Opinion: After All The Traffic Talk, Homes.com Needs to Start Closing Revenue Gap to Realtor

CoStar Group founder Andy Florance is one of the very few real estate marketplace leaders whose quarterly calls with investors are worth listening to. As a man who's been in charge of a company worth $33 billion since he founded it in 1986, he can and does say pretty much what he wants, and his discussions with investors and analysts invariably unearth interesting details of CoStar Group's operations and plans.

For example, in his Q1 call this year, Florance casually revealed that CoStar Group's upstart residential portal Homes.com has been experimenting with vendor-paid advertising—the real estate portal's holy grail of business models and something which other platforms around the world have been tiptoeing around for years.

Apparently, "almost all participants" of a trial run in California said they'd be willing to spend $500 to boost their property's visibility on Homes.com.

That's very good news for CoStar Group because their big residential play needs to start turning talk into revenue growth.

Background

In 2020, CoStar Group, primarily known for its commercial real estate operations, bought the residential agent tools platform Homesnap. A year later, it followed up with the acquisition of the U.S. challenger residential portal Homes.com for $156 million in cash. Florance's comments in the press release made it clear that CoStar Group thought it could do a better job than the likes of Zillow and Realtor.com.

“Unfortunately, current residential listing sites do not serve the interests of homeowners or their agents as they focus on selling advertisements on top of agent listings and increasingly offer competing brokerage services. These sites generate a portion of their revenue from directing potential homebuyers away from the listing agents to unrelated buyer agents that are advertising on top of listing agent listings. This is a practice we plan to no longer continue. Our plan in bringing Homesnap and Homes.com together is to help agents market their listings in support of the ‘your listing, your lead’ philosophy – which stands in contrast to most players in the industry.”

Since taking up the 'Your Listing, Your Lead' banner, CoStar Group has put very significant resources and attention into becoming the operator of leading residential real estate marketplaces in multiple countries around the world.

After calling off the courtship of Realtor.com's parent Move, Inc (but not agreeing to remain friends), CoStar Group snapped up British number three portal OnTheMarket in late 2023 before making a bid for Australia's number two player, Domain in 2025.

What CoStar Group is attempting to do is unprecedented and, if successful, would be the biggest and most noteworthy achievement in the global real estate marketplace industry since Zillow started showing house prices and Rightmove, REA et al beat newspapers at their own game.

So far, the language used in press releases and interviews has been adversarial, the headlines have been (for a sometimes dry industry) decidedly juicy, the marketing has been glitzy and expensive, and the claims have been audacious. While the stated aim for OnTheMarket is to become "the leading agent-friendly player in the UK", in the U.S. and Australia CoStar Group has boldly stated that its portals can become outright market leaders.

At the time of writing, the deal for Domain is yet to go through. As for Homes.com and OnTheMarket though, investors will want to see the theory behind the claims start to materialise on CoStar Group's balance sheet pretty soon.

In 2023, leadership in Washington pledged to spend £46.5 million on sales and marketing in the first full year of CoStar Group's ownership of OnTheMarket. There were also strong hints throughout 2024 that OnTheMarket was to be renamed Homes.co.uk imminently.

Since then, CoStar Group claims it has managed to improve OnTheMarket's website metrics considerably but apart from a spat with Zoopla which saw OTM withdraw its traffic claims after an investigation, British portal watchers have seen little sign of the sizeable shifts many thought were at hand when the Americans took over.

Back over the Atlantic, there have also been traffic controversies. In October 2023, CoStar Group claimed it had overtaken Realtor.com's traffic, citing Google Analytics data and comparing it to Realtor.com's publicly touted traffic numbers. There were more claims and counterclaims, eventually leading to CoStar Group withdrawing ads it put out claiming to have doubled Realtor.com's traffic in the summer of 2024.

The crux of the traffic controversy revolves around the company's 'Homes.com Residential Network' and whether CoStar Group's ads sufficiently disclosed the fact that it was comparing its 156 million network users to Realtor.com's 66 million.

