The Motley Fool sat down yesterday with Zillow Inc (NASDAQ:Z) CEO Spencer Rascoff for a quick interview after the company announced its acquisition of NYC-focused real estate website StreetEasy.
We discuss Zillow’s rationale behind the $50 million all-cash acquisition, Zillow’s growth, and whether the company might have other acquisitions planned.
Brendan Byrnes: Hi Fools, I’m Brendan Byrnes, and I’m joined today by Spencer Rascoff, who is the CEO of Zillow. Thanks so much for taking the time.
Spencer Rascoff: Thank you, Brendan.
Brendan: So, I wanted to ask you about the StreetEasy acquisition; maybe for someone who’s not familiar with it, what StreetEasy does and how it fits into Zillow Inc (NASDAQ:Z).
Spencer: StreetEasy rules New York. They are by far the dominant player in the online real estate scene in New York. They have over a million unique users a month, mostly people shopping for apartments or to rent apartments, and they’ve accomplished something that is incredibly impressive from my perspective, which is they have a local network effect; they have basically all the home shoppers, but they also have incredibly high levels of engagement among real estate professionals, and that local network effect, in a market as important as New York, is very hard to replicate.
Brendan: Do you think it’s more important to have the local network effect versus their unique visitors, which I think: 1.2 million per month.
Spencer: Well, you know, the reason they have the audience is because of the incredible product.
Brendan: Sure.
Spencer: They have an extraordinary focus on the New York area, so they’ve taken the time to build out an amazing product in New York. New York is a very unique place from a real estate stand point and in a lot of other ways, and StreetEasy has cracked the code in New York frankly.
Brendan: So, you also bought Buyfolio, which also a New York focused company. Could you talk about the New York market, specifically what makes it so important, and whether StreetEasy is something you guys plan on focusing in other cities on or just New York?
Spencer: New York is incredibly unique, first of all, because it’s the largest real estate market in the country, and, by the way, you can’t be the largest real estate company- largest online real estate company on the Web and not be number one in New York. So, that’s why it was so important to Zillow Inc (NASDAQ:Z) to acquire StreetEasy and become number one in New York. Buyfolio is a great service, which helps real estate agents and home shoppers communicate and kind of collaborate in their real estate search. So, we bought Buyfolio because it’s a B-to-B SAS company, and we made their software free to our Zillow premier agents; StreetEasy is a consumer facing website and has a large consumer audience. So, the two are very complementary to each other.
Brendan: Will StreetEasy be cash flow positive on day one?
Spencer: StreetEasy is already EBITDA positive and cash flow positive, so they have revenue, they have EBITDA, and we’ll start consolidating that once we close.
Brendan: Do you guys see this maybe as something you’d only look at in New York, since it’s such a large, important market, or would you potentially look at other large cities that have sites, maybe, such as StreetEasy and look at this to expand there, too.
Spencer: There’s no other StreetEasy and there’s also no other New York. So, certainly, if there were anothe dominant online real estate company in another important city, we’d absolutely look at acquiring it, but StreetEasy is a unique asset and New York is a unique market.
Brendan: Zillow Inc (NASDAQ:Z) has had a few acquisitions lately. Do you look at Zillow as a growth through acquisition company or an organic growth company?
Spencer: It’s an organic growth company. We’ve made seven acquisitions now, but they’ve all been relatively small. This StreetEasy acquisition, at $50 million, is our biggest deal. But all these companies have been relatively small. We’re a growth company; revenue growing 60% every year; traffic growing 60% year over year; leads to our real estate agents growing 80% year over year; our mortgage business growing 100% year over year. And the vast majority of that growth is organic, because most of these acquisitions have been small, B-to-B SAS companies, where we acquire their product then make it for free- we make it readily available for free to our advertisers.
Brendan: How about the rental aspect of StreetEasy? Was that an important part of this?
Spencer: It was. Rentals is a big focus of ours. We’re just starting to monetize rentals. We’re already one of the largest rentals websites out there, but we’ve never monetized rentals before, and so we’ve just started charging multi-family apartment owners to list on Zillow and HotPads, another company we acquired, and so the StreetEasy acquisition plays really nicely into our rentals monetization.
Brendan: Great! Well, thank you so much for your time. Spencer Rascoff, CEO of Zillow Inc (NASDAQ:Z).
Spencer: Thank you.
The article Zillow CEO Spencer Rascoff on StreetEasy Acquisition originally appeared on Fool.com and is written by Brendan Byrnes.
Brendan Byrnes has no position in any stocks mentioned. The Motley Fool recommends Zillow. The Motley Fool owns shares of Zillow.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
