Zillow shares slid sharply Monday after reports arose that Google is testing the display of real estate listings directly within its search results.
Zillow’s dominance could be challenged by the tech giant in online home search fueling concerns for the company’s future. Its stock fell over 9% as investors reacted to early signs that Google might position itself as a new gateway between home buyers and agents — which is something that Zillow has spent years building into its business.
Google vs Zillow
Real estate tech strategist Mike DelPrete shared screenshots showing Google Search content filled with home listings, noting that they, “appeared to be powered by real estate data company House Canary.”
They allow users to observe property details, schedule tours and communicate with an agent, all very similar to Zillow’s core offerings. The feature is only accessible for certain markets and mobile devices as assessment continues.
The market reaction shows how sensitive investors are to signs of increased competition from Google whose dominance as a search engine has disrupted industries previously. Zillow shares fell above 11%, wiping out almost $1.6 billion in market value. The company’s market capitalization is currently near $16.3 billion.
Wall Street analysts weigh in
Wall Street analysts cautioned that the near-term impact on Zillow’s business may be limited. Zillow heavily relies on direct traffic through its website and mobile applications which could help support any immediate disturbance.
Wells Fargo analyst Alec Brondolo stated there are no expectations of “a meaningful financial impact” in the short term, expressing that “Zillow is not overly dependent on organic search results for traffic.”
Addressing clients, Brondolo compared Google’s real estate test to its hotel meta search model, where online travel agencies bid for placement rather than being disintermediated entirely.
“[Google’s] introduction could increase traffic cost to Zillow, but disintermediation is unlikely,” announced Brondolo.
Google would more likely sell ad placements to portals like Zillow, Homes.com, and Realtor.com instead of directly competing for agent relationships.
Goldman Sachs analyst Michael Ng sees longer term risks as he describes Google’s listing as potential competition to Zillow’s Premier Agent program. Connecting buyers to agents within search results could eventually allow Google to obtain high-value traffic.
“While we don’t expect a direct near-term impact on Zillow’s business,” Ng said. “We view this development as a long-term risk for real estate portals like Zillow.”
His rating on the stock is neutral according to CNBC.
Lasting impact
Oppenheimer analyst Jason Helfstein expressed similar concerns and warned that Google’s expansion could gradually reduce the number of consumers visiting Zillow’s platforms that retracted 228 million users in the third quarter.
Helfstein said, “The impact would likely take years to play out and would need to be rolled out across the US to meaningfully impact real estate portal traffic.”
CNBC closes with the report that, “Zillow shares are down more than 8% year to date.” According to the publication neither Google nor Zillow responded immediately to CNBC’s request for comment.
