CSGP Balance Sheet

Published: 22 May 2024| Version 1 | DOI: 10.17632/rzj7my6yz2.1
Kevin Mosby


CSGP will invest ~$1bn (!) this year in homes.com. Up from ~$500m last year. The early spend was on content. Their neighborhood content is already far superior to Zillow’s, IMO. This next leg of spend, is marketing (brand + SEM). Note that they have $4+bn of net cash on the BS, and significantly + FCF even after the homes.com spend. Yes, CSGP is buying homes.com traffic. It is paid, and not organic. That makes the spike in traffic since they bought the asset, and subsequent to the 2024 super-bowl marketing push, potentially ephemeral. In ~1yr, CSGP took homes.com from ~0, to the #2 visited home portal behind Zillow. And they bought it. But this isn’t CSGP’s first rodeo. They did the same with apartments.com, built a brand, and sustained the traffic, which over time became organic. Today, 85% of apartments.com traffic is organic. Monetization of that traffic is just beginning. Remember, CSGP is monetizing listing brokers, not the buy-side. RBC is providing real-time weekly paying agent count from their web scrape of homes.com. Paid agents increased from 0 at the end of Jan2024, to 800 as of 2/20 shortly following the SB ad blitz, to 5.7k on 3/25. Implies ARR up to $35-40m of ARR vs guidance of [$100m] by YE 2024. Also implies that bookings are accelerating, 1.5mo removed from the SB ad blitz. With the caveat that this is a web scrape, and not source-of-truth, the implication is that homes.com guide for [$100m] YE ARR is looking conservative with CSGP currently booking $5+m in net new ARR/week. This is clustered with the NAR settlement above, and there's a good chance we see the market conflate the two. Notwithstanding the fact that the NAR changes don’t go into effect until July 2024. CSGP acquired OnTheMarket (OTMP LN) in late 2023 for GBP100m. OTMP is the #3 listings site in the UK, behind RMV/L and Zoopla (owned by PE). At acquisition, they had ~70% of RMV/L listings and 29% of the traffic. They have no shot to compete, on their own. Their revenue is ‘the good kind’ = agent subscriptions, in which they pay-to-list/premiumize listings. In Andy’s words: “ONTMP charges 1/10 what Rightmove does. And that’s before Rightmove’s plans to raise pricing 7%/yr over the next 5 years while maintaining at least a 70% profit margin. You simply cannot make this stuff up, but you have to love it.” Note, GBP100m = 0.4% of CSGP’s EV, and they have $5.2bn in cash. The size of the deal itself is a rounding error. The question is, what are they going to do with it? Andy has told us. Europe is their next frontier, which CSGP will tackle with their historical playbook: buying tier2 listings assets, and 1) invest in content/website performance, 2) throw ad dollars at traffic. That playbook was wildly successful with apartments.com, in part because there was no clear #1, the market was fragmented, and they had by far the deepest pockets. International will be harder. There are clear #1’s, with deeper pockets.



Financial Analysis