Thank you, everybody. Welcome to the Zillow Fireside Chat at the Goldman Sachs Communacopia and Technology Conference. I have the privilege of introducing Jeremy Hofmann, who's the CFO of Zillow. Prior to joining Zillow in 2017, Jeremy was at Goldman Sachs in investment banking, covering TMT. My name is Mike Ng. I cover real estate tech here at Goldman, and we have about 35 minutes for today's presentation, so first, thank you so much, Jeremy, for making yourself available today. We, we all really appreciate it. Yeah, thanks for the time. Yeah. Nice little homecoming. Yeah, that's right. I guess to start out, you know, coming off the back of earnings, in the last earnings call, Zillow reiterated its full year outlook for double-digit revenue growth and modest EBITDA margin expansion. It's been a, you know, really strong revenue growth to date. You know, Zillow's grown revenue by double digits year-over-year, each quarter, with EBITDA margins of 23%-24%. How does Zillow plan to navigate both sustaining that very strong top-line growth, while achieving margin expansion, and obviously, what's a difficult US housing backdrop? Yeah. Yeah, it definitely has not been the easiest housing backdrop. I think we said in February on our earnings call, we were going to plan for a flattish housing market. We were gonna grow double digits, and we would expand EBITDA margins. I'm really pleased with the progress we've made year to date. We grew revenue 13% in Q1, 13% in Q2, and 10%- 13% guidance for Q3, and we expect to expand margins along the way. So I am really pleased with that. I think the way we're doing it is, if I step back, you know, 2022 was a year in which we really did a lot of re-strategizing and reorganizing. 2023 was a lot of testing, and 2024 was really set out to start to see the investments we made across our business. And we'll talk about enhanced markets, mortgages, Listing Showcase rentals, and a variety of things, but start to see those actually contribute to revenue, and we're seeing that happen. This year, the bulk of the revenue growth that we've had have been from those investments, and we're quite pleased that we've been able to do it alongside good cost discipline. Right. It's been great to see Zillow really taking fate into its own hands, so to speak, against the backdrop. Maybe we can just shift gears and talk about the NAR settlement. You know, there was a settlement to various class action lawsuits that effectively removed the requirement for buyer agent commissions, and reaffirmed the negotiability of those commissions. You know, given that Zillow primarily monetizes with Premier Agent and, you know, Premier Agent has historically been primarily driven by buyer agent advertising spend, could you just elaborate about how the outcomes of the settlement should impact Zillow's business, if at all? And, you know, what are some of the changes that Zillow's implemented in response to the NAR settlement? Yeah, I mean, we think the settlement that's should be finalized in November, but went into place in really in August, is good for consumers, right? The idea that a consumer can now negotiate their fee. They've always been able to negotiate their fee, but now much more plainly understand and negotiate their fee, we think is good. We think it creates a more transparent marketplace as well. So overall, we feel like these are good changes for consumers, good changes for the industry. When it comes to us, we feel like the changes are likely evolutionary rather than revolutionary, and we think we're well-positioned, based on really three factors. So one, we have the most customers of any, you know, real estate site out there. We have roughly 70% share. We're three times the size of anyone else on apps as well, so we feel like we provide really high-quality customers. We feel like we work with some of the best real estate agents in the industry, and how we think about that is four out of every five of our Premier agents are in the top 20% of the real estate industry, and that top 20% of the real estate industry transacts roughly 80% of all transactions, so we feel like we have the most customers, we feel like we work with really high-quality agents, and then we've been adding both through acquisition and through organic build, some of the best technology in the real estate industry. ShowingTime, Follow Up Boss, our rich media, 3D capture technology, these are all things, Dotloop as well, where we think we can help agents become more and more efficient. So in any world in which agents need to become more efficient, we think we provide the technology that allows them to do so, and we think we're really well-positioned to capture more share as a result of any changes that come from the settlement. Yeah, and I'm certainly of the view as well that, you know, more of the market share is gonna consolidate towards the best agents, and if those happen to be the Premier Agent advertisers, right? That's a, that's a good thing for you. Yes. Yeah. Maybe just on that, that first point around just traffic share, you know, Zillow's internet search position, I think you guys have disclosed in the past, is three times that of the nearest competitor. The daily app users are similarly, 3x larger than the next nearest competitor. Maybe you can share a little bit about the competitive landscape across the digital real estate platforms. How is Zillow able to differentiate themselves? You know, we hear a lot about competition from, you know, Homes.com and others. So, where is Zillow kind of differentiated there? Yeah. We feel really well positioned. We've been building for a long time, right? We've been around for