Zillow CEO Rich Barton
Zillow founder Rich Barton is a billionaire after strong results from a risky new home buying strategy sent shares up 17% on Thursday—almost a year to the day since he returned as CEO.
Zillow shares closed above $64 apiece for the first time since June 2018. Barton owns 15.8 million shares, including more than 700,000 he bought in November 2018 when the stock was at a low point.
Barton started Zillow with four colleagues from his last company, Expedia, and owns the largest individual stake. Frustrated by his own home buying experience, he believed technology would revolutionize the process. With its home value estimates and easy-to-access listing, the site was a hit as soon as it launched in 2006, but Barton wanted to go further.
“We just lit up the marketplace. People had been in the dark,” he told Forbes last year. “We showed them what was available, and we got them all junked up and fantasizing about what to buy. For a subset of them, we’re a practical tool and helping them do that. Generally speaking, we were getting them to the edge of a chasm, which is this transaction, and just maybe lighting up the other side, but we really weren’t getting them there.”
In 2010 he passed the CEO title to Spencer Rascoff, one of the four cofounders. Barton stayed involved as executive chairman but spent much of his time with family and on other projects like job review site Glassdoor. Zillow made money by selling ads to real estate agents and by 2018 had 157 million average monthly visitors to its sites, which by then included Trulia, StreetEasy and Hotpads.
Then, in April 2018, Zillow made a sharp turn toward the transaction Barton had long coveted, entering the fledgling on-demand home buying market—known as “ibuying”—with a service called Zillow Offers. Prospective sellers in select markets can go to the Zillow listing for their own home and ask the company how much it is willing to pay for their houses.
In February 2019, the company announced Barton would return as CEO to lead the transition.
Despite Barton’s popularity, his return did not entirely calm investors. Concerns remained over how the company could manage an expensive and operationally intense home-flipping business alongside a high-margin ad sales one. The stock struggled through 2019.
With the release of its full earnings for the year on Wednesday, Zillow showed enough momentum in both businesses to send the stock sharply higher.
Last year, Zillow purchased 6,511 homes and sold 4,313 of them, bringing in $1.4 billion in home sales revenue. In the fourth quarter, when nearly half of the sales occurred, the average price per home was $317,155. Home revenue for the quarter was $603.2 million, with a pretax loss of $12.186 million. Meanwhile, the media business had $1.3 billion in revenue for the year, an increase of 6%.
Zillow has predicted that in under five years it will be buying 5,000 homes a month—1% of all U.S. residential sales—and booking home sale revenue of $20 billion a year, with $2 billion or so from selling real estate ads.
