Zillow shares are getting crushed. Here's why

Zillow's stock took a significant hit on Monday, falling over 9% due to concerns about competition from Google Search. The tech giant is reportedly experimenting with integrating real estate listings into its search results, a move that could disrupt the online property market. Screenshots published by real estate strategist Mike DelPrete over the weekend showcased Google Search displaying real estate listings, seemingly sourced from the data firm HouseCanary. These listings featured options for users to view detailed property information, schedule tours, and connect with agents, mimicking the functionalities available on Zillow's platform. Currently, Google's real estate search feature is being tested in limited markets and is only accessible via mobile devices. This development has led investors to anticipate how Google's entry into the real estate sector may affect Zillow’s market position. During Monday's trading, Zillow's shares dropped as much as 11% at one point. Despite the decline, Wall Street analysts are cautiously optimistic. They noted that Zillow's reliance on organic search traffic is relatively low, which might mitigate potential adverse effects in the short term as more details about Google's offering emerge. Alec Brondolo, an analyst at Wells Fargo, expressed that he does not foresee a significant financial impact from Google’s listings shifting from organic to paid, given Zillow's traffic sources. Brondolo likened the listings to Google’s hotel search results, suggesting that Zillow and other platforms might need to bid for ad space rather than Google directly monetizing the listings. However, some analysts, like Goldman Sachs' Michael Ng, caution that Google's initiatives could pose a long-term challenge for Zillow and similar online real estate services by enhancing lead generation for agents. Ng emphasized that while immediate effects may be minimal, given that most of Zillow's traffic comes from direct sources, the long-term implications could be more significant. Oppenheimer's Jason Helfstein echoed these sentiments, suggesting that Google's real estate expansion could eventually reduce traffic to Zillow’s website, which recorded 228 million visitors in the previous quarter. As of now, Zillow shares are down over 8% year-to-date, and both Google and Zillow have yet to respond to media inquiries regarding the situation.