRT Capital.

Neil A. Doshi - CRT Capital Group LLC, Research Division

Spencer, could you talk a little bit about the opportunity that you have, especially as agents are looking for better ROI and how you can help them achieve that on the Premier Agent side? And then also, if there's any way we can get a sense of what the contribution was from rentals in the quarter and how are you tracking along the rentals side of the business in terms of monetization from StreetEasy, as well as from HotPads and some of the other businesses that you've acquired. That would be great.

Spencer M. Rascoff

Sure. So on agent ROI, what I mentioned about Tech Connect, I think, is important, and let me just clarify and expand my comment. Agents buy media from us, and we want them to use some sort of a system. We want them to use a system to convert those leads into transactions. And we don't much care which system they use, if they want to use a pen and paper, God bless. If they want to keep it in Excel, that's fine. If they want to use Outlook. They want to use Salesforce.com. They want to use Zurple or BoomTown. If they want to use their broker's CRM or their MLS's CRM. They want to use something that we provide, we are relatively indifferent. What we care about is that they convert these leads into deals, that they make money from their ad spend. We are following Google's strategy. Google offers Google Analytics for free, and they do it because they think that if people who run websites are able to track what's happening on their websites, then they'll want to drive more traffic to the website. How they're going to drive more traffic? They're going to buy more media from Google. So Google offers Google Analytics for free, but Google AdWords also integrates with more expensive enterprise-level site analytics software that bigger companies are going to use to keep track of their website. So Google has an open architecture where what they really care about is selling more media impressions, not making money from the sale of web analytics software. So that's Zillow's strategy. It's quite different from our 2 main competitors who have spent hundreds of millions of dollars acquiring and investing in enterprise-level expensive CRMs that they're trying to force their advertisers into. Zillow has a very different strategy here. So your question, Neil, was about -- just about agent ROI. We think the typical agent has around a 3% conversion rate of leads that they end up with from Zillow into a transaction, which equates to about a 10x ROI. As I mentioned, we think that, that ROI could come down quite a bit and agents would still be very pleased with their ROI from Zillow. Most forms of advertising of advertising have a 1 to 2x ROI. And some types of online advertising, like search advertising, have a 1x ROI typically. Your second question was about rentals and revenue contribution. We only started monetizing rentals in earnest in July with a paid inclusion model across Zillow and HotPads. We, according to comScore, we're the largest rentals site on the web. There's a $7 billion TAM here. We have 11 million monthly renter shoppers and we have twice as many rental leads as for-sale leads. So we feel like we have all the, sort of, building blocks in place to turn this into a very big business, but it's only been a couple of months. We have been asked by investors to try to sort of benchmark this relative to our Zillow Mortgage Marketplace ramp. And so I tried to do that by going back in time and seeing that we spent 2 or 3 years on ZMM before we started charging anything. And then once we fired the starting gun on monetization, it took about 3 years to get mortgages to $10 million annual revenue. I fully expect that the ramp in rentals will be faster than that. And I listed some the reasons why in the prepared remarks. But it's not material to the quarter's results, which I think was part of what your question was getting at. One more from [indiscernible] .

Okay. So we're going to do a question from social media. So the first question comes from @themotleyfool. And the question is, "Premier Agent subs were up 68% in Q3, with almost 6,000 in the quarter at 45,000 overall. What do you believe the market opportunity is for that? How high can that number go? Also, your ARPU in Q3 came in at $264. That's down slightly from a year ago, from the previous quarter. What are the main reasons for that?"

So I'll take the first part, and then I'll let Chad talk about ARPU. The Premier Agent sub count at around 45,000, as I mentioned, the way I benchmark our -- the health of the Premier Agent business relative to the opportunity is on a dollar [ph] basis, where we're at kind of $120 million, $130 million annual run rate relative to the $6 billion to $10 billion that agents spend on advertising. And as I said, I think that will actually increase and become a bigger amount as agents start to sort of change the way they think about online advertising. So on a dollar basis, we're dramatically underpenetrated relative to the size of ad spend among agents. And on ARPU, Chad?

