NEW YORK (
-- Trulia is the latest Web site daring the public to buy its shares, hoping to raise $75 million in the very competitive world of real estate listings.
The online real estate company is also setting itself up to go directly against its rival
Unfortunately, in this post-
IPO world, investors are less willing to take a chance on a company that hasn't turned a profit.
That wasn't the case for Zillow when it went public in July of 2011. It priced at $20 above its planned range of $16 to $18 and shot up to $60 on its first trade. Its first-day return was 79%, By December 2011, Zillow's stock was down to around $21.
The volatility has continued but 2012 has been kinder, and Zillow shares have bumped back up to close Thursday at $37.99.
There aren't a ton of analysts covering Zillow -- only nine, but six give it a buy rating. Canaccord Genuity analyst Michael Graham even reaffirmed its buy rating on Zillow when Trulia filed. He believes Zillow's competitive position is intact, writing: "They create tools for agents and are pursuing lower tier subscribers."
But is there really much difference between the two?
Trulia claims it is "redefining the home search experience" and sells itself as having the "inside scoop." The company also makes a big deal out of it "free" products for agents, but also says its subscription products provide a high rate of return on investment.
The company's IPO filing states, "On average, paying subscribers receive more than five times the number of monthly leads compared to real estate professionals who only use our free products." Zillow also provides subscriptions for professionals.
Real estate professional Ed Mermelstein said neither Zillow or Trulia provide much value in his opinion. He said both
give more detail on properties such as zoning, taxes and property size.
Mermelstein also questioned the reliability of Zillow and Trulia. He believes most consumers use the sites to get a sense of the big picture, but when they get serious they go directly to a broker's web site, like Re/Max or Century 21.
A comparison of my own home brought extreme spreads in the market value. Trulia came in at $253,000 while Property Shark said it was worth $458,000. Zillow's custom "Zestimate" is $295,852. It would be nice if I could pay taxes on the lower amount and sell for the higher.
As a consumer, I don't really see very much difference between all these sites. I found school information and property size. Some even knew I had improved my home and listed my tax amounts. The valuations are so varied, though it's hard to know who's right. We'll call this round a draw.
In its S-1 filing, Trulia said it had 22 million monthly unique visitors in six months ending June 2012. The company also said 76% of its users are actually serious buyers, implying Zillow is for looky-loos. However, for the three months ended in June, Zillow had 33.5 million average monthly uniques, so Zillow is winning that battle.
Let's take a look at revenue and net income. Trulia books revenue primarily from sales of subscription products to real estate professionals. They also generate revenue from display advertising. For the years ended Dec. 31, 2009, 2010, and 2011, and the six months ended June 30, 2012, Trulia reported revenue of $10.3 million, $19.8 million, $38.5 million and $29 million, respectively. However, during the same periods, the company notched net losses of $7 million, $3.8 million, $6.2 million, and $7.6 million, respectively.
Zillow during those same years ended Dec. 31, 2009, 2010, and 2011, delivered revenue of $17.4 million, $30.4 million and $66 million respectively, along with revenue of $50.5 million for the six months ended June 30, much higher than Trulia. Zillow has also managed to break into the black, posting net income of $3 million for the first six months of 2012, so it looks like Zillow is winning this round as well.
Zillow is experiencing some insider selling, which normally isn't a good sign but the stock's been public for a year so it's not a shock that some folks are looking to cash in a bit.
Zillow was also on an upswing right before it went public, whereas Trulia's losses are increasing. The IPO market is suffering from Web fatigue after Facebook, so investors are probably better off with Zillow's proven track record. The best strategy with Trulia may be to wait until the company is profitable.
Written by Debra Borchardt in New York.
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