The commercial real estate data and portal company CoStar has truly put the cat among the pigeons in the world of US residential real estate marketing this week. On Monday the company announced its purchase of popular residential portal Homesnap for $250 million, and today CoStar Founder and CEO Andy Florance has delivered something of a battle-cry interview with prominent industry figure Brad Inman in which he left it very clear that CoStar was coming for US residential real estate market-leader Zillow.
Drawing on both his mother’s and his brother’s experience as realtors, the beginning of Florance’s engaging conversation with Brad Inman built on his personal reputation as an ally of American realtors to assuage fears that CoStar may end up moving in on their turf as Zillow is perceived to have done. One early quote in particular spared subtleties: “I think there are some fundamental differences in our vision of how we see the industry.”
Referring to Zillow’s model of allowing competing agents to advertise on a rival’s listing on the portal, Florence said the feeling is “disingenuous” and vowed that CoStar would never allow rival agents to put their brand on another agent’s listing. Currently, CoStar’s commercial realtor customers do not pay to list their properties on the company’s MLS but do pay for tools, a dashboard, and for visibility on the company's commercial portal LoopNet .
Florence drew on the real estate markets in other countries and specifically how Zillow’s main classifieds product ‘Premier Agent’ “does not resonate” with him. Referring to the Murdoch-owned leading Australian portal company REA Group as a success and Zillow as “a failure if you just look at P&L” Florence expressed surprise that on buying US portal Realtor.com in 2014 the Murdoch media empire did not implement the “your listing, you lead” model used by REA Group: “In Australia they don’t put other people’s names on your listings. Here it happens, and I think there is an opportunity to do it right.”
Although primarily engaged in the world of commercial real estate, CoStar has long been circling around the residential industry, and with this week’s events can be seen as setting out its stall to rival Zillow. With quarterly revenue north of $1.5 billion, an EBITDA margin of over 30%, a well-diversified business, and a stock that is an investor sweetheart, CoStar may well have the tools to move in on Zillow’s turf much like Florance’s analogy of a realtor moving in on another realtor’s listing.