Zillow Inc. (NASDAQ:Z) is working on a $2 billion deal to purchase its closest rival Trulia Inc. (NASDAQ:TRLA), according to reports Thursday.
A convergence of the two most popular real estate websites would give both a significant amount of market power in the real estate sector. Combined, the two have more than five times the amount of website visitors as their closest competitor. Unless the talks fall apart, the two could strike a deal sometime in the next few days, according to a Bloomberg report.
Trulia’s market value rose to $2 billion after its stock surged over 30 percent Thursday afternoon based on the news, while Zillow’s stock rose over 15 percent. The two home sales sites offer significant competitions to multiple listing services (MLS), which several real estate brokers usually work together to offer.
Zillow has made recent several acquisitions, including Retsly, a service that helps software developers access real estate data from MLSes. The purchase was announced earlier this month. In June, Trulia was reportedly in talks to purchase its closest competitor, Move, Inc. (NASDAQ:MOVE), which owns Realtor.com. The two were unable to reach a deal.
A Zillow/Trulia merger could “dramatically increased the combined entity’s pricing power,” Barclays analyst Christopher Merwin wrote in a research note Thursday. The sites’ revenue is based on advertising charged to real estate agents to list properties. The two would also have more leverage in negotiations with MLSes, Merwin wrote.
Zillow and Trulia combined have 123.6 million monthly unique visitors, more than five times the number of users who went to Realtor.com, according to the latter's numbers for April. Zillow.com went public in 2011, while Trulia.com debuted on the public markets a year later. Trulia reported first-quarter of revenue of $54.5 million with an average of 44.6 million monthly unique visitors during the period. Zillow served 79 million monthly visitors during the same period, reporting revenue of $66.2 million.