CoStar's logic was that because competitors Zillow and Realtor.com have their sales and rental listings on the same website and cite those numbers in public filings, traffic to CoStar Group's popular rental portal, Apartments.com (and several more of its portals) should be allowed to count towards traffic of the Homes.com Residential Network.

Added together, the unique visitors to Homes.com's Residential Network totalled 156 million at the time the offending ads were put out. In the view of the U.S. National Advertising Division though, CoStar Group hadn't sufficiently disclaimed that it was including additional websites to reach 156 million, on top of the Homes.com visitors.

Nevertheless, the 110 million monthly visitors to Homes.com that the advertising authorities verified by the middle of 2024 is an impressive statistic given that before it was bought out in 2021, Homes.com was seeing fewer than 7 million. It should be pointed out, however, that Realtor.com boss Damian Eales still disputes any claims that his portal has fallen behind.

To get to those traffic numbers CoStar Group spent more than any real estate portal has ever spent on a marketing campaign and invested plenty in building out unique neighbourhood content and designing a state-of-the-art search interface for its users. There are also strong suggestions that CoStar Group has spent heavily on inorganic traffic acquisition for Homes.com.

Revenue follows traffic, right?

The novelty of all the business model barbs and traffic claims has worn off now. Aside from a significant dip during the 2022 'Tech Wreck', CoStar Group's share price has been largely stable since it embarked on its residential voyage in 2021. Investors, agents, competitors and the industry at large are waiting for the balance sheet uptick that must eventually accompany the heavy investment.

CoStar Group seemingly feels the expectancy. In April, the company announced a "refreshment" of its board and namechecked Homes.com in a press release which said that a newly established committee would "review the Company’s ongoing investment in Homes.com and ensure an appropriate timeline for profitability".

On the one hand, perhaps expecting Homes.com, with its radically different business model, to be growing revenue like a country that's just discovered oil is too much. Florance recently admitted that CoStar Group had trouble early on using sales staff from other departments to try to convince agents of Homes.com's way of doing things.

"We were offering a completely new value proposition to an agent customer base with very negative feelings about the business models of legacy real estate portals in our space. There was a bit of undeserved guilt by association."

On the other hand, we're talking about a hard-nosed S&P 500 company with 56 consecutive quarters of double-digit revenue growth. It has some market tailwinds in its favour and some strategies coming to fruition...

• There is a clear shift happening in the U.S. market around exclusive listings, which Homes.com has positioned itself to capitalise on
• As of Q1 2025, Homes.com has 300-plus dedicated sales staff (expected to rise to 500 by Q4)
• The billion-dollar marketing campaign has helped unaided brand awareness go from 4% in February 2024 to 36% in Q1 2025
• Homes.com is weaning itself off the "pure volume" traffic and saw its bounce rate improve by 45% in Q1
• Florance told investors in Q1 that Homes.com recently "optimized" its pricing for Homes.com

The stated timeline for Homes.com to "take a solid and very valuable leadership position" is in the next two to four years. For that claim to be taken seriously, America's loudest portal needs to make money at least on par with Realtor.com pretty soon.

As of their latest quarterly filings, Realtor.com generated $135 million to Homes.com's $16.5 million.

Any CoStar Group protest that those figures aren't an 'apples-to-apples' comparison may be greeted by rivals with the same shrug of indifference with which it treated their complaints about its 'Residential Network' traffic.

For what it's worth...

I am still a believer that Homes.com has a fighting chance of pulling it off. It seems to have a genuinely differentiated proposition for both agents and home hunters. In the UK I am less confident of its chances, and I have no idea about Australia.

I have never tried to buy a house in the U.S., and I haven't drunk the CoStar Group Kool-Aid to the point of referring to Zillow and Realtor's business models as 'lead diversion'. However, I can imagine that being sent to an agent who doesn't know the property when I fill in the lead form on a portal is an experience that can be improved upon significantly by a serious company with know-how and deep pockets.