Chad M. Cohen

Yes, I think consistent with what we said in the past is, ARPU is not a metric that we manage to or how we run the business and definitely not a proxy for proxy for pricing. Pricing effectively is based on the value of homes in the Zip Code in which agents advertise. So you saw in the quarter, we're rapidly bringing on new agents, nearly 6,000 in the quarter, which is a record for us. We're bringing those new agents on at lower impression levels, at lower budget levels than the average ARPU. Agents are testing. They're learning. And what we're seeing, which is a trend that's consistent also with the past, is that existing agents are buying more. So when we look at the composition of the bookings in the quarter, about 50% of our bookings in the quarter came from existing agents buying more. These are agents that were present as of the end of the prior quarter and also agents that came in, in the quarter and started to buy more. And so we're quickly demonstrating value to these new agents as well. And we're happy with those trends and look forward to continuing to see those trends in the future.

Spencer M. Rascoff

So the next question from Twitter was from Colin Sebastian, Internet analyst with R. W. Baird and he asks, "How is Zillow managing the high cost of engineering talent? And can you shift more to cloud services such as AWS?"

So we do use AWS. We've been a customer of AWS, gosh, for 5 years. We were -- I was on stage at the Web 2.0 Conference, I think, 5 or 6 years ago as a referenceable client for AWS that Amazon asked me to go up there and talk about how great it was long before it was the bee's knees. So we've been there for a long time. The question on engineering talent is a real one. And for those that follow me on Twitter, you know I spend a lot of time on this issue, trying to recruit and retain fantastic developers and engineers. And it's difficult. We have engineering centers in Seattle, San Francisco, Orange County, Lincoln and New York. And we also have partner development shops in Europe and in India that help us supplement our talent. But it's a real problem, and it's certainly a challenge. I think we benefit, frankly, from being a small fish in a medium-sized -- sorry, a big fish in a medium-sized pond here in Seattle, where the lion's share of our developers are, because within the Seattle tech community, Zillow is a very highly desirable place to work. So generally speaking, we have an easier time recruiting and retaining people than other companies like Zillow.

One more question from Twitter, and we'll go back to the call. Mike Graham, Internet analyst from Canaccord Genuity. "Please comment on the mix of sources for new PA subs, high versus low end markets, new to Zillow versus agents with existing profiles."

So let's see. The typical PA comes in at a sub-median ARPU. We haven't said exactly what that number is, but it's -- typically, they spend kind of -- actually, I don't have off the tip of my tongue exactly what the number is, but something a lot lower than an average typical ARPU. But that doesn't necessarily mean they're in lower end markets. It just means that they're dipping their toe in the water in terms of the number of impressions that they're buying right out of the gate. And we see this time and time again where they -- because the ad product does not have a prescribed number of leads associated with their ad buy, they dip their toe in the water with a small spend because they're not able to get a straight answer from us as to how many leads they will get for their $100 or $200 spend because we don't know. It depends which -- whether the consumers choose to select that agent or not. And it's incumbent upon the new Premier Agent to go and get reviews or to improve their profile page, for example, in order to get a lot of leads. So they dip their toe in the water and then their ARPU grows relatively quickly as they start to have success, as they get leads and then they get transactions. So an important misunderstanding about Zillow is, I think, a lot of people tend to think that Zillow only works for agents in higher end ZIP Codes and/or in the coastal markets. And that is not true at all. We price each ZIP Code individually based on local market dynamics. And so Zillow works very, very well in small towns, where perhaps we have a lower CPM. And it works very well in large cities, where perhaps we have higher CPM. One of our highest ARPU agents is somebody I just met at one of our local events. He's from Idaho and spends probably $20,000 or $30,000 a month across 80 ZIP Codes in Idaho. He basically buys the whole state, and he's serving an incredibly rural population at relatively low home values and having incredible success with the program. We'll go to the next question from the call.


Our next question comes from the line of Mark Mahaney from RBC Capital Markets.

Mark S. Mahaney - RBC Capital Markets, LLC, Research Division

Chad, just any color on the contribution of StreetEasy to the Q4 guidance? And then, Spencer, a broad question. You started something at the beginning of this year, the major brand campaign that, given the results for the last 2 quarters seems to have been relatively successful. And this fourth quarter guidance kind of implies that you're kind of toning down the sales and marketing spend versus revenue, at least versus the last 2 quarters. Is there a learning in there for you? Do you feel like -- is that just a seasonal shift and you just downplayed a brand campaign during the fourth quarter? Or do you feel like you've accomplished what you wanted to do with that brand campaign? Or is this -- or do we expect to see it kind of ramp up again next year?

