Raymond Jones – Vice President of Investor Relations Spencer Rascoff – Chief Executive Officer Kathleen Philips – Chief Financial Officer

Michael Graham – Canaccord Genuity Ron Josey – JMP Securities Heath Terry – Goldman Sachs John Campbell – Stephens Mark Mahaney – RBC Capital Markets Rodney Hull – SunTrust Dean Prissman – Morgan Stanley Mark May – CITI Aaron Kessler – Raymond James Chris Merwin – Barclays Lloyd Walmsley – Deutsche Bank Tom Champion – Cowen and Company

Thank you. Good afternoon and welcome to Zillow Group’s first quarter 2016 earnings conference call.

Joining me today to talk about our results are Spencer Rascoff, Chief Executive Officer; and Kathleen Philips, Chief Financial Officer. During the call, we will make forward-looking statements regarding future financial performance and events.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we can’t guarantee these results. We caution you to consider the risk factors described in our SEC filings, which could cause actual results to differ materially from those in the forward-looking statements made on this call.

The date of this call is May 3, 2016, and forward-looking statements made today are based on assumptions as of this date. We undertake no obligation to update these statements as a result of new information or future events.

During the call, we will discuss GAAP and non-GAAP measures. We will also discuss certain historical results on a reported and pro forma basis.

Reported results were prepared in accordance with GAAP unless otherwise noted. For comparative purposes, pro forma results assume the February 2015 acquisition of Trulia occurred on January 1, 2014, and reflects certain adjustments and exclusions described in our SEC filings.

All year-over-year comparisons are pro forma unless otherwise noted or the context otherwise requires. We encourage you to read our earnings press release, as it contains important information about our reported and pro forma results, including reconciliation of non-GAAP financial measures.

In our remarks, the non-GAAP financial measure Adjusted EBITDA is referred to as EBITDA, which excludes other income, depreciation and amortization expense, share-based compensation expense, acquisition-related costs, restructuring costs, interest expense and income taxes. This call is being broadcast on the Internet and is available on the Investor Relations section of the Zillow Group website, along with our earnings press release.

A copy of management’s prepared remarks has already been posted to our Investor Relations website. A recording of the call will be available after 8:00 p.m.

Eastern Time today. Today, we will open the call with prepared remarks.

We will follow prepared remarks with live Q&A. During the Q&A, we will answer questions via Twitter and take questions from those dialed into the call.

Individuals may submit questions by tweeting @ZillowGroup using the #ZEarnings. I will now turn the call over to Spencer.

Thanks for joining us on the call today to discuss our first quarter results. The first quarter was an excellent one for Zillow Group.

We reported better-than-expected revenue growth, as we began to see the benefits of our scale hit our financials. We’re seeing a lot of momentum and strength in the fundamentals of the consumer and industry-facing parts of our business.

Taking a look at the highlights of our results, total revenue for Q1 was $186 million, up 25% year-over-year on a pro forma basis excluding Market Leader, and beat the high end of our outlook by approximately $7 million, with particular strength in our Premier Agent and Mortgage marketplaces. EBITDA for the first quarter was $1.9 million and within our outlook range.

With the strength seen in our Q1 revenue, we are now raising our revenue outlook range by $20 million for the full-year, to a new range of $825 to $835 million. We aren’t changing our full-year EBITDA outlook at this time.

In a moment, Kathleen will talk through – walk you through our financial results and outlook in more detail. Turning now to an update on our strategic priorities.

Our first priority is to grow our audience of users, who will become clients of real estate professionals. It’s been an amazing quarter with record-setting traffic and growing market share.

During March, our peak traffic month in the first quarter, more than 166 million unique users came to Zillow Group’s mobile apps and websites, up 22% year-over-year off an ever-increasing base. This was an all-time traffic record.

Every one of our consumer brands, including our largest brands Zillow and Trulia are at or near record traffic levels and growing quickly. Top of the funnel traffic growth is important, but bottom of the funnel contact volume to our agent advertisers is critical.

