Trulia S-1 filing shows optimism, raises questions

Trulia filed its S-1 on Friday.

No big shocks, but I thought a few things were interesting. Here are some quick observations:

I’m struck by the similarities between Trulia and Zillow at the time of its own S-1 filing:

• Trulia’s revenue ($38 million for 2011, $28 million for the first half of 2012) tracks Zillow’s top line at this stage of its growth.
• Same thing on the loss: $7.6 million for Trulia last year, $6.8 for Zillow in the full year (2010) prior to its filing.
• The cash position is similar too – around $10 million – but Trulia also has $10 million in debt

Given that Trulia has often stood in the wings while Zillow absorbs the spotlight, this parity should get them a little respect.

• Trulia claims to have 21,544 paying subscribers. This is a surprisingly large number. As of the end of the second quarter of this year, Zillow claims just 22,696 (though at a seemingly higher average price point).

• The argument about audience quality continues. Trulia characterizes its audience as more “transactional” than Zillow’s and also notes that 50% of Trulia users have not visited Zillow. The only way this makes sense is if those “Trulia only” users come to Trulia via search engine referrals, which are generally regarded to be less valuable than direct users.

• This paragraph – one among many in the “risk factors” section – seems understated to those of us in the industry:

We currently depend on a listing aggregator to provide us with a substantial portion of the unique listings in our database. While these listings are available from their original sources, it would take substantial time and effort for us to aggregate these listings from all of the original sources. Therefore, if the agreement with our largest listing aggregator is terminated, we may not be able to fully replace the listings in a timely manner or on terms favorable to us, or at all, which would adversely affect our business and operating results. In addition, as real estate brokers typically control the distribution and use of their listings, our business could suffer if real estate brokers withheld their listings from us. From time to time in the past, real estate brokers have refused to syndicate their listings to us, and we cannot assure you this will not happen in the future. If real estate brokers refuse to syndicate listings to us, the quality of our products would suffer due to the decline of timely and accurate information, which could adversely affect our business and operating results.

Finally, I’m not certain residential resale real estate can support three large online companies over the long term. Right now, based on their current revenue run rates, Trulia, Zillow and Realtor.com are taking about $400 million from the “Realtor wallet” each year. And while you hear lots of big numbers about the market opportunity (Trulia cites a recent Borrel report that pegs residential real estate ad spending at $23 billion per year) the reality is less grandiose.

The number of agents who are able and willing to buy online ads or software is probably only about 200,000.

This reality means that you either move outward to other housing-related categories (e.g., Zillow’s Rent Juice acquisition) to keep revenue growth going, or you steal share from your competitors.

I don’t see a lot of Rent Juice deals in the near future, so we’re in for a fierce fight.

Stay tuned.