Chad M. Cohen

Hey, Mark. I'll take the question on StreetEasy. So we released the K today, which shows the 2012 results for StreetEasy, as well as the stub period for the first half of the year. And so if you take a look at that, you'll see the top line for the first half of this year, about $3.5 million was the contribution from StreetEasy. Again, those results do not end up in our results. We had StreetEasy results for only 1 month of the quarter, which, if you run rate the $3.5 million for the full year full year out, it's about $7 million representing about $600,000 a month. So we're not providing any discrete guidance going forward. With respect to StreetEasy's contribution, they've been ingested into our revenue line, our discrete sort of revenue line. But you can take that $7 million and the $600,000 per quarter and sort of take a roundabout guess in terms of how those revenue will bleed into the fourth quarter.

Spencer M. Rascoff

And just to elaborate on that before I answer your question about advertising. The priority for StreetEasy going to 2014 is audience growth. It is not revenue maximization. Revenue is important to StreetEasy, and we think there's a lot of potential there even in 2014. But the focus will be on expanding, improving and expanding product offering, growing audience especially on mobile and becoming even more relevant to New York home shoppers. On TV, we always expected -- we always planned on ramping down ad spend in Q4. Seasonally there's not much home shopper activity between Thanksgiving and Christmas, and so we're -- even 6 months ago or however long ago it was when we started our TV campaign, we always had budgeted for and anticipated ramping down spend in Q4. You shouldn't draw any conclusions about -- based on that ramp down. In fact, as I mentioned, 2014 will be the same or higher total ad spend.

We'll do another question from the call before we go back to Twitter.


Our next question comes from the line of Dan Kurnos from The Benchmark Company.

Daniel L. Kurnos - The Benchmark Company, LLC, Research Division

Spencer, just maybe one high-level question. We've seen some movement in the Zillow Pro for Brokers program. We've seen a couple of MLS listings come on. And we know how you source listings. And data accuracy has always been, I think, a question that you guys get addressed with. So I'm curious how that blend evolves over time and which aspects you see yourselves pushing to get -- to make sure that you're on a level playing field?

Spencer M. Rascoff

You're right. Data accuracy is very important to us. We invest very heavily in it. And frankly, our listings accuracy and listings breadth is significantly greater today than at any point in the company's history. I think that you sometimes hear is you hear about outliers, small brokerages that with great fanfare decide not to put listings on websites for one reason or another. Those are outliers. That's not the bulk of the industry. The real industry is Century 21, RE/MAX, Keller Williams, Long & Foster, Howard Hanna, Douglas Elliman, et cetera. They all understand the value proposition of having listings on the biggest real estate site in every city in the country and the biggest one overall. And that's a pretty clear value proposition for a broker, especially as compared with where it used to be. 10 years ago, they used to have to pay their local newspapers millions of dollars a year to put their listings on the biggest platform in their local community. Today, they get that for free. They put their listings on Zillow and other sites like Zillow. And it's free to have their listings in front of the most buyers in their local community. So it's certainly something we work very hard on, but don't get -- don't over extrapolate from outliers that bloggers and people that sell tickets to conferences like to put on pedestals. That's not the way the real industry is at.

So we'll go back to Twitter now. A question from Brian Bolan from Zacks. He writes, "Looking for update on Zillow Digs. What's the growth been like there?"

So as I mentioned, we launched Digs on iPhone, which has given me a whole new pastime. It's incredibly fun to use Digs on iPhone. If you haven't, I encourage you to. We've had 1.1 million cumulative Digs so far and 161,000 boards created since we launched the product. And iPhone just started, gosh, probably 3 or 4 weeks or so ago. So now we're on 3 platforms: iPhone, iPad and desktop. The team is focused on improving virality of the product and especially on mobile. And we'll have an update in further quarters. It's still a very new area of investment for us. And so it's obviously, there's no revenue associated with it. And it's not material to our business results. It's still in experimentation mode.

Next question from Connor of The Atlantic, @Connor sent -- Connor asks, "Can you guide when sales and marketing as a percent of revenue will start to decline?" And then he writes, "To elaborate, I have confidence that you guys control the levers on how profitable you are. And I know that brand building has led to a spike in advertising as you've laid out. Just wondering how long you expect that to continue."

So the -- it will continue as long as we think there is significant brand whitespace in front of us and as long as we feel like we're still in hyper growth revenue mode. So there will come a time for margin maximization and to harvest the fruit that we planted. The seeds that we planted. That time is not now. And it's not 2014. And I don't know -- I can't answer the question specifically because I don't know when it will be, but it doesn't -- I know it's not now. I know this is the time to lean forward into these opportunities across each of our marketplaces, agents, rentals, mortgages and home improvement.

