Zillow Group Inc. (NASDAQ:ZG) shares dropped more than 5.5% on Monday after reports that Google is piloting a new real estate advertising format that could eventually encroach on Zillow’s core business.
Google has begun testing a mobile-focused property ad experience that places detailed real estate listings directly within search results. The format includes property information, comparable listings and the ability for users to request home tours. Prospective buyers can connect with “top-rated” local agents via a “Request a tour” button, with Google indicating an expected response time of around 15 minutes.
Goldman Sachs analyst Michael Ng said the immediate effect on Zillow is likely to be limited, but warned of potential longer-term implications. “While we don’t expect a direct near-term impact on Zillow’s business, given that most of Zillow’s traffic is direct and Google’s new product is currently limited to select markets and mobile browsers, we view this development as a long-term risk for real estate portals like Zillow,” Ng wrote. He currently has a Neutral rating on the stock.
The new advertising product is being developed in partnership with ComeHome, a real estate analytics and brokerage firm. According to reports, listings are sourced from the Multiple Listing Service rather than directly from agents. The format competes with Zillow’s Premier Agent model by generating leads for buyer-side agents searching for prospective clients.
By integrating features typically associated with dedicated property portals — such as filters for price, size, number of bedrooms and bathrooms, and new listings — Google’s experiment could challenge Zillow’s role as a primary destination for online home searches over time.
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