[Updated at 4 pm Pacific] Real-estate website operator Zillow (NASDAQ: [[ticker:Z]]), which went public in late July, reached profitability in the second quarter on revenues of $15.8 million, more than double the sales of a year earlier. The Seattle company’s net income for the quarter was $1.6 million. A year earlier, it had lost $2 million.
As has been the case for the past few years, revenue growth was driven by “marketplace” revenues, which include subscription fees for real estate agents and advertising sold to mortgage lenders, along with charges for lenders to participate in the company’s Mortgage Marketplace.
That revenue stream reached $9.7 million in the second quarter, up from $2.6 million a year earlier. Display advertising, meanwhile, still grew—but nowhere near as rapidly, reaching $6.1 million for the quarter, up from $4.7 million in the same period during 2010.
Zillow said average monthly unique visitors to its website nearly doubled for the quarter, to 20.8 million. All the publicity around the company’s IPO certainly helped drive eyeballs.
[Update] Here are some key takeaways from the conference call with analysts:
—Zillow is going to spend some money this year to beef up technology, ramp up sales, and grow the staff. The company cleared nearly $80 million from the July IPO after underwriting fees, and had $16.2 million in cash on its balance sheet and no debt at the end of the second quarter on June 30. Now at around 265 employees, Zillow is moving to a new headquarters this month and is hiring for about 40 positions.
—Zillow didn’t break out a net-income guidance figure for the third quarter and rest of this year, but gave an outlook for overall revenues and its adjusted EBITDA earnings. The company expects $16-$17 million in revenues in the third quarter, with non-GAAP earnings of around $8 million. For the year, Zillow is looking at revenues of between $59-$61 million, with non-GAAP earnings in the range of $8-$10 million. Both of those revenue figures would be around double the performance from a year earlier.
—Agents signed up for Zillow’s Premier Agent program are spending more on their accounts, helping overall revenue from that segment grow faster than the pace of new agents signing up. CEO Spencer Rascoff said that means overall “marketplace” revenues are a better measurement, cautioning analysts not to lean too heavily on the number of new agents as a performance indicator. The agent program is the biggest slice of those marketplace revenues, which also include sales from its relatively new mortgage-shopping site.
—There are about 13,400 agents signed up to the premier program, a fraction of the 1 million nationwide that Zillow estimates are active in the real estate business. Zillow also estimates that the nation’s real estate agents spend about $6 billion annually on marketing, leaving a huge source of revenue to attack. “We have less than a 1 percent share of their advertising budgets right now,” Rascoff said. “We think we’re dramatically under-penetrated, relative to our traffic and our importance in the industry.”
—There’s been some improvement in the sluggish housing market following the historic collapse of a few years ago, and it’s not ready to rebound just yet, according to Zillow’s data. While some markets, such as Washington, D.C. and Pittsburgh have improved, “Zillow’s data says that we haven’t bottomed yet, and we don’t think we’re going to bottom until 2012,” Rascoff said.
“We’re certainly closer to the end of the housing recession than the beginning, but we’re not through it yet. However … we’ve managed to grow quite nicely through this recession,” he said. “I think, actually, the housing downturn has accelerated the migration of advertising budgets for real estate advertisers from offline to online, and Zillow’s clearly been a beneficiary of that acceleration.”
