After years of investing heavily in building a fourth competitive real estate search portal, CoStar said Wednesday it would reduce spending on Homes.com in the coming years as it looks like the company will become profitable.
The company said in a U.S. Securities and Exchange Commission filing that it would reduce net spending on the portal by $300 million this year — or more than 35 percent year over year — and then by more than $100 million annually through 2030. That’s a sharp decline from the estimated $850 million the company said it had invested in the portal by 2025.
The portal’s parent company said in the filing that it aimed to have Homes.com generate more revenue than expenses by the end of 2029 through a mix of lower costs and continued subscriber growth, advertising and partnerships.
“The company is implementing its proven playbook to continue to scale Homes.com and increase profitability,” CoStar wrote in the filing.
The cut follows mounting pressure from investors who questioned CoStar’s aggressive move into the residential sector after dominating the commercial real estate sector.
CoStar acquired Homes.com in 2021 and began trying to scale it into a force in the residential space on par with Zillow, Realtor.com and Redfin. The company turned heads in 2024 when it unveiled a $1 billion marketing investment to raise awareness of Homes.com, including through celebrity Super Bowl ads.
The company — which has traditionally been a giant in commercial real estate but had a smaller footprint in the residential sector — also undertook lesser-known but controversial efforts to generate awareness and revenue, including sending direct mailers to home sellers asking them to pay to boost the marketing of their listing through Homes.com.
Homes.com has reported strong subscriber growth among real estate agents who pay the portal for various services, including a marketing boost within the Homes.com network.
However, investment and subscriber growth were not enough to translate into stock market gains. Shares of CoStar are down nearly 10 percent from a year ago and about 30 percent from five years ago.
Last April, the company woke up the board of directorsand a committee was formed to focus on reviewing “the company’s continued investments in Homes.com [to ensure] an appropriate timeline for profitability,” a company statement said.
Around the same time, the investment firm Third Point released a report that included analysis of CoStar and questioned its heavy investment in Homes.com.
“After several years of uncertainty, we believe it is time for CoStar to begin the journey of meaningful self-help,” Third Point wrote in the paper. Letter dated April 30.
Specifically, the company writes: “Increasing losses at Homes.com have obscured the rapid growth of its core business.”
Analysts with the investment company William Blair offered tempered optimism about the cuts, saying the move should allow the Homes.com model to “marinate” in the meantime.
“We are encouraged by the guardrails surrounding Homes.com’s spending,” William Blair analysts wrote in a quick response to the news.
William Blair initially believed that CoStar should cut its investments by $200 million, the analysts wrote.
“While we believe investors will appreciate the cuts and added granularity around the path to profitability, some may have been looking for a faster timeline to profitability than 2030,” they wrote.
Shares of CoStar remained down about 5 percent after the announcement on Wednesday.
CoStar said the company as a whole was using artificial intelligence to improve efficiency and user experience “across all market platforms.”
“Homes.com is an important part of our ecosystem,” CoStar CEO Andy Florance said in a statement. “We now have a clear path to accelerate revenue growth and increase profitability.”
Email Taylor Anderson
#CoStar #plans #reduce #spending #Homes.com