Analysis: Can Zoopla, Realtor.com and Domain See Off Challengers and Close the Gap to Market Leaders?

Well-funded challenger portals have been generating a lot of headlines in the industry recently.

CoStar has been explicit about its mission to become a market leader in both the US and the UK and has named Zillow and Rightmove as the companies it intends to supplant with Homes.com and OnTheMarket respectively.

Both CoStar-owned challengers are currently (arguably) sitting in third place right now. To have a shot at the title though, you have to rise through the ranks.

Muhammad Ali had 20 fights by the time he fought Sonny Liston and before going for the big boys' belts CoStar will have to get through Realtor.com in the US and Zoopla in the UK first.

Down under there's a similar situation brewing. Realestateview.com.au is the challenger portal being led by View Media Group, a company run by former Domain boss Antony Catalano and billionaire businessman Alex Waislitz.

Realestateview was relaunched in September 2023 with big plans which involve taking on Australia's number two portal and Catalano's former employer as well as a possible IPO.

What are the chances of the incumbent number two real estate portals in the US, the UK and Australia holding off these noisy upstarts and how far are they from challenging the market leaders themselves?

Traffic

Perhaps the most headline-grabbing metric that any challenger real estate marketplace needs to look to is traffic.

In the UK, Zoopla only has around a third of Rightmove's traffic according to Similarweb. In Australia, market-leading portal Realestate.com.au has around 140% of Domain's traffic but the Sydney-based challenger claimed in its most recent shareholder report that it outperformed its red rival's audience growth figures over the second half of 2023.

In the US market, the issue is even more contentious. CoStar claims to have already overtaken Newscorp-owned Realtor.com with an audience of 149 million and is saying to anyone who'll listen that it has the number two residential real estate portal network in the country. The key word in there is "network".

CoStar's traffic figures are for its entire portfolio of residential portals including multifamily specialist Apartments.com. Traffic to Homes.com (CoStar's direct competitor to Realtor and Zillow) was around 40 million in January according to Similarweb.

The last figure given by Newscorp for Realtor.com's traffic was 74 million monthly unique visits back in Q2 of 2023. Zillow's traffic figures for the period were over three times higher than that, so there's a tall mountain to climb for any challenger to climb and Zillow CEO Rich Barton knows it.

Below: The Online Marketplaces team discuss the number two portals in a recent episode of The PPW Pod.

Financial metrics

Traffic brings eyeballs and it can help a challenger portal's PR push but it doesn't guarantee money in the bank without good quality leads.

So how far behind are the current number two players?

All three of them make between one-quarter and one-third of the revenue made by their market-leading rivals. While Domain may have the smallest gap to its rival in terms of traffic it struggles to monetise its traffic the same way that Realestate.com.au does and is reportedly suffering listings gaps in rural areas of Australia.

In terms of momentum, neither Zoopla nor Domain have come close to matching their main rivals' growth over recent years. Although Realtor.com had some good momentum in 2021 and 2022 and was thought to be catching Zillow, it has endured six straight quarters of year-on-year revenue decline.

Firepower

What about dry powder? How much money can each number two portal throw into the fight for consumer eyeballs?

Two of the three portals have backers with very deep pockets. Zoopla is owned by US private equity firm Silver Lake who paid $3 billion to acquire the company back in 2018 while Realtor.com is part of the Murdoch media empire under News Corp.

Domain is 60% owned by Nine Entertainment, a media group with plenty of reach domestically but a relatively small market cap compared to the other two (A$2.7 billion at the time of writing).

When it comes to free cash that could be used to fund marketing though Domain is likely the only one of the three number two portals with its bottom line in the black.

• For its financial year 2023 Domain reported A$109 million in EBITDA.
• Zoopla made a £6.2 million loss for 2022 (the latest accounts available).
• Doing some triangulation based on its parent company's financial reporting, it looks as though Realtor.com made a loss of around $9 million for 2023.

Domain is also in a healthier position than Realtor and Zoopla when it comes to debt. Not only can the Aussie number two use the free cash it generates from operating to fund marketing efforts, but it is also relatively unburdened by liabilities.

While Zoopla's parent company has around $1.4 billion of debt on its books (mostly related to the 2018 acquisition by Silver Lake), Domain's net debt was last reported at A$176 million, down 5% since it reported its FY23 numbers last August.

Product differentiation

Why would any number two real estate marketplace exist without a USP, something to differentiate itself from its rival?

Zoopla has historically done a decent job of distinguishing itself from Rightmove. The portal was among the first to introduce an AVM for users to find out and track the value of their house without involving an agent. Zoopla's consumer marketing still leans on its AVM offering but in recent years Rightmove and OnTheMarket have both launched their own property valuation tools.

In Australia, the issue is more complicated with leadership being relevant in regional micro-markets. While REA Group might run the portal with the most traffic nationally, Domain claims leadership in many of the wealthy suburbs of Sydney and Melbourne and as such has less need for a differentiated product than Zoopla or Realtor.com.

That said, cruising around different features on Realestate.com.au and Domain, it is hard for the average user to find much to tell the two sites apart. Both have pretty much the same set of filters and very similar listings and results pages. Both also have tools for homeowners to track the value of their homes as well as local auction results.

Domain and Zoopla might be facing an uphill battle to differentiate themselves for consumers but at least they have the freedom to change whatever they see fit in order to do so.

That's not the case for Realtor.com...

Although the portal is fully owned by News Corp, it's run under an agreement with the National Association of Realtors (NAR). The agreement, which was signed when News Corp acquired Realtor.com's parent company Move in 2014, essentially means that if News Corp makes changes to Realtor.com that the NAR doesn't like it runs the risk of having to hand over the entire business to NAR.

The most successful portals in the world are by and large resented by their agent customers. Realtor.com can never become truly resented by agents and therefore appears to be hamstrung.

It has made changes to its business model over the last few years, adopting a commission share model with the acquisition of Opcity in 2018 and introducing premium features for listing agents last year. The problem is that not only are these changes irrelevant for end users, but Zillow also does commission sharing and premium listing features for agents.

Realtor.com is likely to lean into its messaging around being the 'industry-supported' real estate platform. The big question is whether that will be enough in a market where listings coverage isn't an issue thanks to the MLS system and where Homes.com seems to have a genuinely unique value proposition for users.