I like Zillow (Z). I have interviewed the CEO, Spencer Rascoff, several times, and I think he really "gets it." Periodically I have had issues with the company. At one point I thought its New York listings weren't as good as Street Easy in New York. He answered that objection by shelling out $50 million for Street Easy and instantly became the No. 1 Internet site for real estate in the best market in the U.S., New York City.
A second time I was concerned that he was spending too much to go after competitor Trulia (TRLA). But when I interviewed him last month in Seattle, it was clear that he has a hardnosed path to outspending Trulia and then becoming the lucrative last man standing. He compared it to having two newspapers in one town. Historically, you could start with both, but you would reach a tipping point, and then most the ads would gravitate toward the one paper that gave you the biggest bang for the buck. That's been totally true, and it makes a ton of sense. That should happen, because Zillow has a lot more to spend than Trulia.
All that said, Zillow is almost at 52-week highs, shrugging off all suggestions of weakness while every other company in the Internet space struggles. I wonder how much longer it can stay out of the gravitational pull that all of the other companies have suffered, unless it has already bested it and Yelp (YELP) and Priceline (PCLN) are about to have their way with the market.
Or is it possible that we will get what I have ultimately been looking for, the big amalgam where Yelp, OpenTable (OPEN) and Zillow are all consumed by one giant company that will then have a killer handheld app that we would all want? When I think about what Google (GOOGL) has to do or what Facebook (FB) must do to stay competitive, I think about rolling up all of these sites, the way I thought Netflix (NFLX), which reports tonight, should have been bought when it was appreciably lower.
I think you have to keep an eye on this breakout of Zillow. It could foreshadow a return to super growth. Or a whiff of a takeover potential.