twenty years at this point. The business launched on the back of this estimate and a lot of organic traffic, and I think that was a great lesson for us as we built the business going forward. Yeah. So today, we sit in a privileged position where we are anywhere between 65% and 70% of all audience share, and we are three times the size of anyone else on the app front as well. We have 80% + organic traffic and direct traffic. So we feel quite good about the quality of the product that we've built and the brand recognition that we have. Zillow is more often Googled than the term real estate at this point, so we feel like we have a great position from which we can invest into all these transactional services that we'll talk more about. But as a result, we feel like we're as strongly positioned as we've ever been, and our job is really to continue to deliver consumer value. Yeah. We start everything with, "Okay, what does the consumer need? How do we deliver more and more value there?" And for us, that's been migrating the business solely from searching and finding real estate to thinking about more of the action verbs: buy, sell, rent, finance. Those are the types of things we think we can add value for consumers as well, and that's the strategy we're investing against. That all is really backed up. And what's really important is continuing to have the brand love that we do, so we take it very, very seriously. All right. And the 80% figure, that's I guess, organic search, zillow.com directly, and app users? Yeah. Is that right? Okay, great. Maybe just talking about guidance for the upcoming quarter, you know, 3Q 2024, Zillow guided residential revenue growth in line with the housing market, which I believe Zillow was assuming up mid-single digits. You know, after eight quarters of outperforming the housing market, could you talk about what's driving your residential revenue growth outlook? What are you seeing with Premier Agent advertising spend? How are you contemplating the decline in mortgage rates in your outlook? Yeah. Yeah, I mean, we're really pleased with the continued outperformance, right? We don't necessarily over-focus on quarter-to-quarter fluctuations, because there's always noise quarter-to-quarter. But when we look back and see eight quarters of consistent residential outperformance versus the category, we feel like the strategy that we're working against is actually working quite well, and I think we've outperformed in aggregate over two thousand basis points over that period of time. So we feel like the things that we're investing against are starting to deliver an outperformance. With respect to the Q3 guide, it's best factors we have at the time. One of the things that our business tends to be fairly well indexed to first-time homebuyers. Those folks are struggling in an environment like this versus where they were a year and two years ago. So that's factored in as well. But I think when we think about the opportunity in front of us, forget about Q3, but just beyond that, the big driver of residential growth will be in these enhanced markets we've been rolling out. So we were in four for most of 2022 and 2023. We'll be in 43 by the end of October of this year, and then we'll have more to do from there with respect to getting deeper into those markets and opening more markets over time. But that's that enhanced market strategy is one that we think really allows us to have durable growth in the residential in the residential category, and it's one that's still fairly nascent, even though we're gonna 10x the number of markets we're in versus kind of middle of last year. Yeah. You know, one thing that's been fascinating to me is that the number of Zillow Premier Agents, in terms of, you know, count of advertisers, has declined, I think, about 60% since 2015. Normally, you would think fewer advertisers means, you know, fewer dollars for your share of industry revenue. But Zillow's actually done better, and to your point, have outperformed quite a bit. You know, why is it that Zillow can continue to gain that share of overall wallet despite a declining number of Premier Agent advertisers? And what does that mean about the quality of service on the platform, too? Yeah. Yeah, so the stat that we put out was basically from 2015 to the end of 2023, we shrunk our Premier Agent active agent base by 60% while growing Premier Agent revenue by 2.5x. That was really around what I was talking about before, which is try to orient as many of our partner Premier Agents around the highest quality folks in the business. So we tend to invest our relationships with those that convert the highest, have highest customer satisfaction, and folks that wanna grow alongside us, right? Like, being a Premier Agent partner comes with a set of responsibilities that we take quite seriously because of the customers that we're introducing to these Premier Agents. That being said, we still work with thousands and thousands of Premier Agents, and those folks will grow their businesses from here. So it's not like we have a, you know, a set number of agents we want to work with. We just wanna make sure the partner base is one that we think is really high quality to service our customers. And then, of course, with Follow Up Boss, Dotloop, ShowingTime, you know, in each of those, we're working with hundreds of thousands, hundreds of thousands, and in ShowingTime's case, more than 1 million agents on a day-to-day basis through those products. So it's not like we only have a set of partners that work with Premier Agent. We work with the broad industry, with some of the other things that we have owned or acquired over the