Next question comes from Robert Drummer @rqd. "How do you differentiate between the 63.7 million unique users and unique IP addresses? Which is correct?"

So yes, I mean, the unique user counts, we put this in our 10-K. The unique user counts are from Google Analytics, and it's counting a unique IP address. So that's how we measure unique audience.

We'll go to the next question from the call. Operator, please.


Our next question comes from the line of Mark May from Citigroup.

Mark May - Citigroup Inc, Research Division

Because it's hard to get a sense of how spend is trending for an average agent because of the addition of, obviously, the rapid addition of new agents that come in initially with lower spend levels, is there any way that you can give us a sense of what the year-on-year change is and the average spend for a PA that was with Zillow a year ago and what it looked like in the Q3 quarter? And then a question on sales productivity. Can you give us a sense of how in the last few quarters productivity has trended for the mature sales team in terms of new sales per mature salesperson?

Chad M. Cohen

Hey, Mark, this is Chad. As you saw at Investor Day back in March, we showed a chart which basically proved out that agents, as they start to systemize their approach to our platform, tend to spend more. And so when you look at cohorts over time, over the course of 6 months, 12 months and 2 years, you see that those agents continue to spend more and more. So I don't have any specific information with respect to a cohort from last year that I can give over the call today. But what we're seeing is agents, in many cases, doubling and tripling their spend as they continue to work the contacts, respond to the speed of the consumer inquiries and leverage the media spend and the software tools that we provide them. And so those are the trends that we're seeing in the quarter. Specifically, as I mentioned, 50% of our bookings are going to existing agents who buy more. And that is up from what we saw this time last year at about 40% and about 30% a couple of years ago. So those are the trends that we're seeing there. In terms of productivity of the sales force, as our sales reps continue to build their book of business, this is a subscription-based business, they continue to be able to reach in to their book, which contribute to that dynamic of existing agents who want to buy more. They've seen very quickly value delivered from that spend and our doubling down in their own ZIP Codes and in adjacent ZIP Codes to enhance their overall reach with our Platinum product. So those are some of the trends that we're seeing.


Our next question comes from the line of Chris Merwin from Barclays.

Christopher Merwin - Barclays Capital, Research Division

So we continue to see some very healthy traffic growth. And as you add that traffic, you mentioned that the new uniques are, obviously, serious homebuyers. But is there any difference in terms of the newly acquired traffic and the organic traffic as it relates to conversion? And as you expand into other categories like rentals, does the new traffic you gain actually will have to be in the market to buy a home. It just seems like you can now keep users engaged no matter what or no matter where they are in terms of the lifecycle of homeownership.

Spencer M. Rascoff

Thanks, Chris. So on new traffic, we -- the new traffic that we're acquiring through advertising acts like serious home shopper traffic, similar to the serious home shopper traffic that we achieved through other organic channels, whether it be through SEO or PR. So for example, we measure the number of page views per visit from this type of audience growth. We measure the leads -- their propensity to contact an agent on the first visit or on future visits. And this type of traffic is incremental traffic looks and feels a lot like serious home shopper traffic. And that's a testament to the media working well for us. The advertising -- the ads themselves, the creative working well for us and driving the right type of traffic. The -- your question on rentals, rentals, no doubt, benefits from our advertising, as well as mortgages even though the key points of our advertising, which you can see the TV spots at zillow.com/tv, for example, the key points, the key creative points in the advertising are home shopping for for-sale homes, but rentals undoubtedly benefits from the incremental traffic as well. We already have a very significant rentals audience on Zillow and HotPads and now on StreetEasy. So while I -- while we are certainly endeavoring to grow rentals audience further and grow renting -- rental lead volumes further, our ability to turn -- to create a significant rentals revenue line item is not dependent on any type of dramatic increase in the size of our rental audience. We can still have a very big business just from the size of our current audience today. Frankly, there are several competitors, typically privately-held competitors with over $100 million in rental advertising revenue, with less traffic than Zillow and HotPads and less lead volumes -- lower lead volumes. So we already have the audience in terms of rental.

We'll do another question from Twitter. This one comes from, let's see, 2 questions on mortgage rates. One from @Captain [ph] from Sweden and the other from @HodgesBradberry in Atlanta. And they write, "What impact will increasing mortgage rates have on the company's results and website visits?"

