The Case for Owning Zillow

(To read Andrew Jeffrey's piece on what America is waiting for, click here.) * How has the business changed since 2006? From the MD&A section of the S-1: * In November 2007, its launched its listings feed program, allowing real estate brokerages to feed their listings directly to Zillow. * In April 2008, it enabled mortgage lenders to show mortgage quotes directly on the site, and by January 2010 was charging for that ability. * In October 2008, it launched its Premier Agent program, which now has over 10,000 paying subscribers (more on this in a bit). * In December 2009, it began showing rental listings, and in March 2011 began showing estimates for rent values. * In December 2010, it began collecting and displaying consumer-generated real estate agent ratings and reviews. Who are the folks behind Zillow? The current CEO in 1999 co-founded Hotwire, one of the early travel websites. The co-founder and executive chairman founded Expedia (EXPE) as a unit within Microsoft (MSFT) in 1994, and served as Expedia's CEO when it spun out of Microsoft in 1999. The vice chairman and CTO were also part of the original Expedia team. These aren't folks who caught lightning in a bottle in a dorm room, or who scribbled a joke on a napkin which led to a money-losing daily deals site. They survived both the dot-com bust and the housing bust and run a company that is disrupting the housing industry and has grown over 50% a year during a housing collapse. (To see Lee Adler's article on how the market crisis isn't over, click here.) How does Zillow make money? Two ways. First, there's good old-fashioned advertising (display revenues). Second, it allows real estate agents to purchase subscriptions that allow them to connect with individuals interested in buying a house, and also has a similar service for mortgage lenders looking to do the same (marketplace revenues). Display revenues are doing well, and grew 26% YoY in Q1, but it's the marketplace revenues that are really compelling, as they grew 271% YoY. Marketplace revenues have gone from 17% of revenues to 61% of revenues over the past two years. (To read the rest, head over to Minyanville.

(To read James Kostohryz's story on how the probabilities of bearish scenarios are increasing, click here.)