Less than a year after crashing out of the iBuying business, Zillow has announced a partnership with Opendoor. And while this latest move dominated the Rich Barton-helmed company’s second-quarter earnings call with investors, executives said it is just one part of Zillow’s strategy to become a one-stop-shop for homebuyers and sellers.
Barton on Thursday told investors that Zillow has a “five-pillar plan” to improve its customer experience and grow its revenue per transaction. The pillars include financing, touring, seller solutions, enhancing partnerships and integrating services.
Zillow executives feel that the bombshell partnership with Opendoor touches upon several of those pillars and opens up numerous opportunities to better serve home sellers and those looking to both sell and buy a home.
“When fully rolled out we will be able to service sellers across more than 50 markets in the U.S.,” Barton said. “This expands our addressable market and allows us to create a suite of seller service over time to complement Opendoor’s cash offer program. As we build out complimentary seller offerings, we will be able to connect premier agents with interested sellers that are looking to sell their home the traditional way.”
As the company looks to recover from its ill-fated misadventure into iBuying and improve its profits, it will certainly need these and other efforts to help it get there.
After hemorrhaging $528 million in 2021, Zillow recorded net income of $16 million during the first quarter of 2022. During the second quarter of 2022, the firm again generated a modest net income of $8 million. Revenue for the quarter came in at $1 billion.
Even as the housing market “rebalances” and homebuyers face “affordability challenges,” Barton sounded confident that Zillow is on the right track for the future. While homebuying activity cooled during the second quarter, Zillow’s mobile app and websites had a monthly average of 234 million unique users and 2.9 billion visits, year-over-year increases of 2% and 5%, respectively.
“Our brand is a part of people’s everyday lives,” Barton said. “Streaming and shopping on Zillow, Tulia and Street Easy doesn’t stop because of a poor housing macro-outlook. Our business model is ultimately driven by transactions, but it is our relationship with customers between transactions that is, and always has been, our advantage.”
Barton also expressed relief that, considering the volatile market conditions, the firm is out of the iBuying business. In the second quarter, the remainder of Zillow’s iBuying business generated $505 million in revenue and the firm has paid off all of its iBuying debt. At the moment, Zillow has only 25 homes currently not under contract.
While Zillow says it was pleased with the winddown of its iBuying business in the second quarter, its other segments did not perform as well. Although its mortgage segment saw a 58% increase in purchase origination volume, revenue decreased 49% to $29 million and the segment recorded a net loss of $38 million.
Zillow also saw a decrease in its Premier Agent revenue, which fell 5% year over year to $333 million. Both executives and analysts on the call attributed this decrease to real estate agents tightening their belts when it comes to their marketing budgets, as market conditions shift.
Like these agents, Zillow CFO Allen Parker told investors that heading into the second half of the year the firm is looking to control costs.
“We are fully aware of the macro-economic headwinds impacting our near-term outlook and are carefully evaluating every dollar we choose to invest. As we have done other previous times of dislocation, such as the start of the pandemic and as we wound down our iBuying operation, we will be vigilant and decisive as we control the levers of our operating costs and pace of investments.”