And on that metric, our Q1 results were excellent – leads to Premier Agents on Zillow and Trulia are up nearly 60% year-over-year and exceeded 4 million leads in the quarter for the first time ever. During the first quarter, Zillow Group also achieved our highest traffic market share to-date, with over 63% of the online and mobile audience in our category, according to comScore.

That is a huge achievement, made even more impressive by the fact that our category as a whole has grown 55% over the last three years. The online real estate pie is growing very quickly, and our piece of that pie is growing even faster.

You can find further evidence of this by looking at Google search data. According to Google Trends, more Americans now search for the word Zillow than the term real estate.

This trend is due to our continued product innovation, excellence in free marketing channels, amplified by our advertising. You may have seen the Zillow brand national ad campaign on broadcast and cable networks called Home, which feature people’s real-life stories about what home means to them.

And if you live in Manhattan, you cannot miss the latest StreetEasy campaign called Find Your Formula, which is prominently displayed in outdoor advertising, taxi-tops and subway stations. These campaigns are resonating with consumers and have been successful in driving home shoppers to our mobile and web platforms.

Our outstanding products then keep these visitors coming back and help them become clients of our Premier Agents. We carefully track the efficacy of our offline advertising and its impact on traffic, leads to Premier Agents, and awareness among different user types.

We continue to be pleased with our advertising’s effectiveness. In addition, our combined scale and multi-brand portfolio strategy have created significant efficiencies in our online advertising spend.

Our next priority is to grow our Premier Agent business, which achieved record revenue during the first quarter and beat the high end of our outlook. Our Premier Agent advertising program focuses on attracting those agents who can capture maximum benefits from our platform, converting leads at a high rate and earning more commission.

At a recent gathering of our top Premier Agents in San Antonio, we announced several innovative features that will help the highest producing agents in the industry capture a greater share of transactions in their respective markets. Among these features was the launch of team profiles, which gives agents the opportunity to associate themselves with their team while also retaining an individual profile.

As we have discussed before, agents increasingly are shifting to the team model as a way to effectively convert their flow of online leads into commissions. We also launched a new suite of lead management tools that allow team leaders to assign online leads automatically to their team members and track results.

Using this feature inside our free Premier Agent app, team leaders have the ability to see exactly how the buyer or seller was handled by their team members. To help our Premier Agents to better manage their advertising with us, we also launched a new shopping cart experience.

Our agent advertisers now have a new way to buy their advertising through a self-serve process, which provides more flexibility and control around their advertising across Zillow and Trulia. We are innovating quickly for our Premier Agent advertisers, and growing the ranks at the most advanced agents in real estate.

In the next few years, we believe that high-performing agents and teams will accelerate their growth with us as more consumers search for homes and select their agents through Zillow and Trulia. Now turning to our emerging marketplaces, our mortgage marketplace revenue this quarter exceeded our plans.

We are seeing the impact of enhancements to our mortgage products and features, which enable consumers to find what they want more efficiently. This is leading to increases in the average revenue per loan information request, the number of mortgage shoppers, and additional contacts flowing to our lender advertisers.

Our mortgage marketplace has also benefited from low interest rates year-to-date, which drove increased refinance activity in addition to strong overall purchase performance. That having been said, most of our loan information requests are for purchase loans rather than refinance, which protects us from the inevitable rising rate environment which will likely negatively impact other online mortgage services.

In our rentals marketplace, landlords and property managers continue to embrace the direction we are taking with our products and features that promote their available rental units to the largest audience in the category. We have achieved all-time highs in usage, contacts and paying relationships, resulting in accelerated revenue growth.

Rentals revenue for Q1 2016 is up over 100% year-over-year and tracking ahead of our expectations. In our New York City marketplace, StreetEasy and our recently acquired brand, Naked Apartments, continue to extend their leading presence in New York.

Product advances on mobile and brand advertising for StreetEasy have driven traffic to record levels, and significant revenue growth. Our final priority is to continue to maintain our extraordinary company culture which attracts, retains and motivates incredible people to do their best work.