So mortgage rates ticked up to about 4.5% and then came back down to around 4%, but they're still up 50-ish basis points from where they were. It hasn't impacted our business. And the reason is, for better or for worse, serious home shoppers are much more focused on home prices and inventory than on changes in mortgage rates. They have been sitting on the sidelines for 2 or 3 or 4 years waiting for home values to bottom and now that they feel that home values have bottomed and are appreciating rapidly, they're trying to move quickly, independent of what's happening to the mortgage rates. So it hasn't affected -- we don't think it's affected our shopper volumes. And on the Zillow Mortgage Marketplace side of our business, most of our mortgage shopping behavior is for the purchase loans, not refi loans. So we also haven't been affected very much by the increase in mortgage rates over there either.

We'll do -- is there another question from the conference call, operator?


Yes. Our your next question comes from the line of Heath Terry from Goldman Sachs.

Heath P. Terry - Goldman Sachs Group Inc., Research Division

Spencer, now that we're a little over 1 year away from your first television ad campaign, are you starting to get any real data behind what the absolute conversion rate? People who are actually buying a home in that audience of television-related traffic looks like relative to your other traffic. I know you've said before that things like engagements have been very similar, but just curious how -- now that hopefully you've gotten some closing data, how that compares.

Spencer M. Rascoff

Sure. Well, measuring the efficacy of TV advertising is always difficult for any company. It's even more difficult for a company like Zillow to completely close the loop, as you're asking, which is from somebody seeing a TV spot, to visiting Zillow, to contacting the agent, to actually buying a house and paying an agent a commission. That last step of closing the loop is very elusive for us and made even more complex by trying to tie it back to how the original user was acquired in the first place, whether it be through TV advertising or some other form of advertising. So I don't think that we have a good read on that, frankly. Where we do have a good read on is the propensity of a TV ad and other types of advertising to drive a new user, to drive that new user to visit page views of listing of homes for sale, to contract an agent and to do other behaviors on the website or mobile apps like save a home, to favorite, sign-up to receive e-mail from us and do other user actions that we -- that tie to our business results. We do -- as it relates to agent ROI though, I will say, we believe we get a halo effect from our Premier Agent advertisers, thanks to our ad spend, where they feel that their investment in Zillow is being leveraged. They're riding our coattails via our media spend. And so we definitely benefit from that as well in terms of our advertising.

So we'll go back to Twitter for a question. This one's from @mikezengaris [ph] . He's a blogger with Motley Fool. He writes, "While mobile visits have doubled year-to-date, what's being done to take advantage of this trend as opposed to simply letting it play out?" So just some mobile stats for a second. So we're at about 120 or so homes viewed every second on mobile. And on our IPO roadshow, let's see...

Chad M. Cohen

20 to 30 range.

Spencer M. Rascoff

July 2011, I think, we were at about 20 homes viewed a second on mobile. So up 6x approximately from the IPO roadshow in summer of 2011 in terms of mobile page views per second. And 60% of our usage during the week is on mobile and 70% of our usage during the weekends is on mobile. The way we take advantage of that mobile migration is, we sell our Premier Agent subscription product in an integration fashion between desktop and mobile. And Google has switched their system to this as well. So now advertisers they buy SEM from Google, buy it in an integrated way between desktop and mobile. We view that as a significant advantage of our model relative to competitors because it's much simpler for an agent to understand when they're talking over the phone to one of our representatives that they're going to be buying impressions across Zillow desktop and Zillow Mobile. And then the impressions that they purchase get consumed across those different platforms. Because so many of our impressions now are on mobile, a very significant portion of our revenue comes from mobile. We don't break out exactly what percent of our revenue comes from mobile other than to say that 60% to 70% of our visits are on mobile. So we're definitely a beneficiary of the mobile trend. And just one other, I think, kind of interesting strategic point that I mentioned in the prepared remarks. Here as a nationwide technology company, we are significantly advantaged relative to the competition because we have a nationwide footprint. And so we can do things on mobile, which attract interest from our partners at Apple and Samsung and Google and other mobile companies, which is very difficult for local real estate companies to do because their mobile service would only apply to 1 or 2 cities where that company is based.

Is there a next question from the call?


Yes. Our next question comes from the line of James Cakmak from Telsey Advisory Group.

James Cakmak - Telsey Advisory Group LLC

I just want to follow-up on your mobile comment. Can you provide detail on the behavior of mobile users versus desktop? For instance, are they driving a proportionate amount of leads as to the growth in traffic? So any insight on mobile versus desktop behavior would be helpful. And then real quick on mortgage CPCs. Is that still around $3?