years. Right. And by improving the quality of the agent base, it also improves the experience that the person on the other side gets from interacting with Premier Agent partners. You got it. Yep. If we could just talk about the housing market writ large. According to the MBA, existing home sales this year are gonna be about 4.2 million, up slightly year-over-year. What's Zillow's outlook for, you know, U.S. housing volumes and pricing this year? You know, how does that compare with industry forecasts, and how do you expect, like, Premier Agent advertising spend to react to the housing market rates? Yeah. Yeah. You know, I think we said it in February, and we said we think the housing market and when we say housing market, we mean both existing home sales multiplied by change in home prices. Right. We thought that was gonna be flattish. I think we sounded bearish compared to others, but we had a view that things weren't gonna improve that much, and we, as a company, don't wanna be betting on housing market to save us. We want to be able to grow regardless of what the market does, which we're proving out this year. We expect more of the same for the bulk of 2024. We think it'll be flattish to up a bit, but not nearly as rosy as some folks have been, and then with respect to Premier Agent, it goes back to what we were talking about before, which is we need to grow our residential revenue, and PA is a big part of that, regardless of what the housing market does. We are single-digit share today in transaction share. We have a goal of going from 3%- 6% by the end of 2025. That's still very small in the grand scheme of what the brand means and how much, how many eyeballs are on the sites and apps on a day-to-day basis. So we feel like 6% is a great mile marker for us to feel like the strategy that we've laid out is working well, but we have a lot more to do beyond that as well. Okay, great. Double-digit revenue growth in a flat housing market. That's pretty good, right? And maybe it's a good segue to the next point, which is around enhanced markets. I think you just said, we'll get to 43? 43 by the end of October. Yeah, enhanced markets by the end of October. Could you just elaborate on how you're expanding these initiatives across markets? Like, what does it actually mean to be an enhanced market? And obviously, what are some of the tangible benefits of that? Yeah. Yeah. The strategy is basically to bring what we think is a new, a better customer experience, better partner experience, and then roll that out market by market. So what folks get, consumers get in the enhanced markets are real-time touring, so the ability to book a tour as easy as it is to book a restaurant or anything else that you have in modern-day convenience. The ability to work more closely with Zillow Home Loans, and then a more curated partner base on the Premier Agent side. All of those things come together in this enhanced market experience. We were in four for the bulk of 2022, and 2023, we'll be in 43 by the end of October, and then we'll need to do more as time goes on. But we do think it's the, you know, it's the experience of the future. We think it's a better customer experience. You know, if you think about what a buyer needs to do, the vast majority of buyers in the country need a mortgage, need an agent. Why shouldn't we be able to deliver that collectively, in one experience? And then also help those consumers as they are getting ready to meet a real estate agent, understand what they can afford while they're searching on Zillow. That's what we're trying to build. It's really an integration of financing an agent, in a way that comes together that we think is a better customer experience, and we're seeing it translate to, increased transaction share, increased conversion, and increased revenue versus total transaction value. So that's the reason why we are expanding as aggressively as we are. And we'll have to do more from here. Great. Let's talk about some of Zillow's ancillary businesses. Rentals is a place where we can start. There's been a tremendous amount of momentum, you know, eight consecutive quarters of growth. I think on the rentals platform, Zillow has 1.9 million listings as of June of this year. What's Zillow's long-term vision in rentals? How is it able to have, you know, grown so fast over the last few years? And maybe you can talk about some of the benefits of diversification when you think about rentals with the Premier Agent business. Yeah. Yeah. Maybe I'll answer the last one first. Sure. We wanna be. For Zillow, we wanna be a housing super app. We wanna be able to ultimately be a place where everyone can come and get their moving needs done, and whether that's for sale, you're looking to buy a home or rent a home or rent an apartment, we wanna be the trusted place. Yeah. And going back to the audience share and brand love we command, we think we're in a privileged position to go do it. So we talk a lot about what we're doing on the for sale side in these enhanced markets, but rentals has been a really good story for us. It's a strategy that we've invested in six plus years at this point, which is there's no real central organizing force in rentals. On the for sale side, you have the multiple listing services, MLS. In rentals, you don't have that, and we think we have the opportunity to be that place. So for the last six years or so, we invested very heavily in trying to find as much single-family homes for rent supply in the market. We built that up, really in earnest, starting in 2018, and we're now at a place where we have roughly 60% of all single-family homes for rent on Zillow at any given time. Wow! That