A Deal for Realtor.com Could Allow CoStar to Better Compete With Zillow

The price being discussed would value Move at more than $3 billion, according to people familiar with the matter.

News Corp is the parent company of Dow Jones, publisher of The Wall Street Journal, as well as other assets including HarperCollins Publishers and news organizations in the U.K. and Australia.

Mr. Florance said he is in talks with numerous companies as part of CoStar’s push into the home sales market. He declined to comment further about the status of the company’s conversations with Move or other potential targets. 

Both Zillow and Realtor.com make most of their money from advertising and selling sales leads to real-estate agents. Most buyers and sellers of homes use these sites to check out listings as well as data about the properties and neighborhoods.

Zillow brought in more than 230 million unique monthly users on its mobile apps and website in the third quarter, according to the company. Realtor.com reported 86 million users during the same period. CoStar made its first push into the online single-family marketplace in 2021 when it purchased Homes.com, which analysts estimate has about 10 million unique monthly users.

Mr. Florance is trying to flex his muscles in the home sales market at a time when the market is weakening largely due to last year’s rise in mortgage rates. Sales of previously owned homes last year were the slowest since 2014, sliding 17.8% from 2021 to 5.03 million, according to the National Association of Realtors.

Shares of CoStar, which has a market cap of about $31 billion, have stayed flat during most of the pandemic partly due to  investor concern over the large investment it has been making in its push into the single-family home industry. It has a strong balance sheet and might benefit from making a big push into the single-family marketplace when the market is ailing, according to some analysts.

“Many of [CoStar’s] peers may be distracted and focused on defense,” said Ryan Tomasello, an analyst with Keefe, Bruyette & Woods.

Mr. Florance, 59 years old, founded CoStar in 1986 when he was an undergraduate at Princeton University as a company that primarily provided data services to the office building industry. Since then it has expanded into marketplaces and data services for most types of real estate, partly through acquisitions. CoStar reported revenue of $557 million for the third quarter of 2022. News Corp reported Move had revenue of $169 million for the same period. 

As it expanded, CoStar fought numerous legal battles over intellectual property, especially against other companies in the online data space in the commercial property industry. For example, before CoStar acquired data firm LoopNet Inc. in 2012, the two sued each other numerous times. All the lawsuits were settled out of court or dismissed. 

Mr. Florance’s foray into the single-family home market began in 2020 when CoStar agreed to pay $250 million for Homesnap Inc., which provides home brokers with apps and other technology. He has been building Homes.com into an online marketplace that he claims better serves the interests of home sellers and brokers than its competitors.

 “With rising interest rates and a rapidly cooling residential property market, I believe now is the perfect time to invest in a marketplace that’s designed to help consumers and their agents advertise and sell properties faster and at a higher price,” he said in October on a CoStar earnings call.

Mr. Florance is following his usual playbook combining acquisitions and internal growth in his efforts to grow his residential business. He also tried to buy CoreLogic Inc., one of the largest residential real-estate data companies, but CoreLogic instead agreed in 2021 to sell itself to two private-equity firms. 

Analysts say CoStar has a number of different avenues to achieve its goals. Realtor.com is attractive primarily because of its online traffic from consumers who want to buy and sell homes, according to analysts. “The key missing piece of the puzzle is consumer eyeballs,” Mr. Tomasello said.

—Will Parker contributed to this article.

Write to Peter Grant at [email protected]

The price being discussed would value Move at more than $3 billion, according to people familiar with the matter.

News Corp is the parent company of Dow Jones, publisher of The Wall Street Journal, as well as other assets including HarperCollins Publishers and news organizations in the U.K. and Australia.

Mr. Florance said he is in talks with numerous companies as part of CoStar’s push into the home sales market. He declined to comment further about the status of the company’s conversations with Move or other potential targets. 

Both Zillow and Realtor.com make most of their money from advertising and selling sales leads to real-estate agents. Most buyers and sellers of homes use these sites to check out listings as well as data about the properties and neighborhoods.

Zillow brought in more than 230 million unique monthly users on its mobile apps and website in the third quarter, according to the company. Realtor.com reported 86 million users during the same period. CoStar made its first push into the online single-family marketplace in 2021 when it purchased Homes.com, which analysts estimate has about 10 million unique monthly users.

Mr. Florance is trying to flex his muscles in the home sales market at a time when the market is weakening largely due to last year’s rise in mortgage rates. Sales of previously owned homes last year were the slowest since 2014, sliding 17.8% from 2021 to 5.03 million, according to the National Association of Realtors.

Shares of CoStar, which has a market cap of about $31 billion, have stayed flat during most of the pandemic partly due to  investor concern over the large investment it has been making in its push into the single-family home industry. It has a strong balance sheet and might benefit from making a big push into the single-family marketplace when the market is ailing, according to some analysts.

“Many of [CoStar’s] peers may be distracted and focused on defense,” said Ryan Tomasello, an analyst with Keefe, Bruyette & Woods.

Mr. Florance, 59 years old, founded CoStar in 1986 when he was an undergraduate at Princeton University as a company that primarily provided data services to the office building industry. Since then it has expanded into marketplaces and data services for most types of real estate, partly through acquisitions. CoStar reported revenue of $557 million for the third quarter of 2022. News Corp reported Move had revenue of $169 million for the same period. 

As it expanded, CoStar fought numerous legal battles over intellectual property, especially against other companies in the online data space in the commercial property industry. For example, before CoStar acquired data firm LoopNet Inc. in 2012, the two sued each other numerous times. All the lawsuits were settled out of court or dismissed. 

Mr. Florance’s foray into the single-family home market began in 2020 when CoStar agreed to pay $250 million for Homesnap Inc., which provides home brokers with apps and other technology. He has been building Homes.com into an online marketplace that he claims better serves the interests of home sellers and brokers than its competitors.

 “With rising interest rates and a rapidly cooling residential property market, I believe now is the perfect time to invest in a marketplace that’s designed to help consumers and their agents advertise and sell properties faster and at a higher price,” he said in October on a CoStar earnings call.

Mr. Florance is following his usual playbook combining acquisitions and internal growth in his efforts to grow his residential business. He also tried to buy CoreLogic Inc., one of the largest residential real-estate data companies, but CoreLogic instead agreed in 2021 to sell itself to two private-equity firms. 

Analysts say CoStar has a number of different avenues to achieve its goals. Realtor.com is attractive primarily because of its online traffic from consumers who want to buy and sell homes, according to analysts. “The key missing piece of the puzzle is consumer eyeballs,” Mr. Tomasello said.

—Will Parker contributed to this article.

Write to Peter Grant at [email protected]