This post was generally positive about Zillow’s future, but a commenter left this remark about Zillow puffing their counts:
Interesting that you repeatedly quote ‘according to management’ – did it cross your mind that Zillow management exaggerate performance with over stated Average Monthly Unique Users?, or how they use EBITDA instead of GAAP for earnings so that $114M of share based compensation is excluded?
The 152M ‘Average Unique Users’ in Q4 reported by Zillow is substantially overstated compared to 83.2M MUU’s reported by Comscore (http://bit.ly/2G7Zc6V). Even Zillow admits they duplicate MUU’s with the following statement buried in the SEC Form 10-Q Filing:
“Measuring unique users is important to us because our marketplace revenue depends in part on our ability to enable real estate, rental and mortgage professionals to connect with our users, and our display revenue depends in part on the number of impressions delivered to our users. Growth in consumer traffic to our mobile applications and websites increases the number of impressions and clicks we can monetize in our marketplace and display revenue categories. In addition, our community of users improves the quality of our living database of homes with their contributions, which in turn attracts more users.”
“We count a unique user the first time an individual accesses one of our mobile applications using a mobile device during a calendar month and the first time an individual accesses one of our websites using a web browser during a calendar month. If an individual accesses our mobile applications using different mobile devices within a given month, the first instance of access by each such mobile device is counted as a separate unique user.”
“If an individual accesses more than one of our mobile applications within a given month, the first access to each mobile application is counted as a separate unique user. If an individual accesses our websites using different web browsers within a given month, the first access by each such web browser is counted as a separate unique user. If an individual accesses more than one of our websites in a single month, the first access to each website is counted as a separate unique user since unique users are tracked separately for each domain. Zillow, StreetEasy, HotPads, Naked Apartments and RealEstate.com (as of June 2017) measure unique users with Google Analytics, and Trulia measures unique users with Adobe Analytics (formerly called Omniture analytical tools)”.
Another interesting aspect of Zillow is how a handful of Investors control 60% of the shares and even when Executives dump huge amounts of shares the share price goes up. Are these investors acting in concert with the executives? so that there are buyers in the market knowing that executives are bailing out? Take a look at the major institutional investors and consider how easy a stock like Zillow can be manipulated by relatively small purchases in the market.
Finally, Zillow is a consistently Loss Making business with $443M in accumulated Losses in the 6 years since its IPO and losses of $149M in 2015, $107M in 2016 and $94M in 2017. Put that in context of Facebook making a massive investment in Real estate and Redfins growth substantially higher than Zillows and you have to question the long term viability of Zillow whose business model is to incrementally increase costs greater than the additional revenue generated.
Full Disclosure: I am a Zillow cynic who takes issue with Zillow imposing inaccurate Zestimates on millions of homes and refusing all reasonable requests to correct the erroneous valuation despite fundamental flaws in the proprietary Zestimate algorithm.
Link to Article
I also remain skeptical about anything Zillow says, or any other disrupter.