being said, we still have 40% to go get, right? On the multifamily side, to the big apartment buildings, we have 35% roughly today, and we need to go get more of that. Now, as we felt more and more confident in our position to acquire single-family homes for rent, we felt like we started to be able to drive a whole bunch of traffic to the sites and apps because there was a lot of inventory that renters were looking for. We then started to invest in multifamily on the apartment side. That is a more nascent effort comparatively, but it is one that is higher paying set of folks, right? Property management companies are bigger spenders on advertising than single-family mom-and-pop landlords. So that's what we've been doing the last few years, and we've been really pleased with the progress. We grew multifamily buildings, property count, roughly 40% this year or this past quarter, and we grew multifamily revenue in that zone as well. So we're seeing both the supply of multifamily buildings grow really nicely, while revenue grows really nicely as well. And the business today is roughly around $500 million run rate. We think we have a pretty clear path to $1 billion in revenue in rentals, just on the back of multifamily growth, and then there should be more and more opportunity from there as we build more and more of the comprehensive rentals marketplace. Yeah. Could you just talk a little bit more about rentals and the strategy of getting more multifamily advertisers onto the rental platform. It feels to me like Zillow's in this unique competitive position where they get more traffic than anybody else, and with your unique position in single-family homes, you also have probably more single-family home- We do. -rentals than anybody else. So does that make it an easier pitch to the multifamily advertiser, for lack of better words, right? Yeah, I wouldn't say it's easy. Everything is hard, everything is hard. Maybe the CFO can say it, but the person that runs rentals can't necessarily say it. That being said, we do show up with a lot of goodies- Yeah when we show up to a property management company's office and say, "We're driving a ton of traffic. We're driving a ton of high-quality consumers to hopefully help you fill your vacancy." And, you know, Zillow is a brand that they know and trust. We have been pretty aggressively building the supply side, so adding more and more properties on a daily, monthly, annual basis. What we've also been really focused on is making sure that the demand side is well captured as well. It's actually one place where we had a bit of an audience gap. People don't think of Zillow for apartments. Right. So as we got to what we thought was a national scale, we turned on a national marketing campaign this year to make sure that folks understand that Zillow is a place you can go find apartments as well. Yeah. We coupled that with a really cool partnership with Realtor.com, where we are the exclusive provider of their multifamily buildings as well. So now we can show up to a property management company's office and say, "Not only do you know us because we have a big brand that you know and trust, we have the most traffic. We're driving a whole bunch of quality leads. You can see us in the market in this marketing campaign, and you're gonna get leads from Zillow, Trulia, HotPads, StreetEasy, and now Realtor.com exclusively as well." That pitch is working quite well in a way that we're pleased with. Great. Shifting over to mortgages, it certainly was an impressive quarter. The company saw nearly 30% revenue growth in that business, you know, despite the fact that the housing and mortgage market are not particularly strong for the industry. Marketplace, where it was, you know, basically introduced consumers to various third-party lenders. We've internalized a lot of that now, and that's all around this integration thesis. If we can be the home, the home loans provider, we connect you with a great real estate agent, we feel quite good about what that experience can be, and it feels integrated in a way that consumers are going to want to have. The opportunity set is pretty significant. Like, the mortgage market is really fragmented. You can't really find anybody with more than 5% market share at any given time. And we are not 5% today, we are smaller than that, but we are growing quite nicely. The business, Zillow Home Loans, year-over-year, grew 125% in purchase origination volume. So we feel like we're on a really nice path. From here, we think the way in which we grow. We think there are three ways primarily in which we grow. First is more of these enhanced markets. So as we open more enhanced markets, you'll see more Zillow Home Loans growth, deepen the relationships within the existing markets. And then additionally, really starting to, introduce people to Zillow Home Loans on our sites and apps. Yeah. So if you think about what you do on Zillow today, you're primarily searching for a home, and you don't really know what you can afford. We're starting to introduce tools that introduce affordability way higher in your search funnel. So things like this tool we call BuyAbility, which basically tracks what the potential payment is based on your criteria. We're starting to implement things like that so that you can really start to see what you can afford while you're searching, well before you start to actually get into market and look to buy a home. And there are two businesses, Zillow Home Loans and Premier Agent, are quite synergistic. So if you think about, you know, the vast majority of people need to buy a home via using an agent, using a mortgage. If we can, you know, introduce