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Zillow In Talks to Acquire Trulia

Published by: Kelly Curtis on 25th Jul 2014 | View all blogs by Kelly Curtis
Zillow In Talks to Acquire Trulia

 
Several unnamed sources this week reported that online real estate giant Zillow is in talks to acquire its biggest rival in the space, Trulia.  One source even said that a deal might be reached as early as next week, though terms being discussed between the two parties are unknown at this time.  The anonymous sources were not aware of any price tag being discussed for Trulia, but the company's market cap surged to nearly $2 billion on Thursday as the rumors about a possible merger of the two biggest names in online real estate swirled.  Industry insiders noted that should the merger happen, it would make it virtually impossible for smaller competitors, such as Move. Com and Homes.com, to compete.  A Trulia / Zillow powerhouse would also have tremendous power in pricing advertising and lead-generation services for real estate agents across the country, who use the sites to generate leads that they hope will turn into home sales, and commissions.

 
Zillow became a publicly traded company in 2011, and reported a 70 percent increase in first-quarter revenue this year.  The clear leader in the online real estate space also enjoyed a record in traffic in April, with 79 million unique visitors.  Trulia, meanwhile, went public in 2012 and saw a 127 percent jump in Q1 revenue this year.  Trulia falls well short of Zillow in traffic, however, as it reported an average of 44.6 million unique visitors each month during that period.  In addition to gaining more power in what it charges agents for its combined services, a merger would also give Zillow substantially more power in negotiating with local multiple-listing services.  Not only would acquiring Trulia make the company that much bigger, the gap between No. 1 and No. 2 in the space would surge dramatically.

 
Over the past 12 months, the US housing sector has spent some $5.8 billion on marketing, the majority of that coming from agents in an attempt to generate leads.  Hundreds of agents have already expressed concern that a Zillow / Trulia merger would create an entity so powerful they can charge agents whatever they want for the services they provide.  Agents will be forced to pay those prices because it will likely be nearly impossible to operate without a presence on the sites.  Many agents even indicated they may get out of real estate entirely if Zillow and Trulia merge, as the cost of acquiring leads and marketing listings may simply be too high to make a living in the field.
As rumors of a Zillow / Trulia merger permeated the Internet on Thursday, shares of both companies soared dramatically.  Trulia shares gained nearly a third on the day, driving the company's market cap up to $1.98 billion, while Zillow shares rose 15 percent, giving the Seattle firm a market cap of $5.8 billion.

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