Zillow Is Dumping Display Ads
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Zillow (ZG) is downplaying one part of its business: Display ads. “Display advertising is very, very difficult because there’s a glut of ad inventory on the internet,” said Zillow chief’s Spencer Rascoff. The company’s strategy, therefore, is to move display ad revenue into its marketplaces. Display ads have been falling out of favor as more companies turn to video to get their message across. Furthermore, with tech behemoths like Facebook and Google raking in the bulk of ad dollars, it’s making it harder for smaller firms to compete. Programmatic ad exchanges are driving down the rates at which publishers charge advertisers, said Mr. Rascoff. “That’s why paid content…is growing very quickly.” In its latest quarterly report, Zillow’s real-estate revenue was up 34%, mortgage revenue soared 65%, but display revenue was down 34%. For the quarter as a whole, Zillow posted a loss of 13 cents a shares, not nearly as bad as analyst consensus. Overall sales rose 25% to $186 million, also exceeding Wall Street’s expectations. In an example of how Zillow is moving its display ad revenue into its marketplaces, the company is going to multifamily property managers and saying don’t buy display ads from us; rather, we’ll charge you on a cost-per-lease basis to put your rental inventory on Zillow’s site, said Mr. Rascoff. Despite Zillow’s better-than-expected first-quarter report, shares have languished the past two years, down 41% since peaking in July 2014. “We’re a very volatile stock. Always have been, probably always will be,” said Mr. Rascoff. He takes a “long-term view,” and added that he tends to obsess about where the stock is going to be five to 10 years from now versus where it’s trading in the near term.
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