Zillow Home Loans customers to Premier Agents and Premier Agent customers to Zillow Home Loans, those are really nice synergy. It's a really nice synergy business model. We're pretty early days in it, but it's exciting growth, and it's one that we think can be a far bigger business down the road, given how nascent we are today. Great. And on those synergies between, you know, Zillow Home Loans and Premier Agent, I wanted to talk about, like, Premier Agent synergies with just other adjacent categories like that, whether that be Zillow Home Loans or, like, ShowingTime. Like, my theory has always been, hey, to the extent that you're able to get, you know, prospective home buyers through these checkpoints, right? Whether that's a Zillow Home Loan application or to go through a virtual tour, there's probably, like, a greater likelihood to buy, and there's a better ROI for the Premier Agent advertiser. Is there any credibility to that thought process, or? It is. Am I just? Yeah. No, I think that's fair, and I think the, you know, in a pretty crummy housing market over the last three years, the way in which we've been able to outperform has been by delivering higher and higher quality customers to these Premier Agents and higher and higher quality ROI. If you have more customers that show up to Premier Agents more ready to buy. That's a great thing for everybody, right? Right. Higher converting, it's better time spent for the partner agent, it's a better experience for the customer, and then ultimately a better revenue outcome for us, too. I do think that, you know, pre-qualified or pre-approved customers are more willing, or, you know, that they're more serious if they've gone through that process. Right. Somebody that's willing to get off their couch and not just take a virtual tour, but take an in-person tour is another, you know, high-quality lead that we've been able to drive. Or high-quality connection type that we've been able to drive. And there's more things that we can do from there, but you're absolutely right. A lot of the product investment that we have been making has been around really trying to drive higher and higher intent customers to our partner agents, because it works well for all three parties involved. Right. That makes sense and we're bumping up on time, so I wanted to ask, I guess, a big picture question, maybe two big picture questions but where does the competition come from or where does the market share gains from Premier Agent advertising come from? Like, are there obvious pockets within, you know, digital that, you know, Premier Agent can pick up in terms of share of wallet? Is there still a large offline component that, Yeah your Premier Agent can, you know, fund growth by? Yeah, it's primarily going to come from offline to online. I think real estate, residential real estate, is one of the last industries, I think, in the country that are still fairly analog. We've done some to make it more digital, but we have a lot more to do. That's what we're investing against. And when we think about where do share gains come from here, we come back to 70-ish% audience share, single digits transaction share. We want to go from 3%- 6% by the end of 2025. That's a great mile marker. It's not the end by any means. We think there's far more opportunity from there. But the way in which that we really start to grow share is just taking more of the folks that are currently transacting offline and turning them online. Yeah. I've certainly been struck by that statistic that you guys gave in the past around how 2/3 of real estate transactions have typically, like, touched Zillow- Yeah in some way, shape, or form, yet the monetization is obviously significantly lower than that. Maybe just to close out the discussion, you know, as you look out over the next five years, what are some of the things you're most excited about for Zillow as a company? You know, what do you see as the key priorities and strategies that, you know, Zillow is pursuing over that time period? Yeah. I'm really pleased with what we've been doing in the enhanced markets. You know, to go from four in the middle of last year to forty-three by the end of October, I think is a real credit to the team. Yep. I think it's setting us up for a lot more growth into the future. So I think that I've been really pleased about, and I get really excited about the five and 10-year opportunity there. That's probably first and foremost, because it's the biggest chunk of the revenue today, and should set us up well. I think rentals has been really strong. We talked a bunch about that, but I've been really pleased with the execution there. And then Listing Showcase, which we haven't talked about, which is us really starting to get more deeply into the listing agents' wallet, is nascent. We're roughly 1% of new listings today in Listing Showcase, but that has the opportunity to be far bigger from here. So all of that feels quite good, and we can layer on things like mortgage, that's growing well, and then future adjacencies, so long as we continue to execute, and title and home insurance, and things like that. So I look at the longer term opportunity as far bigger than what we're doing today, but we got to, you know, knock things down along the way. And we're doing that with pretty good cost discipline. Great. So feel like the path to GAAP profitability, you know, feels on the march at this point, too. So when we combine all those things together, it's a pretty exciting time with the company. It's a great way to end it. Jeremy, thank you so much for being here. It's been a privilege to share the stage with you. Yeah. Thank you. Thank you.