[Update 1: Adding comment from Zillow and more context 14:40 pm. EDT 7/29/2014]

Everyone, including this news site, has been buzzing about the impact of Zillow's (Z)  $3.5 billion acquisition of Trulia (TRLA) .

The media consensus has been that the acquisition creates a powerhouse – a model village, so to speak, of real estate online listings.

As of 11:13 a.m. ET, Zillow's stock was down slightly for the day but still riding the huge boost it got on the rumor Friday and the news confirmation Monday, pricing at $156.74, compared to its rough average range of $70-$100 over the past year. Trulia, which hovered in the high $30s since November 2013, is hovering near its three-day peak of $65. 

But Citron Research says that this "powerhouse village" may be more of a Potemkin village.

According to sources, the Citron piece is nothing short of a "hit' on the Zillow and Trulia stock. They say research notes, such as the following, do not serve to elucidate, but rather to manipulate stock prices.

Katie Curnutte, director of communications for Zillow, issued the following statement:

"Citron is a firm run by a short seller that publishes self-serving propaganda. We don't engage with unethical practices of this type. For balanced and thoroughly researched reports that focus on fundamentals and fact, not fiction, see the attached notes," the statement reads.

[For a balanced view, a full take on the Bull/Bear comparison on Zillow stock, please see The Angle in the February issue of HousingWire magazine.]

In the meantime, make your own call on the validity of the Citron note (and we'll publish said other side soon enough):

The combination of Zillow and Trulia is supposed to give the combined entity the power to triple ad revenue from real estate agents. Nothing could be further from the truth – and we have the proof.

Citron Research now exposes the big lie that has never been discussed by any sell side analyst, mainstream media pundit, and most importantly NEVER DISCLOSED by Zillow or Trulia. Zillow/Trulia already have in place a rock bottom deal with Realogy, the largest real estate agency in the world, that prohibits ALL OTHER agencies from advertising on their listings … and for this they pay a fee 95% less than any other agency pays. Not only is this deal unsustainable in the industry, we’re not at all sure if it’s even legal from an anti-trust perspective. But incredibly, it falls to Citron to publish the documents that no one from either Zillow or Trulia has ever showed Wall Street. This deal spans all of the Realogy agencies:

  • Coldwell Banker
  • Sotheby’s
  • ERA
  • Century 21
  • Better Homes

We’ve published a copy directly from Coldwell Banker. Below is the pricing for the 175,000 Realogy agents who are a dominant force in the industry. Not only amazing -- IT HAS NEVER BEEN DISCLOSED. And it already covers exclusive agent status on both Zillow and Trulia – most notably with regard to excluding other brokers’ ads from Realogy listings.


Really? Anybody ever read Chapter 1 about anti-competitive practices and antitrust laws?

This Realogy marketing deal was done to purposefully afford Realogy an unfair advantage over their competitors, by blocking all competing agent ads on listings generated by Realogy agents.

More importantly, this agreement eliminates over 20% of all Zillow/Trulia inventory in exchange for a minimal amount of money. (Note that whatever gross sum FAB PLUS generates from Realogy and its agents has to be split among all the online ad vendors; we also acknowledge Realogy corporate probably subsidizes a small, undisclosed part of the overall deal price.)

But it’s not just any 20% -- Realogy’s NRT group is the largest  owner and operator of residential real estate brokerages in the United States, with operations in more than 40 of the 100 largest US metropolitan areas – surely the most lucrative potential markets for Zillow/Trulia.


Despite Realogy already having a deal to block all competing agent ads on its listings for an undisclosed small sum, they are still moving aggressively to compete directly -- going head-to-head against Z/T, which should make Z/T concerned about the nuclear option despite the rock bottom pricing.

Realogy is already preparing for a black-swan price increase, by building a robust real estate portal of their own, that also accepts competitors’ listings. Meanwhile, whatever metrics you use, if Realogy pulls its listings off of Zillow / Trulia, it would hardly dent their business at all.

However, that step would evaporate the $9 billion Zillow / Trulia entity.

HousingWire has asked Zillow for a response to the allegation. The story will be updated to reflect their response. 

For the full Citron Research report, click here.