Trulia Buying Market Leader for $355M, Upping Zillow Competition

5/8/13Follow @bromano

Home shopping website Trulia is bolstering its offerings for real estate professionals with a $355 million cash and stock purchase of Kirkland, WA-based Market Leader.

San Francisco-based Trulia’s acquisition of a company right under the nose of top online real estate rival Zillow underscores the fierce competition—and unclaimed opportunity—in the online real estate market.

Trulia CEO Pete Flint calls Market Leader “an excellent strategic fit,” noting its online sales software for real estate agents will fill out Trulia’s offering.

“Marrying our 31 million—and increasing—monthly unique visitors with Market Leader’s robust offerings and extensive partnerships with leading real estate franchisors and brokerages creates a company that will play an even more integral role driving value to the real estate industry,” he says in a statement.

Trulia (NYSE: TRLA) would pay $11.33 per share for Market Leader, 18 percent above Tuesday’s closing price, in the form of $6 cash and 0.1553 shares of Trulia stock per share of Market Leader (NASDAQ: LEDR) stock.

Shareholders of Market Leader—formerly HouseValues.com—must approve the transaction, which the companies expect to close in the third quarter. Market Leader, founded in 1999, would become a wholly owned Trulia subsidiary, maintaining its Kirkland presence.

“Market Leader stands alone as a clear leader in the highly fragmented real estate software sector,” Flint says.

Zillow, too, has been snapping up real estate software makers. Last fall, it acquired Mortech, which makes tools for mortgage professionals, and Buyfolio, a Web and mobile software platform to help real estate agents work with home shoppers.

Indeed, Zillow and Trulia have made several similar moves in the last year. Before its acquisitions last year, Zillow (NASDAQ: Z) raised about $147 million in a secondary stock sale. In March, Trulia—public since last September—sought to raise an additional $150 million in part to fund acquisitions.

“They’ve been playing catch-up behind Zillow,” says Brian Bolan, a stock strategist at Zacks Investment Research. “Zillow has been out there reaching different markets much faster.”

Bolan notes that the online real estate market—particularly niches such as rental housing—is still relatively open, and fragmented.

Zillow CEO Spencer Rascoff made this point during the company’s first quarter earnings call Wednesday while explaining his decision to ramp up advertising spending.

“While we are the largest Web and mobile player in our category, our unaided brand awareness still is only about 12 percent,” he says. “Put another way, 88 percent Americans can’t come up with Zillow when asked to name a real-estate related Web site. And 27 percent of Americans can’t name any brand at all. Not one. This brand white space is unmatched in just about any other Internet or mobile category.”

Says Bolan: “There’s going to be acquisitions in this space for a long time to come.”

Benjamin Romano is editor of Xconomy Seattle. Email him at bromano [at] xconomy.com. Follow @bromano

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