Threats to Zillow’s Revenue

Most of Zillow’s advertising relationships are short-term, so it can’t take downtown Boston real estate brokers ads for granted. Zillow’s advertising revenue, on which the company’s financial success relies, will suffer in 2020 if existing advertisers ended their relationship because of a slower Boston condos for sale market and if Zillow is unable to replace their revenue stream. If Zillow’s user base dwindles (which I think it will) or if its competitors become more attractive to a small or medium size downtown Boston real estate company like mine. The result, ad revenues will decline. Also, as the company relies heavily on ad revenue from its Premier Agent program, revenue could seriously suffer if agents stop seeing value from advertising on Zillow (like I just did). Finally, a slowdown to the downtown Boston real estate market (U.S. in general) or a drop in consumer interest in home buying and mortgages, both of which are beyond Zillow’s control, would likely reduce traffic to the site and lead to a drop in ad revenue.

The Bottom Line

Zillow makes money by selling advertising on Zillow.com and the Zillow mobile app to real estate agents looking for buyers and sellers and mortgage lenders looking for borrowers. What will happen to Zillow if we hit a housing bubble 2.0? Simple answer guys like me will cut back on highly cost ads that show no return for the investment. What will happen if interest rates go up? All this money Zillow is borrowing is going to get very costly.

Let me end on a positive note. I don’t see any recession coming up in 2019. So Zillow is safe in the short term.

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