Spencer M. Rascoff

So in past quarters, we've mentioned that somebody looking at a mobile listing on Zillow is 3x more likely to contact an agent than someone looking at the same listing on desktop. Now a mobile user also views more listings per session because it's fun and easy to flip through multiple homes in a single session on mobile. But on a per person basis, the contact rates are quite a bit higher on mobile. In terms of other behaviors, we don't, for competitive reasons, we don't share other information such as saving favorites or registering for e-mail or other user activities that we encourage our users to create. The other part of the question was mortgage CPC. Chad?

Chad M. Cohen

Yes, so mortgage CPCs, as you know, James, range from about $0, they're free in some cases, up to low-double digits. On average, we've seen average CPCs move up from last year, which were about $2 to $3, to the $3 to $4 range, with many price points in between. But we typically see that refinanced pricing for CPCs are significantly higher than purchase loans. But on average, they're about $3 to $4, and you should put that in your model.

Spencer M. Rascoff

Next question from Twitter and then we'll go back to the call. @cashrulestim [ph] asks "How much market penetration do you need to have in the U.S. before you start thinking about international?"

We've -- we don't have anything specific to announce right now about international. Certainly, the international TAM is quite interesting to us. We feel like there is a lot of market cap potential and revenue potential and brand expansion potential here in the U.S. in each of the businesses that we're currently in. And so that's our primary focus at this point, and we have nothing specific to announce about that right now. Next question from the call?


Our next lesson comes from the line of Lloyd Walmsley from Deutsche Bank.

Lloyd Walmsley - Deutsche Bank AG, Research Division

One for Chad and one for Spencer, if I may. So just Chad, on the StreetEasy revenue contribution, how did that fall between the real estate segment as well as the Display segment? And I just asked because I'm trying to get to a kind of a real estate x Premier Agent x [indiscernible] to get a sense for rental and if it's all in that real estate segment, it would imply that kind of other actually declined sequentially despite the launch of rental monetization. But I figure some of it may be in Display and then there may be some deferred that you can't recognize. Would love your reaction there. And then just, Spencer, philosophically, you guys have kind of described StreetEasy as structurally kind of in a better place than the rest of the U.S. in the New York market. I'm just wondering how you can kind of square that with the revenue, the revenue in the first half of like $3.5 million, it pales in comparison to the REA Group metaphor.

Spencer M. Rascoff

I'll let Chad do the first one and then I'll...

Chad M. Cohen

Lloyd, we're not providing a discrete breakdown in terms of their revenue lines for StreetEasy. So much of this may change over the course of the next 6, 12, 18 months as we look to amplify certain revenue lines. I will say that they've got 3 primary lines of revenue. They have a product called Insider, which is a subscription-based model. They have a featured listing model for pros, as well as display. So there is a contribution in Display, but I'm not going to assign a certain percentage to it because it's certainly nothing that we've broken out in the past and wasn't in the K today. In terms of the deferred revenue piece of it, there's about $250,000 to $300,000, I'd say, in deferred revenue that was on the books of StreetEasy at the time of the acquisition that we were not able to recognize, per purchase accounting rules. I'll turn the other question over to Spencer.

Spencer M. Rascoff

Yes. So you hit the nail on the head, Lloyd, which is, StreetEasy is -- there's a huge disconnect between the power of the StreetEasy brand, the strength of its product and its revenue and profitability. This is incredibly undermonetized asset relative to the size of the opportunity. And the reason that I drew some comparisons in terms of broker commissions and ad revenue and transaction volumes in New York versus other countries is to paint the picture of, frankly, what our investment thesis was when we chose to pay $50 million to acquire StreetEasy, it's that we see a very, very significant revenue opportunity from New York. It will take a couple of years to play out. And as I said, our near-term priority for StreetEasy is actually not to start over-monetizing, it's to grow its audience even further by improving its product and expanding it on mobile. But this was a bootstrapped startup that accomplished an extraordinary amount in a relatively short period of time, but has not yet been fully monetized. And down the road, you can be sure that we'll fully monetize it.

I think one more question from the call or should we wrap? Okay. So thank you very much for joining us today. We are very excited about the opportunities ahead. I'll continue to answer a few more questions on Twitter via the #ZEarnings hashtag from both investors and individuals and analysts at Motley Fool, who will be moderating that Q&A on Twitter. And I thank you very much for your time, and we'll speak with you next quarter. Thank you.


Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

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