My analysis on Realtor.com earlier this week surfaced a particularly interesting chart on Zillow's revenue growth. The slowing growth piqued my interest, so I dug deeper into the data and strategic implications.

Zillow has been growing fast over the past few years. The company topped $1 billion in annual revenue for the first time in 2017. But the gravy train can't last forever. How big can Zillow really get?

In its FY17 annual report, Zillow had this to say about its future growth prospects: We see significant opportunity to expand our addressable market over the long term. As we dive deeper in the funnel we see more opportunity to increase the number of transactions and commissions to our partners. 

Many people think Zillow is right at the beginning of its journey, and that it is just scratching the surface of the U.S. market opportunity. However, the numbers tell a different, more nuanced story.

Sources of growth

Zillow generates the vast majority of its revenues (71%) from its premier agent program, which is essentially lead gen for buyers agents.

Other revenue streams, such as display advertising, mortgage leads, and rentals, form a small percentage of overall revenue. Zillow is very much a business centered around -- and reliant on -- its premier agent program. So it is natural to focus on premier agent revenue growth to frame the future prospects of the business.

The key question is: How much runway is left for Zillow to monetize and grow its premier agent business? Are we just at the beginning, or is the opportunity maturing?

Premier agent growth slows

Zillow's year-on-year premier agent revenue growth, broken down by quarter, shows a clear trend of slowing growth. Keep in mind this is off a large revenue base ($760 million annually) so is to be expected. But the trend is clear: growth is slowing.

The chart below shows the same metric, but with absolute year-on-year dollar growth, instead of a percentage. After running up to a high in Q2 2017, the growth rate is dropping, and Zillow is forecasting that trend to continue.

We can also look at the numbers from a full-year financial perspective. The chart below shows steady year-on-year growth in the premier agent program, but Zillow's own guidance shows that it is -- for the first time -- forecasting a slowdown in that growth on an annual basis.

Most businesses eventually reach a terminal growth rate, or a rate at which the business grows in perpetuity. At property portals around the world -- in mature markets where the leaders have effectively saturated the market -- this rate ranges from around five to 15 percent.

Zillow's premier agent program hasn't reached maturity yet, but it appears to have hit its peak growth rate. Now the question is, where will it settle?

Strategic implications: Where to from here?

With Zillow's primary revenue stream slowing, it needs to look at new revenue streams to drive future growth.

One area where Zillow is seeing strong growth is in rentals, where it saw a 124 percent increase in revenue. This is undoubtedly driven by the decision to start charging for rental listings on StreetEasy in NYC in July of last year. You can see the corresponding bump in revenue below.

In 2018, expect Zillow to begin aggressively monetizing new revenue streams. My guess would be a continued focus on rentals and back office tools (dotloop), with additional efforts around new construction and mortgages. This is relatively consistent with the strategy of its international peers.

Also expect Zillow to continue to aggressively monetize agents. By its own admission, "as we dive deeper in the funnel," is code for doing more and charging more. Zillow will attempt to increase the value of existing leads while becoming the technology partner of agencies with transaction management tools like dotloop.

Zillow's slowing premier agent revenue growth will put pressure on the business to develop and exploit new revenue streams. Expect that to be the theme of 2018.