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ZipRealty (ZIPR)This is an EDITABLE stock research wiki. You can contribute by clicking on the EDIT PAGE link above or on the page icons that appear when you roll over one of the category subtitles below. From 1Table of contents
Company Information:Company Address: 2000 Powell Street Suite 1555 Emeryville, CA 94608 Company’s Web Address: http://www.ziprealty.com Industry Sector: Fiscal Year: Dividend: Note: this section is not editable.
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Company Overview:Company Products/Services/Markets:Zip is a full-service residential real estate brokerage firm, using the Internet, proprietary technology and efficient business processes to provide home buyers and sellers with high-quality service and value. Their solution includes a client-centric business approach, a sophisticated website that empowers home buyers and sellers with relevant information, a proprietary business management technology platform and significant financial savings for consumers. With operations in 24 major metropolitan areas, they employ over 1,800 sales agents, known as ZipAgents, all of whom are licensed in their local markets, are members of the National Association of REALTORS®, or NAR, and work for them on an exclusive, full-time basis. This is a unique employee-based model in an industry characterized almost exclusively by independent contractors.
Through their website, registered users can access a broad range of current information and tools to research and commence the process of buying or selling a home, including direct access to comprehensive local Multiple Listing Service(s), or MLS(s), home listings data, such as asking prices, home layouts and other features. They also provide information in addition to MLS data, including neighborhood attributes, new home listings, school district information, comparable home sales data, maps and driving directions. They attract users to their website through a variety of marketing channels, including online advertising, word-of-mouth and advertisements in traditional media.
Their proprietary ZipAgent Platform, or ZAP, automatically matches registered users with local ZipAgents who market and provide comprehensive real estate brokerage services, including showing properties to buyers and listing and marketing properties on behalf of sellers, as well as negotiating, advisory, transaction processing and closing services. Their ZAP technology also includes a customer relationship management system that identifies and analyzes user behavior on the website allowing them to provide more relevant information and service to clients and a business management system that allows managers to monitor the activities of ZipAgents to ensure a high level of client service. According to a 2006 survey by the California Association of REALTORS®, 94% of home buyers who used the Internet as an important part of their overall home buying and selection process were very satisfied, compared to only 25% for traditional home buyers who did not use the Internet as an important part of their process. The business was founded in 1999 and has grown rapidly since inception. They generate revenues principally from earning brokerage commissions in connection with representing buyers and sellers of residential real estate. As of March 1, 2007, they had approximately 1.4 million active registered users who had accessed the website within the last twelve months. They currently have operations in Atlanta, Baltimore, Washington D.C., Boston, Chicago, Dallas, Los Angeles, Orange County, Phoenix/Scottsdale, Sacramento, San Diego, the San Francisco Bay Area, Seattle, Las Vegas, Houston, Miami, Orlando, Palm Beach, Tampa, Minneapolis/St Paul, Austin, the Greater Philadelphia area, Fresno/Bakersfield and Naples. They currently plan to begin operations in Tucson, Denver, Jacksonville, Richmond and Salt Lake City in 2007 and intend to open two to six additional markets later in the year. [10]
Strategy:Zip Realty has correctly identified some of the key challenges in the traditional brokerage model:
They have addressed these challenges by making their agents employees and supplying them with leads. In addition, they offer their buyers a 20% rebate on the commission. Buyers are 80% of their business and 50% of these buyers are first time buyers. Agents are compensated on a graduated scale that starts at a 40% split of the commission and rises to 80%. However, this split is calculated after the 20% rebate and an 8% technology fee, leaving the agent with only 28.8% of the gross commission. This compares with 50% or more with a traditional brokerage. However, the agent does not need to spend time and money prospecting so this may be fair. [20] While commissions for sellers are in theory discounted, they report that their listing commissions are averaging 4.5 - 5.0%. [10] Given that standard commissions are now averaging 5.0% this is not really a discount at all. 34% of their leads are generated organically, with the remainder purchased via various Internet lead generation vehicles, including cost-per-click, cost-per-lead, and cost-per-impression models. 27% of their leads come from Homegain, which charges 30% of the gross commission, and 15% of their leads come from Google. Their expectation is that for every 60 leads they will get 2 closings. [10] Zip Realty sees their proprietary technology as a key competitive advantage and has a technology staff of over 42 employees. [10] Competitors:In addition to traditional brokers Zip Realty competes with Redfin, a privately held, Seattle based company that provides a low service model with a 2/3 rebate to clients. They also compete with BuySide Realty, a Chicago based low service model with a 75% rebate. Industry Trends and News:Commissions are on the decline and new competitors are coming into the market. Financial Analysis:The following table shows the trends in key operating costs as a percent of revenue over the past 5 years [10]:
While net transaction revenue has grown, expense ratios have not improved and have become worse in 2006 as the company expands. Sell Rationale:
Projected Financials:Income Statement: (Paste Here) Balance Sheet: (Paste Here) Cash Flow Statement: (Paste Here) Financial Ratios: (Paste Here) Other: (Paste Here) News:
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