Amongst our many competitive advantages, which include our massive audience scale and our widely recognized family of brands, the quality of our team stands above the rest. We have a culture of innovation that results in both consumer-facing features, which grow audience, and business model innovation, which drives revenue growth and sustainable advantage.

We continue to win recognition as one of the top and most sought-out employers in the country. To conclude, we are off to an excellent start in 2016.

The media market opportunity in front of us in residential real estate, rentals, mortgages and New York remains massive in the billions of dollars. We continue to grow rapidly by creating the category-defining experiences for the consumer across our brand portfolio, attracting the largest audience, and providing professionals with the most effective way to reach them.

As I’ve said many times before, advertisers follow audience. With that, I will now turn the call over to Kathleen.

Thank you, Spencer, and hello to everyone joining us on today’s call. As we get started, for reference, when discussing year-over-year comparisons of our first quarter financial results, we will compare 2016 GAAP results to our 2015 results on a pro forma basis unless otherwise noted or the context requires.

I would like to remind everyone that our pro forma results in 2015 assumed the close of the Trulia transaction occurred on January 1, 2014, and do not include the impact of acquisition-related costs and restructuring costs, in addition to certain other adjustments. Note that our GAAP and certain pro forma financial results, along with our pro forma comparisons, have been included in our first quarter 2016 financial results press release, which contains important information about how the pro forma results were prepared.

Now, let’s dive into our results, starting with traffic. In the first quarter of 2016, we attracted more than 156 million average monthly unique users to Zillow Group’s mobile applications and website, achieving a new record peak month of more than 166 million unique users in March.

As a reminder, our unique user metric is a combined measure reflecting traffic across our consumer-facing brands, including Zillow, Trulia, HotPads and StreetEasy. Beginning next quarter, we will add in Naked Apartments as well.

Total revenue for the first quarter increased 14% year-over-year to $186 million, from $162.5 million in the same period last year. Excluding Market Leader from last year’s results, total revenue increased 25% year-over-year.

Looking at our primary revenue category, marketplace revenue was $169 million, representing an increase of 23% year-over-year. Excluding Market Leader from last year’s results, marketplace revenue increased 37% year-over-year.

Marketplace revenue now accounts for 91% of our total revenue, as compared to 84% during the same period last year. Taking a closer look into our real estate subcategory, our first quarter revenue grew 34% year-over-year to $152.5 million.

As a reminder, this subcategory includes our Premier Agent advertising, agent services, DotLoop, StreetEasy and rentals revenue. Our Zillow Group Premier Agent advertising revenue increased 25% year-over-year to $134.5 million in the first quarter, which exceeded the high end of our outlook range by $2.5 million.

The annualized run rate for our agent advertising business reached $537 million at the end of the quarter, compared to $432 million at the same time last year. This positive result was driven by the continuing trend of our highest-spending advertisers buying more impression to expand their presence on our platform.

We ended the quarter with 91,878 advertiser accounts essentially flat as compared to the fourth quarter of 2015. For the first quarter of 2016, average revenue per advertiser, or ARPA, was $487, increasing 40% year-over-year on a pro forma basis.

Sales to same agent advertisers, or those who have been on our platform for more than one year, grew by more than 56% compared to the prior year. Additional sales to existing advertisers made up 71% of total bookings in the first quarter.

Year-over-year growth of the agent advertiser cohort that spends more than $5,000 per month was 83% on a total dollar basis, and 74% in advertiser count. Churn in this cohort continues to be minimal.

As a reminder, we will no longer report on advertiser count and ARPA in 2017. These metrics do not accurately reflect the performance of our business.

As we have seen before, more agent teams and independent broker agents represented by one account are buying advertising at much higher levels than the average. With the launch of our new team profiles product that Spencer described, we will have more visibility into this trend and continue to support the success of our advertisers who leverage a team model.

Our strategy continues to accelerate the larger trend across the real estate agent population of higher producing agents taking market share from those who are less competitive. Moving now to our mortgage marketplace, our revenue reached $16.5 million, which represents a 65% increase year-over-year.

