Zillow, a real estate listing service that’s nearing profitability, is also dreaming of going public, though it’s pragmatic enough not to set its sights on doing so for another year. Zillow COO Spencer Rascoff today told Bloomberg that the company was courting Wall Street investors. The question is, why is he talking about it now?
If you ask me, Zillow is using its IPO dream declaration as a stalking horse for what is a more likely outcome: an acquisition, preferably from someone like Google (s goog). Zillow raised $30 million in 2007 at a whopping valuation of $400 million, and bringing the total amount raised in venture funds to $87 million.
Zillow, along with fellow online real estate listings provider Trulia, are prime acquisition candidates. Google, which was rumored to have made an attempt to buy local search and reviews provider Yelp, seems to be in the market for such vertical search services, especially in light of reports that it was kicking the tires at Trulia as well. Expect one of them to end up in the arms of Google.
Zillow, Trulia and many other post-2007 startups are in an awkward place: They’re not small enough for a quick merger but aren’t beefy enough to justify their massive valuations. The good news is that Zillow has a full grip on reality, as Rascoff indicated in his chat with Bloomberg.
Zillow’s newfound optimism stems from a strong showing in 2009. Despite the woes of the real estate industry, the company saw its traffic grow 37 percent (in terms of page views), launched a rentals listings service, and partnered with many U.S. newspapers to provide them with its real estate search. Zillow, with some 5.2 million monthly visitors, is the second-largest real estate listings service behind Move.com, which has close to 6.4 million monthly visitors, according to comScore.
That said, whether it harbors dreams of an IPO or a sale, Zillow needs to not just repeat but exceed its 2009 performance, when sales rose 65 percent even while online real estate advertising declined $100 million to $7.5 billion. The company is looking to sell more lead-generation advertising, most of it targeting the mortgage lending industry. And Zillow should benefit from any rebound in the housing market, but that might not be enough.
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