(Bloomberg) -- Zillow Group Inc. provided a third-quarter outlook below what analysts were expecting as a slowing US housing market looks poised to reduce demand for real estate advertising.

  • The company expects earnings before interest, taxes, depreciation and amortization of $73 million to $88 million in the third quarter, according to a letter to shareholders Thursday. Analysts expected $170 million, the average in a survey compiled by Bloomberg.

Key Insights

  • US housing shifted in the second quarter, with frenzied demand cooling rapidly. The hot market in the early part of the period boosted demand for Zillow’s services. The company reported Ebitda of $164 million for the quarter, beating analyst estimates of $153 million.
  • Zillow, led by Chief Executive Officer Rich Barton, makes most of its money by selling marketing services to real estate agents, who may reduce ad spending as they adjust to the slower market.
  • While demand indicators stabilized in July compared to June, the company expects the dollar volume of transactions industrywide to “meaningfully contract” in the second half from a year earlier, Barton said in a letter to shareholders.
  • Zillow’s big bet on iBuying, a tech-powered spin on home-flipping, crashed and Barton shuttered the business in November, pivoting to a housing “super app” to integrate tools consumers and agents use to navigate the buying or selling process.
  • One new component to the super app: a partnership with a former competitor in the iBuying business. Under the deal, homeowners can use Zillow’s sites and apps to request a cash offer from Opendoor Technologies Inc. The arrangement lets Opendoor tap into Zillow’s audience, while helping Barton’s company fulfill consumer demand for a service that it failed to operate profitably.

Market Reaction

  • Zillow shares had declined 39% this year through the close on Thursday.

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