The increase in mortgage revenue was primarily the result of an increase in our average revenue per loan information request due to product enhancements that allow us to monetize our mortgage products more efficiently. The number of loan information requests decreased 19% from the same period last year.

This was driven by our strategic decision to improve the quality of loan information requests by asking consumers to provide more details before a loan information request is sent to a lender. In our display category, revenue was $17 million, a decrease of approximately 34% over the same period last year, and ahead of our expectations.

Our intentional shift from traditional display revenue continues, as we focus on providing consumers with content-rich experiences that lead to valuable connections for our marketplace advertisers. Display revenue now accounts for 9% of total revenue, as compared to 16% during the same period last year.

Moving now from revenue to our expenses. Total operating expenses were $234 million in the first quarter.

The largest variances from our outlook were in legal costs, headcount related costs including employee health claims, and sales commissions for new bookings for which the revenue will be recognized in future periods. Each of these was higher than expected and negatively impacted EBITDA.

With that, let’s take a closer look at our operating expenses by line item. Our cost of revenue during the quarter was $16.5 million, or 9% of revenue.

Sales and marketing expense was $98.8 million, or 53% of revenue. Our advertising investments for our brands were as expected, while our sales expenses increased by $1.5 million due to higher sales volume.

Technology and development costs in the first quarter were $64.4 million, or 35% of revenue, which was higher than internal forecasts, due primarily to lower capitalized wages. General and administrative costs in the first quarter were $53.8 million, or 29% of revenue, which was higher than our internal forecast.

The increase in G&A is primarily related to legal costs from the News Corp and National Association of Realtors litigation of $15.7 million in the first quarter, which were nearly $4 million higher than we expected. A quick update on where things stand with respect to our defense of the litigation matter brought by News Corp and the National Association of Realtors.

We continue to work through the legal process, and the court is considering our motions for summary judgment, which request that the bulk of plaintiffs’ claims be dismissed. As we have noted before, we believe the claims in this case are without merit and that News Corp and the National Association of Realtors claims for damages are baseless.

We will continue to vigorously defend ourselves in this matter. In the meantime, we remain focused on the daily operations of our business and, as our Q1 results show, the fundamentals of our business are outstanding and unaffected by this litigation.

Moving on to our bottom line, GAAP net loss was $47.6 million. GAAP first quarter 2016 basic and diluted net loss per share was $0.27.

On a non-GAAP basis, which excludes share-based compensation, acquisition-related costs and income taxes, basic and diluted net loss per share was $0.13. Our EBITDA for the quarter was $1.9 million, or 1% of revenue, and within our outlook range.

Zillow Group ended the first quarter of 2016 with more than 2,400 employees and over $500 million in cash and investments. Now turning to our Zillow Group outlook for the second quarter and full-year 2016.

Our press release, which can be found on our Investor Relations website, contains all of our Q2 and full-year 2016 guidance. I’ll just take a moment now to point out some key items.

Second quarter 2016 total revenue is expected to be in the range of $203 million to $208 million. Premier Agent revenue in the second quarter is expected to be in the range of $146 million to $148 million.

Display revenue is expected to be in the range of $16 million to $17 million. Our EBITDA for the second quarter is expected to be in the range of $15 million to $20 million, or 9% of revenue at the midpoint of the range.

Legal costs associated with the News Corp and National Association of Realtors litigation for the second quarter are anticipated to be $18 million to $20 million. Turning to our full-year 2016 outlook, we now expect our full-year revenue to be approximately $825 million to $835 million.

We expect our Premier Agent revenue for the year to be in the range of $595 million to $600 million, and we expect our display revenue to be in the range of $58 million to $60 million. Our full-year EBITDA outlook remains unchanged, which we expect to be in the range of $115 million to $125 million.

We now expect full-year depreciation and amortization expense to be approximately $95 million to $100 million and share-based compensation to be an estimated $105 million to $110 million in 2016. Legal expenses related to the News Corp and National Association of Realtors litigation for the full-year are anticipated to be in the range of $50 million to $55 million.

