CoStar: We Like the Odds as the Firm Comes After Zillow With a Differentiated Residential Strategy

The competition among residential marketplace incumbents like Zillow, Realtor.com, and Redfin remains fierce, but wide-moat CoStar is emerging as a new entrant in an already crowded space. The company has shown great progress in acquiring traffic on Homes.com and has already become the fourth-largest platform by traffic in the United States. The residential marketplaces in the U.S. have very distinct business models, with each model having its own set of advantages and disadvantages. CoStar's strategy is to challenge the incumbents through an advertisement-focused business model that is more agent-friendly and with better customer experience potentially leading to faster adoption. However, we find CoStar's model considerably more difficult to monetize compared with the one adopted by its larger competitors, Zillow and Realtor.com.