The Zillow Group stock market graphic is displayed on a smartphone with the Zillow logo in the background on February 21, 2021.
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Zillow Shares plunged more than 9% on Monday on fears the online real estate platform could have a major new competitor: Google Search.
Google appears to be conducting tests to include property sales listings in its search results. Over the weekend, real estate tech strategist Mike DelPrete posted cell phone screenshots of Google search results with real estate listings that appeared to be provided by real estate data company HouseCanary. The listings allowed users to view the full details of a real estate site, request a showing and contact an agent – similar to features offered on Zillow.com's online marketplace portal. Google Home Search currently appears to only work in select markets and on mobile devices.
Zillow's decline signals that investors are bracing for the potential impact of Google's push into real estate. The company, whose shares fell more than 11% at one point during Monday's session, lost about $1.6 billion in market capitalization. Zillow's market cap is currently approximately $16.26 billion.
However, Wall Street analysts were quick to point out that Zillow's exposure to organic search is quite low, limiting potential downside risks, at least in the near term, as more details surrounding Google's product emerge.
Alec Brondolo, an analyst at Wells Fargo who gives equal weight to Zillow, said he wouldn't “expect a significant financial impact as Google listings shift from organic to paid listings” — since Zillow isn't overly dependent on organic search results for traffic.
“The Listings product appears to be similar to Google Hotel Metasearch results; the launch could increase traffic costs for Zillow, but disintermediation is unlikely,” Brondolo said in a note to clients on Monday. “In the hotel category, Google markets hotel rooms in search results as a metasearch ad product for OTAs. We would expect a similar approach in real estate, with Zillow, Homes.com, Realtor.com, etc. bidding on home listing ad units rather than Google trying to monetize directly on an ad product sold to agents.”
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Zillow stock last year.
However, some analysts see Google's tests as a longer-term headwind for Zillow and other online real estate portals.
Goldman Sachs' Michael Ng wrote in a note to clients that he believes the search engine's real estate listings, which he said is an advertising format for buy-side agents, compete directly with Zillow's Premier Agent program by “facilitating lead generation” for agents from potential buyers.
“While we do not expect a direct impact on Zillow's business in the short term, as the majority of Zillow's traffic is direct (e.g. Zillow.com, StreetEasy.com, mobile apps) 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, who remains neutral on Zillow, wrote in a note to clients.
Oppenheimer's Jason Helfstein said Google's expansion into real estate could impact the number of consumers visiting Zillow.com – which stood at 228 million in the third quarter – and therefore impact the company's ability to monetize its platform. “The impact would likely take years to be felt and would need to be rolled out across the U.S. to have a meaningful impact on real estate portal traffic,” Helfstein said in a recent statement.
Zillow shares have fallen more than 8% since the beginning of the year.
Neither Google nor Zillow immediately responded to CNBC's request for comment.
