CoStar Group earned $625 million in Q3, clinching its 50th consecutive quarter of revenue gains. The company also highlighted a 1,290 percent annual growth in Homes.com traffic.
“We have been doubted before,” a CoStar spokesperson said in Inman’s deep-dive into portal traffic. “We were doubted before we grew LoopNet to become the leading commercial real estate portal in the U.S. We were doubted before we grew Apartments.com to become the leading multifamily portal in the U.S. This is not our first rodeo.”
Florance said Homes.com’s growth is the result of a savvy search engine optimization (SEO), search engine marketing (SEM) and user experience (UX) strategy, and the portal’s ability to deliver on its “your listing, your lead” value proposition — something he said puts Homes.com ahead of the game as a hot-button lawsuit attempts to upend buyer-broker commissions.
“The first-generation real estate portals have been leveraging this threatened buyer-broker commission rule to divert listing leads from all the agents in the market to a small handful of agents who are then required to split their commissions with the portal,” he said in a previous Inman article. “Many agents and brokers strongly resent that model. Now that Homes.com is one of the most heavily trafficked portals, there is a strong and viable alternative for lead generation available to agents that does not require usurious commission splits.”
During the live earnings call, Florance unveiled additional Homes.com data, including a 900 percent annual increase in returning users on the platform and Homes.com’s rise from No. 136 to No. 19 on the Apple App Store’s most popular lifestyle app list.
While those are promising developments, Florance said the company needs to lift Homes.com’s unaided awareness marketing score from “the low single digits.” The CEO said building unaided awareness is key to the company’s monetization strategy for Homes.com, which includes the rollout of Homes.com memberships in Q2 2024.
“Achieving significant unaided awareness is important because it improves SEO, optimizes SEM investments and facilitates sales of advertising products to prospects,” he said. “We do not believe that building unaided awareness is our most significant risk factor. We anticipate selling homes.com memberships in the second quarter of 2024.”
He added, “Costar Group has created dozens of successful monetization strategies and we believe that our planned monetization strategy for Homes.com will become a dozen plus one of our successful monetization strategies.”
Scott Wheeler
CoStar Group CFO Scott Wheeler said the company expects to close Q4 with revenues landing between $485 million to $490 million, with an adjusted EBITDA between $123 million to $128 million. For the full year, Wheeler said revenues should be in the range of $2.445 billion to $2.450 billion, with $43 million of that coming from the residential side of the business.
“The old Pro Plus products are holding up better than we expected, while the Facebook advertising products decline,” he said. “I suspect agents are finding that our millions of free leads from Homes.com are a much better source of potential customers than the poor-performing Facebook ads that were sold through Homesnap.”
“Against one of the worst property markets in decades, we continue to demonstrate that our commercial information and marketplace businesses can deliver strong, double-digit revenue growth regardless of market cycles,” he added. “Our Homes.com strategy is proving to be very successful and has moved us into second place in the U.S.”
Investors seem to be buying what CoStar is selling, as the company maintained its ‘Buy’ rating leading up to today’s earnings. Analysts expect CoStar stock to reach a high of $114 per share over the next 12 months, which would be a roughly 60 percent change from the $70 range CoStar stock has been trading at for the past month.
The company’s market cap stands at $30.29 billion.
Update: This story was updated after publication with additional information from CoStar’s earnings report, and from a call company leaders held with investors.