In summary, our performance for the first quarter of 2016 was excellent. Top-line growth is accelerating ahead of our initial expectations, and we are starting to see the benefits of our scale as we execute on the foundation we established for our long-term growth.

We are excited about record revenue, traffic growth and the future for Zillow Group. We will now open up the call for questions.

Hi, thanks and congrats on a really strong revenue quarter. I just wanted to ask two.

First on the guidance, Kathleen, can you just talk about why revenue guidance is going up and EBITDA guidance isn't? And, some of the dynamics where you're investing there?

And then, I just wanted to ask on the litigation cost? They were a little higher than we thought in Q1, and I'm just wondering if you can frame out maybe what a reasonable, pessimistic case is for where these expenses could head?

Or, if there's anything you could share to help investors frame the risk that might be associated with this going forward? I really appreciate it, thank you.

Sure, thank you very much. And I’ll kind of answer those questions together because they hang together pretty clearly.

So in terms of the – our outlook for the litigation outcome, notwithstanding the higher expenses I do want to emphasize that our perspective in terms of the likely outcome in the case has remained unchanged. We still feel that we are in a very strong defensive position.

Unfortunately litigation expenses did exceed what we expected and will continue to exceed what we expected for 2016 in large part because it's a very complex case, we're moving into heavy motion and discovery practice with a trial expected this summer. The specifically for the full year 2016 EBITDA outlook, the $20 million revenue is offset by $17 million in increased litigation expenses so that's where the bulk of that comes from and that's the driving factor in us not raising our EBITDA outlook for the year.

I will say that we remain confident in our long-term model of reaching 40% EBITDA margins at scale and I think if you look at the overall performance in the quarter you'll see that the lawsuit is not impacting our operations here and with record revenue traffic and audience growth, we're still in really good shape.

Okay. Thanks a lot.

Great. Thanks for taking the question.

Just on Premier Agents, essentially flat year-over-year. Spencer, do you think that's due to seasonality?

Or, perhaps maybe the 92,000 agents are like the high-producing agents you're going after? And then maybe some more details on the self-service shopping cart?

Want to talk – hear a little more about agent adoption with the new tool? And maybe how this ties into potentially planned rollout of market-based pricing?

Thank you.

Sure, hey Ron. So as you know we don't manage to agent count so in terms of perspective as to why agent count is up, down or flat year-over-year, it's an output not an input.

It's just not something that we manage towards or really look even all that closely at which is one of the reasons that we're discontinuing it by the end of this year as a reporting metric. Leads to Premier Agents are up dramatically up around 60% year-over-year and Premier Agent revenue is obviously growing very quickly as well.

The self-serve feature that we launched just allows agents to self-serve to buy premier agent advertising on their own without talking to a sales rep, we think that gives agents more flexibility and we continue to invest in functional in the Premier Agent App which allows them to manage leads and also manage their account. So the functionalities for Premier Agents continues to get better even as lead volume continues to grow rapidly.

If I could follow-up real quick just on the self-service tool, any insight on – well, of course, do you know when – could you tell us when that launched? And, maybe is it live across the U.S.

or in certain markets? Thanks.

For competitive reasons we are not going to detail on where it's live or how broadly rolled out its been.

Okay.

So I can't give anymore details around that.

Thanks. Great quarter guys.

Thank you.

Thank you.

Next question please.

Great, thanks. Spencer, you mentioned the increase in leads generated for agents out of your traffic growth, but do you have a sense of the trends and the conversion rates on those leads?

Realize this can be tough to track but would be interested in your progress towards developing tools to follow ROI on their spend more directly for agent? And then, can you also give us a sense of where you are in potentially monetizing priority within search results?

Sure, one second, Heath. Let me jot down your questions.

Okay, yes. So as you know, Heath, tracking lead conversion is very difficult to do.

