Zillow Kills Competition With $3.5 Billion Trulia Deal

It takes more than “Zestimates” and other zippy technology to make money in real-estate listings, as evidenced by the $3.5 billion in stock that Zillow agreed to drop in order to snap up its chief competitor, Trulia.

The impending Trulia acquisition could centralize listings and tools for home sellers. The joined company says it will provide “advertising and software solutions that help real estate professionals grow their business.” 

Real-estate sites cannot dominate the Internet with lookie-loos alone; they must have advertising dollars. Now Zillow’s listing site can also attract home sellers—and their attendant advertising—with Trulia’s tools for estimating a home’s value.

Zestimates, Zillow’s zingy name for the proprietary algorithm it uses to estimate home value based on publicly available information, put the real estate site in the spotlight—but not always in a good way. Critics question the their true value, citing the algorithm’s inability to know, for instance, whether the neighbors mow the lawn.

A Real-Estate Squeeze Play 

Regardless, Zillow is protective of Zestimates, and sued Trulia for patent infringement in 2011, a claim Trulia disputed. Earlier this year, the rivalry between Zillow and Trulia was still going strong. In February, Zillow announced it would spend $65 million on national advertising. Two days later, Trulia announced it would spend $45 million on same.

Currently, Zillow has 83 million users, according to comScore. Trulia has 54 million. Once joined, the new real estate behemoth on the block will rule 61 percent of the market, making the most visible place for real estate to pay for premium ad placement.

In theory, Zillow’s shelling out $3.5 billion in stock to swallow its former rival could save both companies some money in the short run, since real-estate agents will paying the difference in premium advertising on the biggest game in town. Knocking out the competition makes it a sellers market for ad space. Investors will be pleased.

According to the announcement, the deal—expected to close in 2015—will “maintain both the Zillow and Trulia consumer brands.” As the deal marches toward the regulatory process, specific details of how the merged company will operate and whether there will be layoffs, have not yet been shared.

Lead image by Flickr user John Morgan, CC 2.0

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