An Online Real-Estate Giant Looms Large

July 25, 2014 6:54 p.m. ET

A possible merger of


Zillow Inc.



Z +8.99%



Zillow Inc. Cl A


U.S.: Nasdaq


$158.86


+13.10
+8.99%



July 25, 2014 4:00 pm


Volume (Delayed 15m)
:
4.37M



AFTER HOURS



$158.99


+0.13
+0.08%


July 25, 2014 7:59 pm


Volume (Delayed 15m)
:
119,186




P/E Ratio
N/A

Market Cap
$6.33 Billion


Dividend Yield
N/A

Rev. per Employee
$275,180









07/25/14 In Possible Merger of Zillow a…
07/24/14 Zillow in Advanced Talks to Bu…
05/20/14 Too Much Information? Facebook…
More quote details and news »



and


Trulia Inc.



TRLA +4.86%



Trulia Inc.


U.S.: NYSE


$56.35


+2.61
+4.86%



July 25, 2014 4:02 pm


Volume (Delayed 15m)
:
6.04M



AFTER HOURS



$56.39


+0.04
+0.07%


July 25, 2014 7:12 pm


Volume (Delayed 15m)
:
417,356




P/E Ratio
N/A

Market Cap
$2.08 Billion


Dividend Yield
N/A

Rev. per Employee
$168,161









07/25/14 In Possible Merger of Zillow a…
07/24/14 Zillow in Advanced Talks to Bu…
07/24/14 Trulia, Zillow Shares Shoot Hi…
More quote details and news »



could strike fear into the hearts of some real-estate brokers.

The two portals dominate the online listings space, reeling in millions of home buyers, home sellers, and real-estate agents who want to list and view homes for sale. A tie-up would create by far the largest player in the industry.

That prospect has sent ripples of concern through the residential brokerage business. Some are wary that the merged company would have too much power over listings, possibly raising associated fees. Others are concerned that a goliath listing service might break into the brokerage business itself, something that until now both Zillow and Trulia have avoided.

“There’s a great deal of anxiety in this category over the growth of portals. Some view them as valuable partners, some as a mortal threat,” said

Brian Boero,

a partner at 1000watt Consulting LLC, a real estate marketing and strategy firm.

Seattle-based Zillow is in advanced talks to buy San Francisco-based Trulia, according to people familiar with the matter. Should the talks not fall apart, a deal could be struck within the next week, one of the people said.

Zillow, which went public in 2011, reported revenue of $66.2 million in the first quarter, up 70% from a year earlier. Trulia, which had its market debut in 2012, reported first-quarter revenue of $54.5 million, up 127% from a year earlier.

Neither site typically charges to list properties for sale. They make money primarily from real-estate agents who pay to have their contact information appear alongside searches for their properties. Trulia also sells agents software to manage the sales process.

Some real-estate agents who advertise on the sites say that they are wary of how a combined company would change their costs.

Trish Sweeney-Lowe,

a real-estate agent with Century 21 Triangle Group in Raleigh, N.C., has advertised on Zillow since June. She estimates she’s spent up to $2,100 a month for her information to appear when Zillow users search for homes in certain ZIP Codes in the Raleigh area.

The advertising creates about five leads a week, said Ms. Sweeney-Lowe, who only started her business this summer. If the two sites fuse, she said, it could drive up the competition to appear in the ZIP Codes she operates in.

“It does worry me a bit if Zillow and Trulia combine,” she said.

The portals already have a tenuous love-hate relationship with traditional brokers. On one hand, brokers and agents are Zillow and Trulia’s biggest customers and increasingly rely on their services for data and listings.

But Zillow and Trulia in recent years have become serious competitors to the local “multiple listing services” that are controlled by brokerage companies and dominated real estate listings before the turn of the millennium. As this critical role has been taken over by online firms, the power of the brokerage companies has diminished.

Some brokers also fear Zillow and Trulia could decide to expand by having their own real-estate agents. Zillow raised eyebrows among multiple listing services recently when it started a “Coming Soon” feature, where agents could advertise properties that haven’t yet been officially listed. Both companies in the past have said that they don’t intend to become real-estate brokerages.

Both Zillow and Trulia rely largely on multiple listing services and other data sources to feed them listings.

The National Association of Realtors declined to comment on the potential combination.

The sites’ current services are unlikely to completely replace traditional brokerages, because most buyers and sellers will want someone to guide them through the oft-complicated process of buying and selling homes, said Mr. Boero. Unlike with travel and with stock purchases, most people will only buy and sell a home a few times in their lives, he said.

A combined Zillow and Trulia, which also have partner sites that carry their listings and advertising, would be a giant in the field. Zillow.com and its partners received 53.8 million unique visitors in June, making it the most-trafficked real estate site according to comScore Inc. Trulia and its partners received 31.6 million.

The third-largest real estate site network, which is run by Move Inc. and includes Realtor.com, received 23.8 million visitors.

After news of the talks broke on Thursday,

Richard Swerdlow,

chief executive of Miami-based eRealEstate Holdings LLC, said he received three calls from investors and other real estate media companies on potential partnerships with his firm, whose websites include Condo.com and Houses.com.

“There are dozens of companies” in this space, Mr. Swerdlow said. “We’re a long way from seeing the end of consolidation.”

