Despite the difficulties and volatility of the 2022 market, and only a little over a year since the company’s huge investment in iBuying fizzled out, Zillow is projecting optimism, claiming that it is well positioned to grow in 2023 after beating revenue estimates for Q4 2022.
“I love the pace and the quality of the product and service innovations that we’re launching right now,” said Zillow CEO Rich Barton on a conference call following the earnings report. “It gives us good confidence to prudently invest through this kind of foggy, choppy market.”
Even when real estate transactions were almost at a standstill toward the end of last year as mortgage rates shot up past 7%, Zillow reported revenue of $435 million, with a net loss of $72 million—down from a loss of $361 million in Q4 2021.
Revenue from the company’s Internet, Media and Technology segment made up $417 million of Q4 revenue this year, including $283 million from the Premier Agent program, $68 million from rentals and $18 million from mortgages (far below the $51 million the company brought in from lending in 2021).
Projections for Q1 were $404 million to $437 million, which would be approximately a 22% decline from last year.
The company’s stock was up about 3% in early trading Thursday.
The earnings news comes a day after Zillow announced an expansion of its partnership with Opendoor, even as other large real estate companies have shuttered iBuying services.
But the focus for Zillow going into this year, according to Barton, is the so-called “super app,” meant to encompass every part of a real estate transaction. The company has remained focused on this goal through the turbulence of 2022, and Barton laid out some more details—at least as far as what Zillow hopes to achieve with it.
“Our goal is to increase engagement, increase customer transactions and increase revenue per transaction by investing across five growth pillars: touring, financing, seller solutions, enhancing our partner network and integrating our services,” he said. “The expected output of this strategy is to grow our share of consumer transactions from 3% to 6% by the end of 2025.”
Barton and CFO Allen Parker both highlighted growth in the rental sector (up 13% year-over-year), as well as what Barton characterized as a more “stable” remote employee foundation following significant layoffs last year. Some employees who worked at the company’s iBuying arm have successfully transitioned to working on app and web products, according to Allen, which have made these projects “more of a focus.”
“Voluntary attrition declined steadily across the organization in 2022, down more than half in Q4 compared to Q1, and our workforce is more dispersed, more diverse and more engaged,” Barton claimed. “Further, our data shows that we’re attracting talent at a much greater rate than before the pandemic; four times more applicants per job posting versus 2019.”
Parker honed in on one datapoint—the mix of first-time homebuyers using the Premier Agent program—as a “tailwind” that helped that sector outperform in the second half of 2022.
“Premier Agent revenue outperformed both our expectations and the industry decline of 31%, decreasing 20% year-over-year,” Parker said. “We believe our Q4 Premier Agent revenue results also demonstrate the benefit of our continued focus and years of investments in our brand, customer experience and partner network…all things that we can control.”
Even though there remains a broad degree of uncertainty about housing in 2023, including the looming possibility of a recession, Barton said Zillow remains optimistic about navigating that kind of market.
“We’ve already been through it,” he said. “We’re not really calling a bottom to the market because of the fogginess, but we do feel really good about our position.”
