{ "docId": "019dd923-622c-750b-8b99-74af5c9e9edb", "docSlug": "de028a1085e6", "documentTitle": "Zillow Group, Inc. (Z)", "authorId": "54_Spruce_Point_Capital", "authorName": "Spruce Point Capital Management", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2024-03-05 00:00:00", "orientation": "landscape", "aspectRatio": 1.3333334, "pageNumber": 7, "pageCount": 103, "prevPage": 6, "nextPage": 8, "slideType": "executive_summary", "function": "summarize", "density": "dense", "nDataPoints": 3, "notes": "The slide uses red text to highlight critical negative findings.", "elementsJson": [ "paragraph", "callout_box" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b99-74af5c9e9edb/7", "deckHref": "/decks/019dd923-622c-750b-8b99-74af5c9e9edb", "deckJsonHref": "/decks/019dd923-622c-750b-8b99-74af5c9e9edb.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b99-74af5c9e9edb#slide-7", "components": [ { "bbox": null, "kind": "callout", "text": "Key indicators show Zillow is experiencing a rapid decline in web traffic, which is the foundation for the Premier Agent business.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-3f42-76f3-adc6-5d783ab6eb9e", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.22, "w": 0.94, "x": 0.03, "y": 0.17 }, "kind": "paragraph", "text": "Holistically, Spruce Point agrees with management's strategy to go after the total transaction value (\"TTV\") given its core business has matured. However, whether the pitch is growing Zillow's share of transactions from 3% to 6% or growing its percentage of TTV from 8 bps, we think it is all smoke and mirrors. We believe management would like investors to believe that Zillow can quickly disrupt the deeply entrenched and competitive real estate marketplace. Spruce Point believes it will be a very difficult and risky process given Zillow faces very significant near-term and long-term headwinds which will likely ultimately curtail its diversification and growth efforts.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "3dbd3be6-611d-4953-bbd4-2442d854f4bd", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.25, "w": 0.94, "x": 0.03, "y": 0.71 }, "kind": "paragraph", "text": "Spruce Point believes the multiple NAR/MLS class action lawsuits will ultimately have a significant negative impact on Zillow's core Premier Agent business. On October 31, 2023 a federal jury reached a verdict in Burnett et al. v. National Association of Realtors, et al., finding the defendants guilty of conspiring to inflate commissions paid to real estate agents; defendants were ordered to pay damages of $1.8 billion. Some brokerages have already settled and the DOJ is involved in the conversation and appears to lean towards decoupling commissions. In fact, just recently the U.S. DOJ asked a federal judge in Boston to reject a consumer settlement that it said fails to protect home buyers and sellers from industry practices that allegedly artificially inflate real estate broker fees.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "b9c27888-0fc3-4155-90e0-26fae84f23e9", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.31, "w": 0.94, "x": 0.03, "y": 0.39 }, "kind": "paragraph", "text": "Zillow's core business model is the market-based pricing (\"MBP\") product it sells in its Premier Agent business, which has existed since 2008. Key indicators show Zillow is experiencing a rapid decline in web traffic, which is the foundation for the Premier Agent business. Zillow has seen a sharp deceleration in both site visitors and unique users; additionally, Zillow's measure of its ability to monetize traffic, Premier Agent Revenue Per Visit, has essentially been flat since 2016. Zillow is the go-to website/app for residential real estate search but our research indicates its core revenue model is saturated in selected markets meaning all the desirable zip codes across the U.S. are sold out and there is very little interest shown by agents for the less desirable ones. In addition, our research indicates pricing is fully baked as lead quality has deteriorated over the years.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "bdaae71e-8b0e-48bb-a1ec-32654e1a5cf9", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.38, "x": 0.31, "y": 0.04 }, "kind": "title", "text": "Executive Summary (Cont'd)", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "cacdf2a4-5c89-4834-bbd4-947710dbd544", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [ { "name": "Executive summary", "slug": "executive-summary", "agent": null, "layer": "slide", "matchId": "108f1e37-f55c-45b8-85ef-b2e7b6ab0e77", "evidence": "Continues the executive summary from slide 1, providing more details on Zillow's business model and challenges.", "confidence": 0.9 } ], "frameworks": [], "arcBeats": [ { "to": 20, "from": 6, "beatId": "41072135-1487-41b4-a046-fb8cc35f95b6", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "Complication", "beatSlug": "complication", "evidence": "The document presents a series of complications, including Zillow's mature business model, litigation risks, and management concerns.", "position": 1, "confidence": 0.8, "parentBeatName": null, "parentBeatSlug": null } ], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }