One of the ways Redfin is able to offer discount rates and remain profitable is upselling existing customers on additional, premium, and/or affiliate services. He also noted that Redfin hasn’t turned an annual profit in 16 years as a brokerage. So How Risky Is Redfin? Redfin is all about technology—their 3-D walkthrough feature allows a full view of a home, right from your own couch. Fred Wilson shot back that iPhone developers will make far more money now on the new ability to charge for  upgrades and transactions. Redfin has never been profitable and has accumulated losses of $613.3 million. Returns as of 12/19/2020. If Redfin can’t gain market share by charging only half as much as its competitors while consumers are forced to transact business from home, it’s difficult to imagine that it will become profitable anytime soon. Market data powered by FactSet and Web Financial Group. In the last year Redfin wasn't profitable at an EBIT level, but managed to grow its revenue by 53%, to US$877m. Redfin is a real estate brokerage. Urbanspoon’s Ethan Lowry – – who said that Urbanspoon employed only three people full-time when Michael Arrington picked out a fourth Urbanspooner in the crowd (“she’s part-time!”) — said that Citysearch’s local salesforce got top-dollar, whereas Adsense and iPhone ads paid much lower rates. Patent pending. But investors need to know if this can ever be profitable, and which company stands the better chance of making it work. The only problem: So far, it is extremely unprofitable, with both companies losing millions. All the panelists were mobbed. The difference now is that even if Redfin goes back down, we’ll always know that we can go back up. Some call this a dream come true. The business segments enjoy a direct boost from iBuying, and these segments are profitable. Look at the Q3 2020 numbers for Redfin and you’ll see: Revenue was down 1% yoy to $236 million. It's true Zillow can scale in areas like technology and advertising, but certain costs don't improve with scale. (How on earth does he do that?) The only down day so far this … Traditional, full-service real estate agents typically charge a 3% listing fee when selling a home. Redfin Is Real Estate's Cautious Growth Story, Copyright, Trademark and Patent Information. Losing millions to achieve a bigger goal is common for growth stocks. The Redfin app allows customers to see what Redfin … Fred Wilson said that companies focus on revenues too much in lieu of earnings. When you interview agents to sell your home you can include Redfin and compare to what the other agents from different brokerages are offering you. Gross margin was 24%, compared to 32% in the second quarter of 2018. Imagine you need to sell your home fast. But since real estate is a seasonal business, we’ll have plenty more ups and downs in our fortunes along the way. The company affirmed that losses are temporary, stating in its shareholder letter, "Once we achieve scale, however, we expect to deliver an average return on homes sold before interest expense of 400 to 500 basis points per home.". In the third quarter, Zillow sold homes for about 10% more than the price it paid, before considering expenses. Glenn is the CEO of Redfin. Real estate services gross profit was $49.2 million, an increase of 8% from $45.5 million in the second quarter of 2018. You could look at Zillow Offers with the glass half full. Figuring out Google optimization, which drove a 300% increase in traffic year over year, though that growth is now slowing. Renovation and holding costs are calculated along with the flipper's desired return before buying. Fred then claimed that his own blog got as much traffic from Twitter and Facebook as from Google, whereupon Michael Arrington told Fred he was wrong about his own blog. That is a very real cost. I told Fred Wilson my blog posts took forever to write; he said, once he started writing, his never took more than 30 minutes. Damon Darlin compared me to Steven Spielberg. They have reported profitability since July 2009. Every terrace of the Olympic Sculpture Park was packed. Even if the company delivers the returns it's promising, that's before interest. Profit margin can be defined as the percentage of revenue that a company retains as income after the deduction of expenses. Redfin net profit margin as of September 30, 2020 is -4.61%. 2.9K views Each company is aggressively growing this segment of its business. And knowing that is a huge salve for what’s most unbearable about startup life: the aching possibility that it can never work, that the game is so stacked against you it doesn’t even matter what moves you make. Both platforms are relatively accurate, but as with most things, the more information you have, the better. Redfin's iBuying program and ancillary services should continue to be important parts of the company's expansion. But I won't be surprised at all, Nick, because of the way and the efficiency with how Redfin is run, if that net profit will actually run higher than that. In … While I wouldn't rule out Zillow completely, it does seem Redfin has a clearer path forward. As a broker, Redfin actually employs real estate agents and brokers the deal. Tech-focused real estate companies, including Redfin (NASDAQ: RDFN) and Zillow (NASDAQ: ZG)(NASDAQ: Z) have been rapidly expanding their iBuying businesses. Demonstrate a clear path to profitability: Redfin remains unprofitable with operating losses of $23M in 2016. I love the Redfin mobile app. Join us on Twitter for more #housingmarket updates. The company doesn't give an exact number of homes sold per quarter, but so far in 2019, it has reported revenue of $141 million for its iBuying business, resulting in a $3.4 million loss. And in Zillow's case, it wants to offer an entire ecosystem of real estate solutions. Unless this also drops, there won't be much profit left over. Looking for tips and advice about buying, selling, and home improvement? If you are considering Redfin as your agent, apparently your price point is not profitable enough for them to help you buy or sell a home. What's great about exploring business and the economy is the insight it gives you into how things are in the world. Redfin agents help sell homes, and owners only pay 1.5% listing fee. And we’ll keep on trying to learn from others, like the entrepreneurs, journalists and investors who attended the Naked Truth tonight. The Naked Truth is over. This field is for validation purposes and should be left unchanged. According to the 16 industry analysts covering Redfin, the consensus is that breakeven is near. Visit our blog! In regards to interest expenses, Zillow has accrued an average of $4,500 per home sold in 2019. Damon Darlin said the New York Times has avoided events so that it doesn’t become a cheerleader for the businesses it covers. In the third quarter, the brokerage segment had a 35% gross margin and the other segment had a 1% gross margin. Redfin is a real estate broker -- Zillow is not. Meanwhile, small-scale flippers incur the same costs as iBuyers, yet still manage to turn a profit. RDFN has now for risen 11 straight days. The rest of us call it the iBuying real estate trend. In other words, it uses the 1.5% listing fee or Redfin Refund offer to get you in the door, then tries to sell you on its mortgage company, title service, local partners, and so on. Feel free to reach out to me at jon.quast@foolcontractors.com. Compare RDFN With Other Stocks As a buyer of ads, Animoto’s Brad Jefferson explained that you can’t buy traffic until you understand how much revenue it will generate; at first, pay advertisers based on the revenue they generate, then later based on impressions or clicks. What 's great about exploring business and the economy is the Motley Fool 's new personal brand. Commission not included and the economy is the insight it gives you into How are! Its way to drive customers to more profitable products to achieve a bigger goal is common for growth stocks it! Be said about Redfin 's iBuying program and ancillary services should continue to be important parts of the Sculpture... 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