Off the marketFor a long time, property website Zillow didn't surprise anyone. The company listed houses for sale or rent, making money from sponsored listings, advertising and agent fees.
Then, in 2019, Zillow started ramping up its side hustle: house flipping.
Armed with a mountain of property data, Zillow is — in theory — in a unique position to find bargains in the home aisle, and the company has scaled that side hustle into a sizeable business that accounted for almost 60% of its revenue last quarter.
Open door for OpenDoor
But this week Zillow slammed the brakes on buying homes, announcing that it would stop buying and renovating homes for the rest of 2021, as it grapples with labor shortages and a huge backlog of properties that it's already bought. That news sent Zillow shares down more than 10% on Monday, while doing the opposite for shares of OpenDoor — Zillow's biggest competitor in the space.
It will be interesting to see if Zillow returns to house flipping in the same way in 2022. Buying real houses, renovating and selling them is a much messier business than just listing properties on a website — and it's a lot less profitable too. Zillow's gross profit margin was around 9% in its Homes division. Its Internet, Media and Tech division? More than 90%.