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  "documentTitle": "Zillow Group, Inc. (Z)",
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  "authorName": "Spruce Point Capital Management",
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  "notes": "Includes a red-circled comparison of revenue figures and a quote from Redfin's Q2'23 earnings call to support the argument of declining conversion rates.",
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      "text": "On its Q2’23 earnings call, Redfin noted closed rates unexpectedly fell from ~6-7% in ‘22 to 5.5% in ‘23. This 100 bps decline is significant as it implies a ~15% reduction in conversion assuming lead count was comparable.",
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      "text": "On its Q2'23 earnings call, Redfin noted closed rates unexpectedly fell from ~6-7% in '22 to 5.5% in '23. This 100 bps decline is significant as it implies a ~15% reduction in conversion assuming lead count was comparable.",
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      "text": "revenue per month: $3,000,000",
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      "text": "Spruce Point conducted an interview with a Flex agent based in the Charlotte market. Charlotte is an Enhanced Market which means it was converted entirely to Flex. According to the agent, prior to the switch to Flex there were 300 MBP or Premier Agents. There are now 30 Flex partners. According to the agent there were approximately 4,700 leads distributed to the Flex partners in July ‘23. We estimate conversion rates need to be 10-12% to breakeven from a revenue perspective. Redfin recently reported 5.5% conversion rates (see below). In addition, an article from Follow Up Boss (acquired by Zillow in Nov. ‘23) has the national conversion rate at 0.4% to 1.2%. While we can recognize some teams may achieve higher conversion rates, consistently achieving 10%+ seems like a big stretch. We believe Zillow should disclose conversion rates for each Enhanced Market.",
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      "text": "Throughout the year, demand largely met or exceeded our expectations, but closed sales haven’t. From 2017 to 2022, between 6.3% and 7.2% of the people who contacted Redfin or our partner agents had closed a sale with us by this point in the year. In 2023, that number is 5.5%",
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      "text": "\"Throughout the year, demand largely met or exceeded our expectations, but closed sales haven't. From 2017 to 2022, between 6.3% and 7.2% of the people who contacted Redfin or our partner agents had closed a sale with us by this point in the year. In 2023, that number is 5.5%\" — Redfin Q2'23 Earnings Call",
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      "text": "Source: Interview with Charlotte Flex agent, Spruce Point analysis, Redfin Q2’23 earnings call and Oct. ‘23 blog from Follow Up Boss.",
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      "text": "Flex Model Appears To Be Dilutive",
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