Cash Flows of the Rich and Famous

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Cash flows are in for the first half of 2024, and some companies are losing money, some are making money, and some are making a lot of money.

Why it matters: Operating cash flows are an accurate measure of business model health, and a data-driven analysis reveals insights around various models and market dynamics.

  • Operating cash flow is a metric that cuts through the hype to measure the actual profitability of the core operating business model: does it make money?

Dig deeper: eXp Realty, a real estate brokerage, and Zillow, a tech company and portal, both generated the same amount of cash – a surprising result given the very different business models.

 
 

Industry incumbent Anywhere has moved away from being a big cash generator, likely a result of the challenging market; its business model is less resilient.

 
 

Meanwhile, eXp Realty has grown its cash generation abilities during the same period of time – and in the same market conditions.

 
 

Adding real estate portals from around the world – Germany’s Scout24, the U.K.'s Rightmove, and Australia’s REA Group – reveals just how profitable those businesses are.

  • Rightmove and REA Group are the most profitable real estate portals in the world.

 
 

Considering market size, as measured by population, when comparing real estate portals reveals a thought-provoking data point.

  • Real estate is similar around the world, but market dynamics and business models are very different, as highlighted by operating cash flow per capita (per capita means “per person”).

 
 

REA Group is world-class in its ability to monetize its market – with an operating cash flow per capita 16x higher than Zillow.

  • Australia is the market that CoStar points to when talking about its monetization plans for Homes.com.
     

  • But the markets are very different: Australia doesn’t have MLSs and has vendor funded advertising (for more, check out my Real Estate Portal Strategy Handbook).

 
 

The bottom line: The market is tough but it doesn’t mean all businesses are struggling, and real estate portals remain some of the most profitable businesses in real estate.

  • The U.S. market is huge, but market size does not always correlate to profit potential – it has more to do with local dynamics.
     

  • In the end there will be winners and losers – companies generating cash and burning cash – which is an accurate reflection of business model efficacy.