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 June 24, 2015 - 4:11 PM EDT
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Zillow: Top-Line Growth Will Continue

Zillow: Top-Line Growth Will Continue

In July of last year, which is typically a peak home shopping season in the U.S., Zillow (NASDAQ:Z) attracted a record traffic of 89 million monthly unique users. But that was before the acquisition of Trulia. Following the acquisition of Trulia in February, Zillow's combined strength in attracting monthly unique users, has of course sharply increased. In March 2015 alone, nearly 140 million unique users visited Zillow Group consumer brands, which include: Zillow, Trulia, StreetEasy and HotPads.

I am emphasizing these numbers because they form the basis of Zillow's top-line growth. As I discussed earlier, Zillow, which earns every dollar through its two income streams of marketplace and display, has its revenue directly tied to the amount of traffic it attracts to its sites and mobile platform.

The greater the amount of traffic, the higher the number of listings, which translates into more advertising revenues.

Rising Agreements with Multiple Listing Services

In the past six weeks, Zillow along with Trulia signed 50 new agreements with multiple listing services ((MLSs)), making in total 285 MLSs that have entered in Zillow Group's partnership platform since January 2015. MLSs allow Zillow Group to add accurate and timely feeds on a daily basis, making it very convenient for sellers, buyers and agents alike.

Earlier in June, Zillow Group also announced that it has entered in a new agreement with Miami Association of Realtors, which would allow both Zillow and Trulia to receive direct listings. The agreement is very significant step as the association-the biggest in the nation in the realty sector-represents 36000 members in Southeast Florida. Moreover, Miami not only attracts home buyers from across the nation but also remains one of the leading global cities for international property investors.

Zillow's rising number of listing agreements with MLS underpins the fact that its clout in the online real-estate information marketplace is growing fast, supported by the acquisition of Trulia.

Strengthening Job Market and Rising Home sales

These developments come at a time when the U.S. housing market is witnessing a very strong momentum, boosted by strengthening job market and rising wages. Indeed, first-time home buyers are creating a strong demand, sending property prices northwards.

According to the National Association of Realtors, existing home sales rose 5.1% in May to a seasonally adjusted annual rate of 5.35 million-the fastest growth-rate in the last five-and-a-half years. Not only that, May marked the third successive month when existing home sales surpassed 5 million homes. First time home buyers accounted for about 32% of the total number of homes purchased.

And this momentum is very likely to continue as wannabe homebuyers will like to close deals before the Federal Reserve hikes the benchmark interest rates. Mortgage rates are still hovering near 4%.

In this backdrop, Zillow Group should see increased use of its marketplace, especially during the summer.

All said, Zillow's rising operating expenses, mainly tied to sales and marketing will continue to be a drag on the bottom line as the company looks to increase it foothold in the U.S. property information market. Sales and marketing expenses climbed 68% in the fiscal first quarter, year-over-year. This summer Zillow has started its first national TV ad campaign "Find You Way Home," which will run until the end of the year. So, the bottom line will remain under pressure. However, given Zillow's rising number of unique monthly average users and growing partnerships with listing agencies, it is all set for sustainable top-line…

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Source: SeekingAlpha (June 24, 2015 - 4:11 PM EDT)

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