Contact: Scott Denne
Zillow’s acquisition of fellow Internet real estate company Trulia in a stock swap worth $3.5bn shows the premium a company gets by occupying the top spot in its market. Zillow is only slightly larger but is valued substantially higher in today’s deal, which pegs Zillow’s enterprise value at 31x TTM revenue and Trulia’s at 20x.
Both companies have similar revenue, costs and businesses: hosting real estate listings and selling advertising space and other services to real estate professionals. Zillow generated $224m in trailing revenue and grew 70% YoY in its last quarter, while Trulia posted $174m and grew 127% (a lot of that comes from its acquisition in 2013 of Market Leader, but even comparing Trulia’s 2013 growth, minus contributions from Market Leader, it clocks a few percentage points above Zillow).
Ahead of the deal announcement, the market valued Zillow at 18x and Trulia at half that. Zillow sees value in being the leader and by picking up its closest peer, it shows that it’s willing to spend to retain that spot.
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