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CoStar Group released its Q3 earnings on Tuesday. Florance used the opportunity to deliver harsh criticism of rival Zillow, and outlined his competitive plan.
CoStar Group CEO Andy Florance didn’t mince any words during his company’s third-quarter earnings call on Tuesday.
Florance broadly criticized the residential portal landscape before setting his sights on Zillow, which the company sued in July for allegedly infringing more than 46,000 CoStar-watermarked photos. The founder spent several minutes outlining the growing list of lawsuits against Zillow, adding that regulatory and industry forces will push the company to play on Homes.com’s field.
“Zillow is under siege, facing an unprecedented wave of lawsuits,” he said. “I’m not sure that the market grasps the sheer magnitude of the risk bearing down on Zillow from all sides. These lawsuits are not isolated instances. Instead, they collectively target the heart of Zillow’s operations, exposing alleged antitrust violations.”
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Homes.com finding momentum
CoStar’s investment in a dedicated sales team appeared to have paid off during the third quarter, the company’s earnings report revealed Tuesday, with the number of Homes.com members increasing 150 percent year over year to 26,000. The company said it added 7,000 new members during Q3 alone, and sold 3,300 boosts — the title for its single-listing advertising package — to homeowners and listing agents since July.
- Homes.com launched Boost on April 29. Homesellers and listing agents purchased 1,200 boosts between April and July, a measure that was likely buoyed by Florance offering free boosts in response to Zillow’s private listing ban.
- Some listing agents criticized Homes.com for directly advertising Boost to homesellers in July. However, homeowners’ growing interest was the main driver in the 175 percent quarter-over-quarter growth in Boost purchases. Homeowners are the primary Boost users, paying an average of $386.
- For agents who use Boost, 25 percent go on to subscribe to Homes.com, Tuesday’s earnings report revealed.
Beyond Boost, CoStar said Tuesday Homes.com’s net new bookings — which are based on the annualized change in sales bookings from new subscription contracts, changes to existing contracts, and contract cancellations — rose 1,225 percent year over year to $16 million. The number of net new subscribers logged significant annual growth as well, increasing 1,000 percent year over year to 7,035.
- Those increases are relative to Q3 2024, which was a tough quarter for Homes.com. Traffic had declined, and net new bookings and subscriber growth both slowed, prompting Florance to remind analysts that Homes.com was “in the bottom of the first inning” of its growth.
What this means: Homes.com’s performance signals that agents — and consumers — may finally be warming up to the company’s advertising model. Florance was blunt in his assessment of what this means for the deepening rivalry with Zillow, which has gone all-in on its premium marketing solution, Zillow Showcase.
“We believe the highest and best function of a portal is to market real estate, and that that is the future of the industry,” he said during Tuesday’s earnings call. “…Homes.com is well ahead of Zillow in both revenue and listing count within what we believe is the primary sustainable revenue driver for successful residential real estate portals around the world.”
The quest to build the best home search experience
Florance also touted Homes.com’s new natural-language search feature, Smart Search. The artificial intelligence-powered feature launched on Oct. 14 and is intended to help buyers to explore listings across multiple cities and neighborhoods simultaneously, easily find homes near points of interest such as their job, and use speech-to-text.
- In the two weeks since its launch, Smart Search has led to a 69 percent increase in the number of search filters viewed and a 37 percent increase in the number of listing pages viewed per session.
- Homebuyers, CoStar said, were also five times more likely to return to Homes.com within the following week and submitted 51 percent more listing agent requests after viewing a listing page.
- Florance said Smart Search’s early performance has encouraged the company to direct 50 percent of its software development efforts toward expanding AI-powered features on Homes.com.
The context: Homes.com’s Smart Search is part of a broader trend among portals to ditch filters and create a more dynamic search process. Zillow introduced natural language search in October 2024, and Realtor.com launched its natural language search feature on Oct. 9. All of the portals have reported better homebuyer engagement with listings and the agents advertised on those listings—meaning natural search may be a game-changer in lead generation outcomes.
All-in on Matterport
CoStar spent $1.6 billion on Matterport, and Florance doesn’t regret one penny of it.
- The company’s revenue clocked in at $44 million during Q3, 12 percent above CoStar’s expectations for the quarter.
- Homes.com listings with Matterport’s digital twin technology receive 40 percent more views than those without it.
- And Homes.com subscribers with Matteport on a listing had a 37 percent higher renewal rate than those without it.
Florance said CoStar is expanding Matterport’s capabilities by adding a photo-realistic 3D view of a listing’s exterior, a feature similar to Zillow’s SkyTour that launched in July. CoStar’s investment in Matteport is not only key to Homes.com, Florance said, but to the conglomerate’s portfolio of 14 websites that serve the multifamily and commercial real estate industries.
- The company estimates that Matterport represents a multi-billion dollar revenue opportunity.
- CoStar is looking to bolster Matterport’s sales team, growing it from 30 sales representatives globally to more than 200.
Zoom out: Matterport has become another flashpoint in CoStar’s rivalry with Zillow. Zillow announced on Oct. 20 that it was removing Matterport 3D tours from its sites, and urged users to seek other options, including Zillow’s 3D Home feature.
The Seattle-based portal said its decision stemmed from a dispute over an application programming interface (API) agreement and changes to CoStar’s media licensing terms that put its users at risk of copyright infringement.
CoStar offered a different narrative, saying that Zillow “intentionally misrepresented” the licensing terms to “stir up customer confusion and divert attention away from its many lawsuits,” and encouraged users to send their questions — and criticisms — to Zillow.
The battle for rentals
CoStar isn’t backing down from its struggle against Zillow Rentals, which said during its Q1 and Q2 earnings calls that it had surpassed Apartments.com in unique monthly users.
Tuesday, Florance asserted Apartments.com’s dominance during the earnings call, highlighting solid revenue, traffic, property count, and net-new bookings growth in the third quarter.
- Apartments.com’s multifamily property count grew 66 percent year over year to 87,000.
- Apartments.com network site visits reached 223 million during Q3.
- Apartments.com’s sales team has grown 20 percent year over year, reaching 500 representatives.
What’s at stake: As the for-sale market struggles to normalize, portals have focused their energy on the rental segment, which has remained relatively strong as renting remains more affordable for the typical American household.
This market shift has spurred Zillow to become more bullish on its rental segment, even teaming with competitors Realtor.com and Redfin to get a chunk of the multifamily pie through two syndication deals. Those moves have complicated the competitive landscape for Apartments.com; however, Florance is digging in his heels—and pulling in the courts to slice at Zillow’s rental segment.
- The outcome of this battle has high stakes for Homes.com as well. Apartments.com bolstered Homes.com’s rental traffic by 55 percent during the quarter.
Other numbers to remember
- CoStar’s total revenue grew 20 percent year over year to $834 million.
- CoStar’s North American residential segment, which includes Homes.com, reported $20.5 million in revenue, up from $17.0 million the previous year.
- The company logged a net loss of $31 million.
