Business Model Canvas – Zillow

Zillow started off like the Rightmove of the USA.

In 2004, they created a platform that enabled consumers to search for homes across the United States to rent or buy.

They charged real-estate agents an advertising fee, while it remained free for consumers. In 2018, they launched Zillow Offers and began the channel disintermediation by buying & selling the homes themselves.

Zillow Business Model

How does Zillow make money?

Zillow’s original business model was built around advertising, just like Rightmove in the UK. Real-estate brokers in the US pay a monthly fee to advertise on the platform, generating leads for both rentals and home sales businesses.

Business Model Canvas Banner - Rightmove

For most of its existence, the publicly traded company has earned the vast majority of its revenue through ad sales from brokers hoping to get the attention of renters and buyers

Architectural Digest

This business model propelled Zillow to an IPO in 2011 at a valuation of nearly $540 Million. This is the business the now call Zillow 1.0.

Zillow 2.0, as it is now known, is their Zillow Offers platform where the company actually buys the home from the homeowner and sells it to another consumer on the platform. Launched in April of 2018 in the Arizona marketplace, home sales (Homes) revenue actually outpaced its traditional revenue lines in Q3 of 2019.

In the third quarter, Zillow’s “Homes” segment brought in $384.6 million in revenue, up 55 percent from the second quarter. That represents 51.6 percent of Zillow’s company-wide revenue of $745 million for the quarter. The segment also took a net loss of $87.9 million.


Tapping into the new ‘iBuyer’ market, Zillow 2.0 (Homes) seeks to become the dominant growth and profit centre of the company going forward, effectively shifting the company’s business model away from advertising towards a full-service brokerage model.

Zillow 2019 Annual Report
Zillow 2019 Annual Report

Zillow’s IMT (Internet, Media and Technology) segment is an advertising business model reliant more on CPC (cost per click) or CPM (cost per million impressions), compared to Rightmove’s flat monthly fee (irrespective of performance). Zillow Premier Agent is their hallmark lead-gen product for real-estate agents within this category.

Zillow Premier Agent
Source: Zillow

The IMT business unit is, similar to Rightmove, extremely profitable. Whereas we can see that the Homes segment is only starting to move towards profitability. Mortgages – which represents less than 5% of their total revenue – is a lead-gen advertising product for mortgage brokers.

Zillow Offers (Homes) – which was impacted by COVID19 – has now resumed operations in many of the US markets where it is licensed. Zillow makes money on the spread between what they purchase the home for and what they sell it for.

In Q1 2020, they sold 2,394 homes and purchased 1,479 homes. Their long-term vision is to purchase 5,000 homes per month on Zillow Offers and generate $20 Billion in annual revenue in the Homes segment.

Zillow 3D Homes visual
Zillow 3D Homes – Source: Zillow

Community-Centric or Commercial Partner Strategy?

The US real-estate market is structured much differently than the UK real-estate market, both from a regulatory and commercial point of view. Whereas in the UK, you have high-street agents on every street corner, the US is much more peer-to-peer and decentralized.

The US is much more regionalized and therefore what works in one region or state, strategically speaking, may not work in another.

Even though on paper Zillow is dominant US real-estate platform and Rightmove is the UK’s dominant real-estate platform, their business model’s and strategies are completely different.

Yet still, despite these differences, both must cater to a ‘community’ of real-estate agents/brokers and ensure they remain loyal to the brand.

Within the context of commercial-partnership strategy, Zillow has made key acquisitions for their IMT business line in the last several years, including:

  • acquired San-Francisco based Hotpads for $16 Million in 2012
  • acquired NYC-based StreetEasy for $50 Million in 2013
  • acquired their competitor Trulia for $2.5 Billion in stock in 2015
Zillow's multiple properties
Zillow Premier Agent – Source: Zillow

The combined platforms now form the core of their offering to US-based agents looking to advertise in a targeted way to local consumers in various States. Zillow and Trulia, combined, account for more than 50% of US-based traffic in the sector.

But Homes is an entirely different kettle of fish in the context of the iBuyer market. Companies like Redfin Now and OpenDoor are competing directly with Zillow in this market. It was estimated that 1 in 100 (1%) homes in the US were bought by iBuyers in 2019.

Given all the turmoil so far and restrictions related to in-person viewings, we expect this number to go up exponentially by the end of 2020.

Zillow Zestimate - valuation of home
Zillow Zestimate – Valuation Software

In that light, Zillow’s position as a dominant platform is important, but perhaps not as important as its relationship with its partners. Local expertise will matter more than ever, and given its end-to-end product portfolio of products that Zillow currently has, they will continue to lean on industry partnerships that help them close more transactions.

This will likely lead to a flurry of M&A activity in the not-too-distant future in a similar way to their Advertising business model.

As we move down funnel into transaction-related services, we work to partner with high-performing and service-focused industry partners who share our interests in providing the best-possible services to our shared customers.

Zillow 2019 Annual Report
Zillow Brands (in 2020)
Zillow Brands – Source: Zillow

Fundraising and Valuation

Zillow (Ticker: ZG) is a publicly-traded company that trades on the Nasdaq stock exchange in the US. As of recent trading, they had a market cap of ~$13 Billion USD. In $USD terms, this is ~2X the valuation of Rightmove (RMV), the UK’s leading property search portal.

Due to concerns about the COVID19 pandemic, Zillow raised $1 Billion in stock and convertible debt. The desire to have enough cash stockpiled to help the company navigate an extended period of uncertainty was highlighted in the recent shareholder’s letter by the CEO.

The raise effectively guarantees the company will be able to continue with its focus on ‘Real Estate 2.0’ and avoid mass layoffs of staff.

Zillow Business Model Canvas

A business model is defined as:

“the rationale of how an organization creates, delivers and captures value.”

Alex Osterwalder et al invented the Business Model Canvas to help individuals and organizations conceptualize how to analyze, create, and develop business models.

Zillow – Value Proposition

Leading US-based advertising platform that allows consumers to rent, buy or sell their homes online.

  • US-based brokers pay performance-based fees for lead-gen on their property listings
  • Expanded into new ‘Real-Estate 2.0’ category of buying and selling homes themselves
Zillow Business Model Canvas
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