Overview: Tiger Global Management's 1Q14 positions

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Part 3
Overview: Tiger Global Management's 1Q14 positions PART 3 OF 8

Must-know: Why Tiger Global adds a position in Zillow

Tiger Global Management’s position in Zillow

Tiger Global Management’s latest 13F shows new positions in Avis Budget Group Inc. (CAR), Zillow Inc. (Z), and Trulia Inc. (TRLA). The fund sold stakes in Yahoo! Inc. (YHOO) and Amazon Inc. (AMZN). It raised positions in Vipshop Holdings (VIPS) and Charter Communication (CHTR).

Must-know: Why Tiger Global adds a position in Zillow

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Tiger Global, which was reported to have invested in technology start-ups last quarter, initiated a new position in the online real estate listings service Zillow Inc. (Z) that accounts for 1.96% of the fund’s 1Q14 portfolio.

Zillow provides web and mobile products and services for every stage of homeownership—buying, selling, renting, borrowing, and remodeling. Its living database has more than 110 million U.S. homes—homes for sale, homes for rent, and homes not currently on the market. The company generates revenue from local real estate professionals, primarily on an individual subscription basis, and from mortgage professionals, rental professionals, and brand advertisers.

Zillow, which owns and operates brands including Zillow.com, Zillow Mobile, Zillow Mortgage Marketplace, Zillow Digs, and Zillow Rentals believes in pursuing strategic opportunities, including commercial relationships. With the acquisition of StreetEasy last year, Zillow expanded its audience and brand awareness.

Zillow’s revenue includes marketplace revenue and display revenue. Marketplace revenue consists of real estate revenue and mortgages revenue. Real estate revenue primarily includes subscriptions sold to real estate agents under the Premier Agent program, as well as revenue generated by Zillow Rentals. Mortgages revenue primarily includes cost per click (or CPC) advertising related to Zillow Mortgage Marketplace sold to mortgage lenders, as well as revenue generated by Mortech, which provides subscription-based mortgage software solutions, including a product and pricing engine and lead management platform. Display revenue primarily consists of graphical mobile and web advertising sold on a cost per thousand (or CPM) basis to advertisers primarily in the real estate industry, including real estate brokerages, home builders, mortgage lenders, and home services providers.

Must-know: Why Tiger Global adds a position in Zillow

Revenue increase driven by growth in Premier Agent subscribers and mobile traffic

Zillow’s 1Q14 results beat estimates with a revenue increase of 70% to $66.2 million from $39.0 million in 1Q13. This increase was due to a 56% growth in Premier Agent subscribers to 52,968 in 1Q14 from 34,030 1Q13, as well as significant growth in traffic to mobile applications and websites. Marketplace revenue represented 81% of total revenue and increased 72% to $53.4 million. Mortgage revenue grew 45% due to an increase in the number of loan requests by consumers in Zillow Mortgage Marketplace. Display revenue increased 62% to $12.9 million because of an increase in the number of unique users to its mobile applications and websites.

Non-GAAP (generally accepted accounting principles) net income per share was $0.02 compared to $0.01 in the same period last year, topping street estimates. The GAAP net loss of $6.3 million widened from the GAAP net loss of $3.7 million in 1Q13, mainly due to planned increases in advertising expenses.

Mobile is a significant growth catalyst

In its 2013 annual filing the company said that a mobile device accounts for 65% of Zillow’s traffic, and more than 70% of its traffic on weekends. Its suite of mobile applications includes 27 distinct real estate, rental, mortgage, and home improvement applications that “enable people to access and analyze information where, when and how they want it.”

Zillow saw a 51% year-over-year (or YoY) growth to approximately 70.7 million average monthly unique users of its mobile applications and websites. It said, “In March, traffic hit a new high of 77 million monthly unique users as mobile usage more than doubled year over year, and April just broke that record, attracting 79 million unique users.”

Zillow said in February that it expects profit to be impacted by increasing advertising spending. Chief executive officer (or CEO) Spencer Rascoff  said, “While we will forego some profitability in the near-term to grow our audience market share, the long (term) gain is about capturing revenue share and expanding profit margins.” The management added recently in its 1Q14 earnings release that, “We’re continuing to ramp our marketing investment, and plan to be firing on all cylinders through the busy spring and summer home shopping season, which also helps increase value and opportunity for our agent and broker partners.”

Zillow’s April Real Estate Market Reports showed that national home values decreased 0.1% from March, 2014–April, 2014 to $170,200—a level seen for the first time since 2004. The Zillow Home Value Forecast expects a 2.2% appreciation nationally from April, 2014–April, 2015 which is roughly a third of the appreciation seen in 2013.







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