- Author: PPW
- Source: The Most Interesting Company in the Industry: Deep Diving CoStar Group’s Q3 Results - YouTube
1. Consistent Top-Line Growth, But Market Skepticism
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CoStar reported its 58th consecutive quarter of double-digit revenue growth, with Q3 revenue up 20% year-over-year to $834 million.
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Net new bookings were $84 million (+92% YoY).
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Despite the strong growth, CoStar had a net loss of $31 million for the quarter, mainly due to acquisition and development costs.
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The market reacted negatively: CoStar’s share price dropped up to 18% after the results, reflecting investor concerns about short-term profitability and high spending levels.youtube
2. Competitive Rental Market & Litigation with Zillow
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A major legal battle is ongoing: CoStar is suing Zillow for alleged widespread copyright infringement concerning multifamily rental listings and images.
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The multifamily rental segment is highly competitive; CoStar (apartments.com) and Zillow are both rapidly increasing listings.
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CoStar has 87,000 multifamily listings—a significant rise—and $1.2B revenue run rate for apartments.com, up 11% YoY.
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The legal environment (including third-party lawsuits against Zillow over the Redfin deal) makes the rental portal space volatile and strategic.youtube
3. Homes.com Growth and Differentiated Business Model
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Homes.com, CoStar’s residential portal, is growing fast:
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Net new agent subscriber bookings at an annualized $16M, up 53% quarter-over-quarter.
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26,000 agent subscribers (+7,000 in Q3).
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Strong focus on being “agent-friendly,” targeting subscription revenue over high traffic volume.
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Only about 5% of active US agents pay, so there’s significant headroom.
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Organic site traffic grew 87% YoY, with reduced bounce rate.
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Homes.com’s model does not rely on traffic dominance (unlike Zillow); it focuses on converting agents and offering differentiated services.
4. Vendor Paid Advertising Approach
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Homes.com is pioneering “vendor paid” (homeowner-paid) advertising, rare outside Australasia and Scandinavia.
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This “boost” product grew 136% QoQ (still small in dollar terms, ~$617k but a new avenue for future growth).
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Strategic aim: capture additional value from property sellers, not just agents.
5. Strategic AI and Technology Initiatives
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CoStar is investing heavily in AI—50% of Homes.com development resources are allocated to AI features.
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Partnership with Microsoft to co-develop AI-powered features for real estate search/user experience (contrasting with Zillow’s OpenAI alliance).
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CoStar believes that deep, vertical-specific knowledge and proprietary data are essential for truly useful real estate AI—generic LLMs are not enough for specialized needs.
6. Major Acquisitions & Integration
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Ongoing integration of OnTheMarket (UK), Domain (Australia), and Matterport.
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Focus is on cross-market synergies, product innovation, and “unlocking value” in underperforming acquisitions.
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Matterport’s 3D digital twin technology is seen as a transformative asset for both residential and commercial listings across CoStar’s global platforms.
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Integration of marketing, technology, and sales practices from US units (Homes.com) into acquired international portals.
7. Contrasting Visions: CoStar vs. Zillow
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CoStar positions itself as the “specialist” with a vertical service focus, long-term vision, and strong agent empowerment narrative.
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Zillow’s vision is “vertical integration” or even a future “Amazon of real estate”—a super-app for the entire transaction.
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Direct competitive rhetoric: CoStar highlights lawsuits faced by Zillow and subtly appeals to investors as a less legally challenged, high-potential alternative.
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Both companies invest in AI and new products, but differ in monetization, partnerships, and product scope.
8. Investor & Analyst Sentiment
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Despite robust growth, investors are worried about short-term profit, declining margins, and the heavy upfront costs of new tech, marketing, and integrations.
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The call stressed that CoStar is playing the “long game” and expects sustained, compounding gains from its current investments—market, however, remains impatient for near-term returns.
Summary:
CoStar continues to post strong top-line growth and is aggressively reinvesting in new business lines, technology, and international expansion. While its strategy is long-term and innovation-driven, current losses and massive investments have made the market nervous, as reflected in share price volatility. CoStar frames itself as the vertical specialist, in contrast to Zillow’s “one-stop-shop” ambitions, betting on a combination of organic growth, AI innovation, and acquisition integration to reshape the real estate portal landscape.youtube