At Inman Connect Las Vegas, July 30-Aug. 1, 2024, the noise and misinformation will be banished, all your big questions will be answered, and new business opportunities will be revealed. Join us.
CoStar Group maintained a strong performance in the second quarter, according to the Virginia-based commercial and residential behemoth’s earnings call Tuesday. From April 1 to June 30, CoStar Group’s revenue grew 12 percent year over year to $678 million. CoStar remained profitable, although its net income dropped from $101 million in Q2 2023 to $19 million in Q2 2024.
CoStar Group founder and CEO Andy Florance said he was proud of the company’s performance, with Apartments.com and CoStar yielding double-digit year-over-year revenue growth despite market headwinds.
Andy Florance | Credit: CoStar Group
“We achieved another strong quarter of results in terms of revenue, sales and traffic to our websites,” he said in a statement ahead of the earnings call. “Overall revenue grew 12 percent year-over-year, and our two billion-dollar run rate businesses continue to deliver double-digit revenue growth with Apartments.com growing at 18 percent and CoStar at 10 percent over the second quarter of last year.”
“Our commercial information and marketplace businesses continue to perform and delivered 41 percent profit margins in the second quarter of 2024,” he said.
TAKE THE INMAN INTEL INDEX SURVEY FOR JULY
Florance also praised the progress residential portal Homes.com made in Q2, as net new bookings (i.e., new membership contracts) reached over $55 million — a milestone that took Apartments.com two years to achieve.
Traffic to the Homes.com Network (i.e., Homes Network, the Apartments Network and the Land Network) site increased 73 percent year over year to 148 million monthly average unique visitors. Homes.com’s sole traffic also experienced a boost, rising 197 percent year over year to 99 million monthly average unique visitors.
However, traffic to the Homes.com Network and Homes.com was down quarterly, falling 5.1 percent from 156 million and 10 percent from 110 million, respectively.
“Our Homes.com Network had 148 million monthly average unique visitors in the second quarter, according to Google Analytics, maintaining our position as one of the top two most heavily trafficked residential property marketplaces in the U.S.,” he said. “Our unaided brand awareness continues to climb and reached 27 percent in June 2024 as a result of our aggressive brand marketing campaign.”
Beyond traffic, Florance said Homes.com surpassed 10,000 members during the second quarter, with 86 percent of members signing 12-month contracts.
The typical Homes.com member, he said, won 51 percent more new listings than non-members and received 46 times more exposure on their listings than non-members. The increased exposure has led to greater sales for Homes.com members, with the typical member selling a listing for $11,000 more than non-members.
“Winning new listings is a primary objective for real estate agents,” he said during the earnings call. “We believe that the evidence is overwhelming that our product is enabling agents to achieve that core goal. We believe that the potential [return on investment] for member agents is phenomenal.”
He said the Homes.com team will double down on its membership growth efforts in the coming months. The platform currently has 63 full-time dedicated salespeople, supplemented by salespeople for Apartments.com, LoopNet, and other CoStar-owned sites. Homes.com is already in the process of hiring and training 80 new Homes.com dedicated salespeople, which will help boost membership and slow some of the attrition rates, which Florance said is primarily due to members not updating their credit card information.
“Over the past month or so, I attended focus groups with agents and consumers in Atlanta, Chicago, Irvine [, California] and Nashville,” he said. “Our growth and unaided awareness was clear. Agents reiterated that they prefer our business model of ‘Your listing, Your lead.’ We have more work to do to make them aware of that preferred business model, and we’ll do that work.”
Despite roadblocks with building a dedicated salesforce and increasing demos, Florance said Homes.com is still on track to take the portal crown from Zillow as traffic to the Homes.com Network outpaces Realtor.com and Redfin.
“Our reported Homes.com Network traffic of 148 million average monthly unique visitors for the second quarter is fast approaching Zillow’s first quarter reported traffic of 217 million average monthly unique visitors,” he said. “The Homes Network now has solidly lapped Realtor.com’s reported first quarter of 72 million average monthly unique visitors and has thrice lapped Redfin’s reported first quarter 49 million monthly unique visitors.”
“These solid traffic numbers far exceed our traffic performance expectation for this early in the development of the new Homes.com,” he added.
CoStar’s earnings call closes the chapter on a headline-making Q2, which saw the Virginia-based company’s rivalry with Realtor.com reach new heights.
On July 3, Realtor.com parent company, Move, filed a theft of trade secrets lawsuit against CoStar Group in the U.S. District Court in California.
The lawsuit claimed the former Realtor.com News and Insights head, James Kaminsky, continued to access Move-owned files outlining core information about Realtor.com’s N and I editorial budget, audience and revenue numbers, alongside employment summaries for several Move employees after moving to CoStar in January.
Move said Kaminsky accessed Move-owned files 37 times between January and June, allegedly giving “CoStar a massive unfair competitive advantage” and “increased traffic to its competing real estate listing website, all to the detriment of Move.”
Florance and Realtor.com CEO Damian Eales defended their companies in two Inman Interviews days after the filing. Eales said the filing revealed CoStar’s “deceptive and misleading” tactics. Meanwhile, Florance said the suit was Realtor.com’s latest “PR stunt” as the company struggles to accept its waning influence with agents and consumers.
“I would say that they’ve got an existential crisis in that business,” Florance told Inman. “They had hoped to sell the business last year for $3 billion or so, and that hasn’t happened for them. And it’s an existential crisis if they are no longer one of the largest websites where people shop for homes.”
A week after the theft of trade secrets suit, Move struck again with a National Advertising Division challenge over claims that Homes.com had reached 156 million unique monthly visitors on its site and had double the unique monthly visitors of Realtor.com. Move said the figure of 156 million was “misleading” as it referred to the Homes.com Network — and not Homes.com alone, which has 110 million unique visitors monthly.
NAD agreed with Move’s challenge and recommended that CoStar Group stop its “Homes.com just reached 156M monthly unique visitors” and “Homes.com now has DOUBLE Realtor.com’s traffic” messaging. CoStar Group updated its ads to solely focus on Homes.com’s traffic; however, they can use Homes.com Network metrics as long as they “explicitly disclose it in the body of its advertisements.”
CoStar Group still regarded the decision as a win since NAD acknowledged Homes.com Network and Homes.com traffic metrics as factual — only taking issue with how they’re used in ads.
“Homes.com is the No. 2 most-visited residential real estate portal, far surpassing Realtor.com, and the Homes.com Network has double the traffic of Realtor.com,” CoStar Group General Counsel Gene Boxer told Inman in a previous article. “Apples to apples, Realtor.com is losing the portal wars and losing big.”
Although the NAD decision is in the rearview mirror, CoStar Group potentially has a long road ahead with the theft of trade secrets suit, as Move requested on July 19 that CoStar hand over Move-owned files and any electronic devices Kaminsky used since working at CoStar.
Despite heightened tensions with Realtor.com and minor membership growth challenges, analysts are still quite bullish about CoStar Group’s prospects. The company’s Chief Financial Officer Chris Lown said they expect to maintain a midpoint growth of 12 percent through the year, with revenues reaching between $692 million to $697 million in Q3.
CoStar Group (NASDAQ: CSGP) saw its stock value grow 1.5 percent in the days leading up to its earnings call as analysts delivered a consensus rating of “Moderate Buy” and consensus target price of $100.08 per share.
The company’s market cap stands at $30.67 billion.
This article has been updated with information from CoStar Group’s earnings call.