Write to Joe Light at joe.light@wsj.com

  Click to listen highlighted text! July 25, 2014 6:54 p.m. ET A possible merger of Zillow Inc. Z +8.99% Zillow Inc. Cl A U.S.: Nasdaq $158.86 +13.10 +8.99% July 25, 2014 4:00 pm Volume (Delayed 15m) : 4.37M AFTER HOURS $158.99 +0.13 +0.08% July 25, 2014 7:59 pm Volume (Delayed 15m) : 119,186 P/E Ratio N/A Market Cap $6.33 Billion Dividend Yield N/A Rev. per Employee $275,180 07/25/14 In Possible Merger of Zillow a… 07/24/14 Zillow in Advanced Talks to Bu… 05/20/14 Too Much Information? Facebook… More quote details and news » and Trulia Inc. TRLA +4.86% Trulia Inc. U.S.: NYSE $56.35 +2.61 +4.86% July 25, 2014 4:02 pm Volume (Delayed 15m) : 6.04M AFTER HOURS $56.39 +0.04 +0.07% July 25, 2014 7:12 pm Volume (Delayed 15m) : 417,356 P/E Ratio N/A Market Cap $2.08 Billion Dividend Yield N/A Rev. per Employee $168,161 07/25/14 In Possible Merger of Zillow a… 07/24/14 Zillow in Advanced Talks to Bu… 07/24/14 Trulia, Zillow Shares Shoot Hi… More quote details and news » could strike fear into the hearts of some real-estate brokers. The two portals dominate the online listings space, reeling in millions of home buyers, home sellers, and real-estate agents who want to list and view homes for sale. A tie-up would create by far the largest player in the industry. That prospect has sent ripples of concern through the residential brokerage business. Some are wary that the merged company would have too much power over listings, possibly raising associated fees. Others are concerned that a goliath listing service might break into the brokerage business itself, something that until now both Zillow and Trulia have avoided. “There’s a great deal of anxiety in this category over the growth of portals. Some view them as valuable partners, some as a mortal threat,” said Brian Boero, a partner at 1000watt Consulting LLC, a real estate marketing and strategy firm. Seattle-based Zillow is in advanced talks to buy San Francisco-based Trulia, according to people familiar with the matter. Should the talks not fall apart, a deal could be struck within the next week, one of the people said. Zillow, which went public in 2011, reported revenue of $66.2 million in the first quarter, up 70% from a year earlier. Trulia, which had its market debut in 2012, reported first-quarter revenue of $54.5 million, up 127% from a year earlier. Neither site typically charges to list properties for sale. They make money primarily from real-estate agents who pay to have their contact information appear alongside searches for their properties. Trulia also sells agents software to manage the sales process. Some real-estate agents who advertise on the sites say that they are wary of how a combined company would change their costs. Trish Sweeney-Lowe, a real-estate agent with Century 21 Triangle Group in Raleigh, N.C., has advertised on Zillow since June. She estimates she’s spent up to $2,100 a month for her information to appear when Zillow users search for homes in certain ZIP Codes in the Raleigh area. The advertising creates about five leads a week, said Ms. Sweeney-Lowe, who only started her business this summer. If the two sites fuse, she said, it could drive up the competition to appear in the ZIP Codes she operates in. “It does worry me a bit if Zillow and Trulia combine,” she said. The portals already have a tenuous love-hate relationship with traditional brokers. On one hand, brokers and agents are Zillow and Trulia’s biggest customers and increasingly rely on their services for data and listings. But Zillow and Trulia in recent years have become serious competitors to the local “multiple listing services” that are controlled by brokerage companies and dominated real estate listings before the turn of the millennium. As this critical role has been taken over by online firms, the power of the brokerage companies has diminished. Some brokers also fear Zillow and Trulia could decide to expand by having their own real-estate agents. Zillow raised eyebrows among multiple listing services recently when it started a “Coming Soon” feature, where agents could advertise properties that haven’t yet been officially listed. Both companies in the past have said that they don’t intend to become real-estate brokerages. Both Zillow and Trulia rely largely on multiple listing services and other data sources to feed them listings. The National Association of Realtors declined to comment on the potential combination. The sites’ current services are unlikely to completely replace traditional brokerages, because most buyers and sellers will want someone to guide them through the oft-complicated process of buying and selling homes, said Mr. Boero. Unlike with travel and with stock purchases, most people will only buy and sell a home a few times in their lives, he said. A combined Zillow and Trulia, which also have partner sites that carry their listings and advertising, would be a giant in the field. Zillow.com and its partners received 53.8 million unique visitors in June, making it the most-trafficked real estate site according to comScore Inc. Trulia and its partners received 31.6 million. The third-largest real estate site network, which is run by Move Inc. and includes Realtor.com, received 23.8 million visitors. After news of the talks broke on Thursday, Richard Swerdlow, chief executive of Miami-based eRealEstate Holdings LLC, said he received three calls from investors and other real estate media companies on potential partnerships with his firm, whose websites include Condo.com and Houses.com. “There are dozens of companies” in this space, Mr. Swerdlow said. “We’re a long way from seeing the end of consolidation.” Write to Joe Light at joe.light@wsj.com Powered By GSpeech