CoStar Sees Profits Fall as It Looks to Grow Residential and Fight United Challenge in Rentals

February 19, 2025
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The commercial real estate, data services, and residential real estate marketplace operator CoStar Group saw its profits plunge in 2024 as it looks to scale its residential business and fight off newly unified competitors in the rental space.

Notable points from the company's fourth-quarter report to the market included:

  • Full-year revenue ($2.74 billion in 2024) was up 11%
  • Full-year Net income was down to $139 million from $375 million in 2023
  • Full-year EBITDA ($123 million) was down 68%
  • Operating expenses ($2.17 billion) rose 29% with sales and marketing ($1.36 billion) increasing 38% in 2024

Despite logging the now customary double-digit revenue growth (11% on both a quarterly and yearly basis), the Virginia-based company saw its profits eaten into by increased sales and marketing spending as it looked to invest in growth drivers.

One of the areas seeing increased investment is CoStar's Residential segment which includes the upstart challenger portal Homes.com in its native US and the formerly agent-owned number three portal OnTheMarket.com in the UK.

Domestically CoStar is continuing its expensive marketing push with Homes.com featuring in a Superbowl advert for the second year running. On a call with investors CoStar CEO, Andy Florance said that thanks to the campaign the portal's unaided awareness is now as high as 33% with 50% on the horizon by the end of the year.

The CoStar founder praised the portal's product team which he said had shipped over 110 new features over the course of 2024. Tantalizingly, the nearly 40-year industry veteran cited Homes.com's 2025 roadmap as the most innovative work he's ever seen in his career "by a wide margin".

Despite marketing and product efforts, revenue growth at Homes.com remains modest. When it started selling subscription packages for the portal at the beginning of 2024, CoStar borrowed sales staff from its other businesses to sell the product. The lack of a specialist sales team to convey Homes.com's somewhat unique 'your listing, your lead' value proposition will no longer be an issue however with Florance announcing that the portal's sales force would grow from 275 to 500 by the end of the year.

As for the portal's popularity with house hunters, CoStar claims that its network of residential sites (which includes the rentals site Apartments.com) saw 110 million average unique monthly visitors in Q4, well above the 62 million reported by rival Realtor.com.

While Florance hailed the figures as a "remarkable" achievement and claimed that Homes.com had surpassed Realtor in "apples-to-apples traffic" in its first year since relaunch, there remain caveats around the comparison and the source of Homes.com's traffic.

Over the Atlantic, CoStar reported that OnTheMarket saw a 75% increase in traffic in 2024 while its listings inventory was up 23% and sales leads were up 42% against 2023's figures.

 

$9 billion opportunity and increased competition in the rental segment

Earlier this month Zillow announced that it had allied with rival Redfin (and Realtor.com before that) in a practical listings alliance to take on CoStar's rentals marketplace Apartments.com.

Responding to the news, Florance announced that CoStar intends to grow its multifamily rentals sales force by 23% in 2025 to take on what the company sees as a $9 billion opportunity.

He also called into question the legitimacy of the Redfin deal, claiming that rather than a listings partnership the deal was "effectively a sale [by Redfin] of the asset that attempts to avoid FTC scrutiny."

In any case, Apartments.com continues to grow apace and saw revenues exceed $1 billion in 2024 with multifamily clients up 7% year-on-year and paid single-family rental listings increased 59% year-over-year to 323,600.

Unlike previous CoStar earnings calls Florance's remarks did not contain any hints at future mergers or acquisitions but the CEO did provide an update on the $1.6 billion deal to take over the digital twin specialist Matterport. First announced in April 2024, CoStar believes the deal is "on track" to be closed in the first quarter of 2025.

February 19, 2025
Since March 2020 Edmund's job has been to read about, write about, collect data on, analyse and generally know about real estate marketplaces and the companies that run them. Before that he worked at the aggregator Mitula Group (which became Lifull Connect) for five years.

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