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RISMEDIA, July 22, 2011—(MCT/RISMedia)—Real estate listing service Zillow had a positive day Wednesday when its initial public offering price of $20 a share far exceeded expectations as it began trading July 20 at $60 a share, 200% above the listing price. The IPO had already gone well above the $12-to-$14 original estimated range and the $16-to-$18 range announced last week.

Even with its closing price ending the day at $35.77, the Seattle-based firm must be happy and view the close as a success. How investors will respond long-term for the popular real estate information and listings service will depend largely on whether traders view the Seattle-based company as an exciting Internet pioneer or a hostage to the housing market.

Put another way: Does Zillow, whose database of more than 100 million U.S. homes attracts millions of visitors a month, resemble social-media company LinkedIn and Internet radio phenomenon Pandora, both of which had successful initial public offerings recently?

Or is Zillow more like HouseValues, a Bellevue-based provider of online real-estate data that went public in December 2004 and soared during the housing boom but was slammed by the bust?

Early indications are that, at least for now, investors are betting on the tech side of Zillow, the first e-commerce IPO for a Washington-based company since HouseValues.

Along with a concurrent $5.5 million private placement to two venture-capital firms that already own shares, Zillow will gross $74.7 million from the deal, or about $66.4 million after fees and expenses.

It could take in an additional $10.4 million if the underwriters, led by Citigroup, fully exercise their option to buy up to 519,300 additional shares.

The higher-than-estimated price initially meant Zillow would begin its life as a publicly traded company with a market value of $538.2 million. It ended the day with a market capitalization of over $950 million.

The company has built substantial brand awareness since launching its website in February 2006. It says some 22 million “unique users” used its site or mobile applications in May to get estimates of their home’s value (“Zestimates” in Zillow-speak) or to conduct other real-estate research.

Those users don’t pay anything. Instead, Zillow gets subscription and advertising revenue from real-estate agents, mortgage lenders and others.

Zillow hopes to follow the path of companies such as Amazon and Expedia, which employed the power of the Internet to shake up traditional service businesses, ride out early-stage losses and eventually earn profits. Several of its founders and top executives, including Executive Chairman Rich Barton, helped start Expedia.

However, given the company’s dependence on advertising from the real-estate industry, much of Zillow’s future growth depends on the revival of the torpid U.S. housing market.

No matter how Zillow fares, it’s achieved one distinction: It is the only Nasdaq-listed company with a single-letter ticker symbol (Z). All the others are listed on the New York Stock Exchange.

Copyright (c) 2011, The Seattle Times