Is Zillow Inc (Z) Zooming Past its Competitors? – Trulia Inc (TRLA), Move Inc. (MOVE)

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Note: A previous version of this article inaccurately described Zillow’s website. The error has been corrected.

With the housing market picking up again in the United States, investors are now focusing on companies that are directly benefiting from the recovery. Investors have usually been looking at big builders, such as D.R. Horton, Inc. (NYSE:DHI), or home improvement retailers, such as The Home Depot, Inc. (NYSE:HD). Some more experienced investors are loading up on REITs.

Zillow Inc (NASDAQ:Z)However, there’s one industry where housing and tech – two hot markets – intersect: online real estate search websites. Over the past five years, more prospective home buyers are taking advantage of the Internet’s search capabilities to narrow down searches quickly. At the forefront of this revolution is Zillow Inc (NASDAQ:Z).

What is Zillow?

Zillow was founded in 2005, and since then has become one of the most-visited real estate search websites in the United States. The website is a place where brokers, agents and homeowners can post for-sale and for-rent homes. Over 100 million homes are listed on Zillow – including homes for rent, sale and foreclosures.

The company also operates Zillow Mortgage Marketplace, where borrowers can instantly connect with lenders to be pre-approved. Buyers and sellers can also seek advice in its Zillow Advice forums.

The company generates revenue by connecting home and mortgage shoppers with professionals and through selling targeted advertising to real estate professionals.

Fourth Quarter Earnings

For its fourth quarter, Zillow Inc (NASDAQ:Z) earned 2 cents per share, or $0.5 million, on revenue of $34.3 million. This topped the analyst consensus of 0 cents per share on revenue of $31.47 million, and also represents a record 73% increase in revenues from the prior year quarter.

$26.8 million of its revenue was generated by Zillow Marketplace, and $7.5 million came from display advertisements.

Zillow’s primary rival, Trulia Inc (NYSE:TRLA), reported similar results for its fourth quarter, with a loss of 3 cents per share on revenue of $20.6 million. Revenue grew 75% from the previous year and topped estimates, but earnings came up short of the loss of 2 cents analysts had been expecting.

For the full year, Zillow reported net income of $5.9 million – up 436% from the $1.1 million it reported in 2011. Revenue was also up 77% to $116.9 million.

“We finished the year on a resounding note, achieving record quarterly revenue, a rapid increase in mobile traffic, and strong subscriber growth,” stated CEO Pete Flint in a press release. “We are well positioned to grow in 2013 as the real estate market continues its recovery.”

Mobile Growth

Zillow Inc (NASDAQ:Z) reported an average of 34.5 million unique monthly visitors during the quarter. In December, over 50% of those visits originated from mobile devices, such as smartphones and tablets. Zillow stated that the figure usually surges to 60% on weekends.

By comparison, Trulia Inc (NYSE:TRLA) reported 23.6 million unique monthly visits, with only 24.6% coming from mobile devices. For now, Trulia has a smaller footprint in the mobile world than Zillow.

Zillow has released dedicated apps for Android, iOS and Blackberry, which take advantage of smartphone GPS technology to track real estate listings on the move.

To expand its footprint in the mobile world, Zillow also recently introduced Digs, a Pinterest-style iPad app that allows users to share interior design and remodeling ideas with each other. Digs integrates with Zillow to generate the estimated cost of each renovation. Like Pinterest, it allows users’ content to be followed, liked and shared.

In addition, Zillow recently acquired collaborative shopping platform Buyfolio, rental website HotPads and mortgage software maker Mortech. These three products were acquired to boost the strength and efficiency of Zillow’s core website. They will also make Zillow more attractive to real estate agents, who sign up for its Premier Agent service for access to premium real estate search tools.

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