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Zillow real estate site reaps big rewards with IPO

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"Investors are very keyed up on business models that integrate the Internet into their main platform and have mobile apps," said David Menlow, the founder and president of research company IPOfinancial. He added that there is also a lot of pent-up demand for promising companies in what's been a stodgy overall market.

Founded in 2004, Zillow provides online listings for more than 100 million homes that are either for sale or for rent. A feature called "Zestimate" helps estimate property values, so that people can see how much homes in their neighborhood_or desired neighborhood— are worth.

The Zestimate has drawn criticism from homeowners across the country who suddenly had the value of their homes — as well as what they bought it for — easily accessible by anyone with an Internet connection. Zillow calculates the figure by taking available data, most of it public, and entering it into a formula that takes into account hundreds of such details as how many bathrooms or bedrooms a home has or where it is located. The site also offers personalized mortgage rates and housing advice. The company has never made a profit, though it grew its revenue 74 percent in 2010, to $30.5 million.

Zillow makes money from advertising, by real estate professionals as well as mortgage companies and brands such as phone or insurance companies. Spencer Rascoff, Zillow's 35-year-old CEO, said the volatile housing market has actually helped the company grow its ad revenue. That's because it accelerated companies' migration to online advertising from higher-priced offline ads in newspapers and elsewhere.

In the first quarter of this year, Zillow's loss narrowed to $826,000 from $2.8 million in the same period a year earlier and revenue doubled to $11.3 million. The company reported a loss of $6.8 million last year.

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