Seeking Alpha

Barron's hangs a "For Sale" sign on Zillow and Trulia

  • The stocks of both Zillow (NASDAQ:Z) and Trulia (NYSE:TRLA) have already fallen about 15% since their merger deal - dubbed Godzulia by the bulls - was announced, writes Bill Alpert, perhaps reflecting worry their "heft might be computer-generated imagery."
  • Though the market cap of the companies nearly equals the marketing budget for all U.S. realtors, they have yet to monetize much of their hefty Web traffic, and while bulls like to think their combo will make for an advertising "must buy," the two have both been quietly offering deep discount to chains like Realogy (NYSE:RLGY), suggesting any thesis about pricing power may need to be rethought. "We have the audience," says Zillow boss Spencer Rascoff in response. "Eventually, the advertising dollars will follow the audience."
  • There's no doubting impressive growth in traffic. From a few million monthly visitors in 2008, Zillow's traffic rose to 25M browsing from desktops and another 28M from mobile devices in June. Revenues have grown nicely as well, but not at as fast a pace as traffic, and earnings have been even harder to come by - at least if you count expenses the way GAAP does. "Clearly, there's still work to be done because Zillow and Trulia haven't proved yet that they can grow their Web traffic and ad sales profitably."
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Comments (14)
  • steveviglione
    , contributor
    Comments (15) | Send Message
     
    Zillows been overvalued for months and has had significant support. Slipping slowly though...
    9 Aug 2014, 09:18 AM Reply Like
  • Steven Couche
    , contributor
    Comments (267) | Send Message
     
    When the market decides again making money is important, 50% downside from here will still be a good exit price. Real estate itself is inherently a fragmented, local business comprised of thousands of individual agents. Sure, there are teams, but it's still a game of commissions. So long as real estate agents remain financially independent, Z's advertising and sales costs will rise almost lock step with revenue.
    9 Aug 2014, 10:23 AM Reply Like
  • convoluted
    , contributor
    Comments (2125) | Send Message
     
    The very simple fact remains that buying a home is not just the most expensive decision a consumer will make-it is so exponentially greater that comparisons with other marketing strategies are virtually meaningless. One doesn't make an impulse decision to buy a home over the internet. A 'purchase' is linked with mortgage factors, plus the required services of a host of local experts-attorneys, inspectors, appraisers, surveyors, etc. There are numerous pitfalls for the unwary, and unlike a Walmart or typical retailer, a buyer can't get their money back if they find a better price-or a boundary line dispute. For these reasons, this is the one predominant "zone" where the middleman will always play a major role.
    Discount brokerage services and internet savvy ideas can only accomplish peripheral or marginal results-at best. Even younger folks, armed with cell phones, laptops, etc. will defer to a local agent-assuming that agent has the requisite experience to link all the key variables together. So, I had absolutely no problem doubling down on my short position when the TRLA/Z was announced. I sometimes think some people want the 'internet' to feed them and tell them what to do. But, when it comes down to substantial sums of money, it's an entirely different mindset. I'm still short for all these reasons, plus a few calls from some annoyed realtors to their senators will spell big problems for this 'merger.'
    9 Aug 2014, 11:37 AM Reply Like
  • starcorral
    , contributor
    Comments (735) | Send Message
     
    Could you just have not wated the time writing this article and instead posted a short phrase - Barron's Shorts Zillow?
    9 Aug 2014, 01:40 PM Reply Like
  • Fanebrb
    , contributor
    Comments (636) | Send Message
     
    I distrust Barron's long before I distrust where Zillow is headed.
    9 Aug 2014, 03:40 PM Reply Like
  • Mark Krieger
    , contributor
    Comments (4393) | Send Message
     
    Barron's always bashes high multiple momo stocks. it is a very conservative publication.
    9 Aug 2014, 05:41 PM Reply Like
  • tungle7
    , contributor
    Comments (25) | Send Message
     
    Mark, did you buy any share when it dropped in the last couple days? You had mentioned it would be a great buying opportunity?
    9 Aug 2014, 05:59 PM Reply Like
  • PChan444
    , contributor
    Comments (514) | Send Message
     
    Chan short z also short Krieger
    9 Aug 2014, 08:38 PM Reply Like
  • bosephus61
    , contributor
    Comments (2) | Send Message
     
    I just bought a home and moved to a different state. Don't think I could have done it without zillow. I lined up places that I wanted to see and then had the realtor show me. Did 15 homes in 2 weeks and then closed in 2.
    9 Aug 2014, 11:06 PM Reply Like
  • PChan444
    , contributor
    Comments (514) | Send Message
     
    How'd u select your realtor bose?
    10 Aug 2014, 12:25 AM Reply Like
  • june1234
    , contributor
    Comments (3150) | Send Message
     
    Momo stocks have never appealed to Barron's readers
    10 Aug 2014, 06:27 AM Reply Like
  • Rob Nokes
    , contributor
    Comments (3) | Send Message
     
    Zillow's statistics on housing prices and rental prices are notoriously behind the curve because local agents rarely update the data. Several agents and mortgage brokers told me this. Seems like a good site with bad data that is scattered between both the past and the present.
    10 Aug 2014, 09:08 AM Reply Like
  • depueman
    , contributor
    Comments (116) | Send Message
     
    90% of RE sales/purchases START with an online viewing. The advertising dollars this hook up potentially will claim will grow exponentially. You either get on board with Z or you don't sell your home as efficiently. And this only "gets truer" as time marches on. Do you really think people drive to look at 5 different homes they are interested in WITHOUT looking at them online first? In the years to come, LOAD UP ON ANY SUBSTANTIAL DIPS.
    10 Aug 2014, 11:44 PM Reply Like
  • Fanebrb
    , contributor
    Comments (636) | Send Message
     
    I follow Barron's and do the opposite and make $ 98% of the time. I like Barron's.
    11 Aug 2014, 11:07 AM Reply Like
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