Seattle-based Zillow, the leading online site based on the number of users, is making a bid to buy San Francisco-based Trulia, the second most popular site, for as much as $2 billion, according to a report Thursday by Bloomberg that cited unnamed sources. Neither company would comment on the report.
Both sites have brought tremendous changes to the process of buying a home. Trulia has an easy-to-use app that allows potential buyers to shop on their mobile phones, while Zillow has the best-known way for homeowners and virtual lookie-loos to get an estimate of how much a home is worth. But some in the industry worry the combination would harm consumers, leading to less competition and less innovation.
Combined, the company would have more than 80 million unique visitors, according to the market research firm Comscore, and nearly 90 percent of the market.
Trulia's shares jumped more than 32 percent or $13.16 a share on the report, and Zillow's shares were up more than 15 percent or $19.29 a share at the close of the market. Both companies have enjoyed a run-up in stock prices this year.
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"An acquisition like this will have a huge impact, specifically on the home-buying space and particularly for real estate agents in the single family resale business," said Charles Stubbs, chief executive officer of RentPath, whose websites include ApartmentGuide, Rent.com and Lovely.
It would also create a more formidable competitor to San Jose-based Move Inc., which operates realtor.com for the National Association of Realtors. Realtor.com was third in unique monthly visitors in March, according to Comscore.
Move declined to comment on the report.
If the acquisition is completed, Zillow swallows a challenger to its business, leaves consumers with one less place to browse for real estate for sale or rent, and real estate agents one fewer place to list homes for sale.
"I don't know that this is a good thing for the consumer," said Myron Von Raesfeld, president of the Santa Clara County Association of Realtors. "I don't think eliminating the options for the consumer ultimately benefits the consumer."
Competition between the companies has led each of them to substantially increase their advertising and improve their websites.
With an acquisition, they can cut their advertising spending significantly, "and no longer be in this ad race" for traffic, said Daniel Kurnos, an analyst with the Benchmark Company.
Trulia also has made a big push on its mobile app, while Zillow has continued to generate traffic with its popular home valuation site. Not long ago it launched a home remodeling web page. Both companies make revenue by charging real estate agents to list property on their sites.
Zillow and Trulia also list homes and apartments for rent.
The acquisition would be one more disruptive event in a real estate marketplace punctuated by rapid change and recent acquisitions.
Trulia acquired Market Leader last year, giving it a tool to help agents track down leads for potential clients. Zillow bought StreetEasy, a New York area real estate site, last year for $50 million.
The acquisition of ZipRealty by Realogy, a franchise that includes many well-known real estate names, was announced this month. ZipRealty is an Emeryville-based company that emphasizes listing, buying and selling real estate online.
"A lot of people in the real estate industry are struggling," ZipRealty's CEO Lanny Baker recently told this newspaper. "They know how to put a sign outside and how to bring in the consumer, but how do they do that online? The big challenge for them is to figure out the digital world."
Another disrupter, Redfin, based in Seattle, is changing the tried and true model in which real estate agents work with brokers to collect commissions on sales of houses. Redfin's agents are salaried and paid according to customer satisfaction, according to the company.
Despite the big traffic numbers generated by Zillow, a substantial amount comes from people using its "Zestimate" tool to see how much their homes, and their neighbors', are worth, said Bradley Safalow of PAA Research. "Half of Zillow's traffic comes from homes that are not for sale. People saying, 'What's my home worth?'"
Safalow said only 15 percent of real estate agents can afford to advertise with the sites.
If the two companies combine, "my expectation is that a lot of brokers will say I'm not going send my listings to you anymore. They might put them on realtor.com" or stop sharing them with the websites, he said. "I think that's the biggest risk in this merger.''
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