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

|By:, SA News Editor

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."