Zillow has entered into a definitive agreement to acquire Trulia for $3.5 billion in a stock-for-stock transaction. As per the official announcement, the Boards of Directors of both companies have approved the transaction, which is expected to close in 2015.
Zillow and Trulia are two rapidly growing real estate sites on mobile and the Web, enabling advertisers to reach a large and expanding consumer base. In June, Zillow reported a record 83 million unique users across mobile and Web. For the same month, Trulia reported a record 54 million monthly unique users across its sites and mobile apps. The two brands have limited consumer overlap – approximately half of Trulia.com’s monthly visitors do not visit Zillow.com, and approximately two-thirds of Zillow.com’s monthly visitors across all devices do not use Trulia.com. Maintaining the two distinct consumer brands will allow the combined company to continue to offer differentiated products and user experiences, attract more users and maximize the distribution of free content across multiple platforms, apps and channels.
At closing, Trulia CEO Pete Flint will remain as CEO of Trulia reporting to Zillow CEO, Spencer Rascoff, and will join the Board of Directors of the combined company. In addition, at closing, a second member of Trulia’s Board of Directors will join the board of the combined company. Rascoff said
Both companies have been enormously successful in creating compelling consumer brands and deep industry partnerships, but it’s still early days in the world of real estate advertising on mobile and Web. This is a tremendous opportunity to combine our resources and achieve even more impressive innovation that will benefit consumers and the real estate industry.
An interesting observation is that both Zillow and Trulia are primarily media companies, generating the majority of revenue through advertising sales to real estate professionals. Still, there’s huge scope of growth as the two companies’ combined revenue currently represents less than 4 percent of the estimated $12 billion real estate professionals spend on marketing their services to consumers each year.
A summary of expected benefits of the deal is as follows:
- Faster Innovation. By combining resources, the companies expect to accelerate innovation on mobile and Web to provide more valuable tools and services to consumers and professionals.
- Greater Access to Free Real Estate Market Data. The companies expect to share real estate market data, housing trend analysis, and forecasts to make more free data available to consumers and real estate professionals to empower people to make more informed decisions.
- Broader Distribution. Home sellers and their agents, brokerages, and participating MLSs will benefit from seamless free distribution of listings across even more platforms to reach an even larger audience of consumers.
- Enhanced Value and ROI for Advertisers. The companies expect to offer shared services and marketing platforms for advertisers that enhance agent productivity and marketing and deliver greater return on their investment.
- Corporate Cost Savings. By operating independent consumer brands through one corporation, the companies expect to realize synergies to improve overall operational efficiency over the long-term. By 2016, management expects to achieve at least $100 million in annualized cost avoidances.
The Zillow-Trulia deal gives us an idea of the tremendous scope of development in the real estate segment. Housing and CommonFloor have come a bit far in this domain but it’s just a matter of time when a new entrant poses a threat given the rapid growth of the industry.
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