Leading U.S. homes portal Zillow posted its most profitable quarter yet, with its core real estate agent ad product continuing a two-year streak of revenue growth.

Meanwhile, its I-Buying business, Zillow Offers, remains stymied in home acquisition amid a housing inventory shortage. Zillow’s Homes segment posted revenue of $704 million, down 9% year-on-year.

Overall the company is thriving, posting net income of $52 million during Q1, besting the record profit set last quarter of $46 million.

Revenue for the quarter was $1.22 billion compared to $1.13 billion for the same period last year, an improvement of 8%.

Zillow’s IMT division (internet, media and technology) brought in $446 million in revenue in Q1, a 35% year-on-year gain. Zillow’s flagship ad product, Premier Agent, drove the growth, bringing in $334 million, up 38% year-on-year. The once moribund product has found new life in the last two years, with revenue growth of 42% compared to Q2 2019, the company pointed out.

Most of the rest of IMT improvement came from rental listings, which the firm has been investing in over the past year.

The firm’s other reported segment, mortgages, had revenue of $68 million, up 169%. As in previous quarters, most of the gain was driven by record low mortgage rates and resultant demand for home refinancing.

While the rest of the firm flourishes in the unusually heated housing market, Zillow’s relatively new I-buying division remains unprofitable.

Zillow managed to sell its own stock at record rates. But it struggles to buy homes and finished the quarter with lower inventory than it had three months earlier.

The company sold 1,965 homes during the last quarter at an average selling price of $356,730 per home. After direct costs (purchase, renovations, holding costs, marketing and interest), the company reported an average return of $17,634 per home.

However, the I-buying arm has overhead costs that continue to make it a losing venture in and of itself. The homes segment lost $58 million in Q1 (compared to $99 million in Q1 2020). On a per-home-sold basis, that was a loss of $29,517.

Although some have speculated that Zillow is using I-buying as a loss leader to drive sales of ancillary products — mortgages, closing services and sales leads — Zillow CEO Rich Barton has always maintained that Zillow Offers would become profitable as a standalone business. It has some ways to go before achieving that.

In the last year, the company has established real estate brokerage licenses in all 50 states, laying the grounds for Zillow Offers’ nationwide expansion from its current 25 markets.

In a call with investors Tuesday, the company noted it plans to expand its workforce by 2,000 employees this year, up from just over 5,000. “A lot of that will be for Zillow Offers and we’re making other investments in ZO as well,” Barton said.

Barton boasted of record consumer awareness of the company itself, having  221 million average monthly unique users during Q1, an increase of 15% year-on-year. But awareness of Zillow’s I-buying product is lagging.

“We’re leaning in because most consumers don’t even know what Zillow Offers is, yet,” Barton said. 

Read the earnings press release here.

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