Portal War ‘24: What $1 Billion in Advertising Buys You

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The biggest upstart real estate portal in the world, CoStar’s Homes.com, has comfortably settled into the #2 spot in the U.S. – but at what cost?

Why it matters: Homes.com is a real-time case study of what it takes for a portal to disrupt the status quo, and it appears to take $1 billion in advertising.

  • After a year of heavy investment, Homes.com has overtaken realtor.com for the #2 spot for two consecutive quarters.

 
 

Dig deeper: In May I asserted that portal traffic was a non-zero-sum game, meaning that traffic gained by one portal (Homes.com) is additive and not coming at the expense of other portals.

  • That trend continued into Q2, with the combined traffic of Zillow, realtor.com, and Redfin remaining the same as last year, while Homes.com significantly grew its traffic.

 
 

It’s not rocket science; Homes.com’s traffic growth is directly correlated to its overall advertising spend – which is how advertising works.

  • The steady increase in traffic during the first three quarters of 2023, the dip in Q4, and the big increase in the first half of 2024 tracks exactly with CoStar’s overall advertising spend.

 
 

Astute readers may notice that advertising spend is required to maintain traffic levels, revealing insights around overall advertising efficiency.

  • Dividing the overall advertising spend by the number of average monthly uniques provides a rough illustration of advertising efficiency over time (cost per visit).
     

  • Not all of CoStar’s advertising budget is going into Homes.com, but considering it was $55 million in Q1 2022 and $234 million in the latest quarter, it’s clearly a lot.
     

  • Directionally, this highlights that advertising efficiency isn’t meaningfully changing, traffic is not growing organically (yet?), and that, for the time being, continued advertising spend is required to maintain Homes.com’s traffic levels.

 
 

The bottom line: For years, disruptor portals have tried unsuccessfully to unseat market leaders around the world. 

  • Becoming the #2 portal has cost CoStar about $1 billion in advertising, but the real question is: how much will it cost to maintain that position (the current math suggests the answer is around $950M in advertising spend per year).
     

  • Homes.com is proving that changing the status quo is possible, if you have the cash.