Traditional Canadian real estate companies should be concerned about Zillow and other new proptech companies that are capable of disrupting the traditional business model. Disruption will take place as the new companies take advantage of data and technology to streamline the real estate transaction process, while driving down costs and providing more relevant services to consumers.

Story continues below

My company, Insightt, closely monitors the U.S. real estate industry for early warning insights into what could and probably will take place in Canada. For this article, we reviewed the market cap, stock price and profitability of Zillow versus Realogy, which are both publicly traded companies on the U.S. stock exchange.

Zillow has brought change to the U.S. real estate industry with its impressive website, lead generation, property valuation model (Zestimate) and the acquisition of companies that are complementary within the real estate value chain.

Realogy is also an impressive real estate company that is categorized as traditional because it owns a number of traditional franchise brands, including Century 21, Coldwell Banker, Corcoran and Better Homes & Gardens. While Realogy has also introduced numerous innovative and positive changes to the U.S. industry, it remains largely dependent on the traditional real estate business model.

Is Zillow impacting traditional real estate companies like Realogy?  The numbers tell the story.  As shown in the chart below, Realogy reported a market cap that was seven times larger than Zillow in 2014. Fast forward to 2021and Zillow’s reported market cap is now more than 16 times greater than Realogy.

We know that market cap is not the entire story, so we also looked at the revenue and profit for each company in 2020 as shown below.

We also tracked the stock price of both companies over the past five years as shown below.  Zillow’s current stock price is more than 10 times higher than Realogy’s stock price in U.S. financial markets.

Putting it all into perspective: Traditional real estate organizations must consider Zillow as a force to be reckoned with and taken seriously. They have a large market cap, they have better than industry margins and they have access to vast amounts of capital for the acquisition of additional companies in the real estate value chain.

We are not suggesting that established real estate companies in Canada need to raise the white flag yet, but they need to start heavily investing in technology and data before it’s too late. The next few years are about to get quite exciting in the Canadian real estate market. Zillow is now in Canada and many other new proptech companies are coming on the scene.

12 COMMENTS

  1. Hi Pascal – eXP is now over 50,000 agents worldwide and have a market cap over $ 5Billion which is 2.5 time bigger than Realogy to put in perspective.
    ExP and Zillow have very different strategies. Zillow is a tech company first that is changing the real estate process whereas eXP is a real estate brokerage company first that is using technology and a different model to change how brokerages work. These are very different models, but both are dramatically changing the industry.

  2. Hi Randy:

    Zillow has a lot of revenue streams which is what makes them such a viable competitor in any market. They have been very aggressive on the acquisition front in terms of playing a role in the real estate value chain. They own Bridge interactive, recently acquired Showing Time, they do loans, closing services and much, much more. Here is the link to their companies – https://www.zillowgroup.com/about-us/business/

    • Yes & Wow. Extremely interesting comments. Can you comment in the current situation with Zoocasa? It seems to have disappeared out here on the left coast. Many Thanks, enjoy your columns.

  3. JERRY BRESSER
    I have been developing “List More, Sell More” Lead Generation and Lead Conversion systems for agents and companies for over 45 years.

    NAR reports that 87% of all new agents fail. I have companies who reported 75% of new agents survived for 15 to 20 years

    Real Trends reports the average transaction production is about 8 sides per year. I have companies who reported raising average production per agent from under ten per year to over 33 per year.

    I have agents who report winning the listing 75% to 90% of their appointments in competitive situations.

    We have now developed new Zoom based training systems where agents practice effective and proven Lead Generation and Lead Conversion strategies on a daily basis.

    With the right listing tools, training, coaching and leadership, brokers can now have most new agent survive and have productive careers instead of failing.

    Zillow cannot compete successfully against well-trained agents who can help sellers get 3% to 6% above average selling prices.

    Looking to find partners to help launch to North American Real Estate Market.

  4. I have been selling real estate for over 44 years and have seen many supposedly competing styles come & go. I will not be giving my listings to Zillow and paying for the leads generated. The help yourself brands come and go because in reality, it is not as easy to sell a home as some make it out to be, and so, they fail.
    I don’t plan on living in fear if Zillow, Redfin, Purple Bricks, or any other company. I’ll just keep my head down, give better than expected service & results & I and most like me will do just fine, thanks.

  5. I have been a Realtor for over 40 years. I have built a company allowing members of public looking at realtor listed homes, ON THEIR OWN. Approved by Alberta regulator and Real Estate boards.
    Have sold homes off this system without showing the property to start with. I have shown homes and buyers have gone back on their own for second viewing and even 3rd viewing. Offer then written. Also built for rental property private viewing system. Of anyone wants to know more, contact me direct. Looking to launch to North American market. Looking to find partners to help launch to North American Real Estate Market.
    Massive lead generation system for agents and companies.

  6. This same old same ol has been regurgitated fir years now. We’re still here and we’re still very relevant . Can you say that for al these big tech companies? Zillow is nothing more then another assesment site in my opinion. Which means they’re behind the times and can’t keep up to market conditions or trends.

  7. I left a franchise decades ago because I didn’t need to pay for their lead generation. Zillow is succeeding only because our real estate organization has been sleeping at the switch.

  8. Funny you should that Pascal, that is the next research article we are currently working on. We looked at exp numbers in terms of cap rate and it is an impressive story as well.

  9. It would be interesting to add eXp Realty (NASDAQ: EXPI) to the analysis as it is a publicly traded company as well and its business model differs widely from the traditional brick and mortar franchise model and is giving a run to Zillow as well technology wise.

LEAVE A REPLY

Please enter your comment!
Please enter your name here