It's difficult to even for our top Premier Agents to do no less it's even more difficult for us to try to measure. We've historically said that we think lead conversion is around 3% to 3.5% so of all of the leads that we generate to premier agents probably 3% to 3.5% of them convert into a real estate transaction.

Using that math, we think in 2015 Zillow Group helped generate about 3 billion of commissions to Premier Agents out of the approximately $80 billion of commissions paid in the United States. I do believe that that conversion rate is trending up and I don't know if it's 4%, 5%, 6% is very hard to say.

But it’s something that we’re focused on strategically. And some of the ways that we work on improving lead conversion rate are firstly, by reducing the number of low performing agents who are Premier Agents.

So over the last year or so, around 20,000 Premier Agents if I'm do the math correctly, we've exited them from the Premier Agent program and essentially reallocated those impressions to top performing agents who have higher lead conversion. So that's the single biggest lever on improving lead conversion.

Second biggest lever is tech connect at our Premier Agent App so increasingly leads are going into a CRM, not just into a Premier Agent’s e-mail, inbox, they are going into either the Premier Agent App that we give for free or they are going into the approximately 70 other CRMs that we connect to. So those are just a couple examples of things that we're doing to improve lead conversion.

I wish I had a better way of judging the impact that it's having other than – it's just very hard to measure. Your other question was about monetizing short order or sort of other innovative ad products besides our traditional Premier Agent business.

We have experimented a little bit on certain of our brands with monetizing short order and other ad products and we continue to test different strategies here. I don't have anything specific to announce right now but it's certainly it's not a significant driver of our total Premier Agent revenue today but it is something that we continue to evaluate and to test.

Great. Thanks, Spencer.

Hey guys congrats on a great quarter.

Thank you, John.

It sounds like you have been fairly successful in rejuvenating that Trulia traffic. I know you guys said the traffic is pretty top priority for you guys, and I guess the Sales and Marketing lift would reflect that.

But, just curious, A, what's the key thing kind of driving that success of rejuvenating the Trulia traffic? And then, B, I might have missed this, but how should we thinking about the pace of overall ad or branding spend throughout the year?

Sure. I'll take the Trulia piece and Kathleen can comment on the ad spend seasonality.

The Trulia story is one of an extraordinary rebound in its product innovation and traffic, so about a year ago, Trulia traffic was declining about 20% at the top of the funnel and leads were increasing about 20% on Trulia at the bottom of the funnel and today traffic at the top of the funnel for Trulia is growing around 15% to 20% year-over-year and at the bottom of the funnel its growing – leads are growing over 40% year-over-year so huge turnaround in Trulia traffic and lead volume. What's driving that, you name it.

Product innovation, better personalization, better marketing of the brand online and through other social channels. So just it’s been across-the-board improvements on the Trulia product and traffic growth.

PR, the Trulia Chief Economist is doing an extraordinary job with his team of generating PR stories around Trulia brand using Trulia data so it's really been across-the-board just an incredible success story over the last six months. Kathleen on ad spend?

Yes. So really nothing has changed on ad spend since we discussed in the last call.

We continue to execute on our plan for ad spend for this year which as we said last time around will be more than we spent last year but growing at a slower rate than our revenue growth. And a big part of that is that we're benefiting from the years of brand advertising that we're doing and we're spending both online and offline in a way that is far more efficient and effective.

We see this in offline as we said because of the brand investment and in online through the benefits of the scale. We did start a little bit earlier with our brand spend this year in Q1 but by and large you can expect it to look much like last year.

Okay. That's helpful.

And then, Spencer, just one more on Trulia. Have you guys – I guess as best you can tell, have you guys been able to tell a difference between the conversion rates of a Trulia versus a Zillow lead?

So the conversion rate from a Trulia visitor or to a lead we measure religiously and across all different platforms and based on how the consumer ends up on one of the brands et cetera. So we are constantly looking at that.

In terms of once this site or mobile app generates a lead what type of lead conversion that has no we are not able to measure that across brand. I have no reason to believe that has materially different lead conversion rate between Trulia and Zillow and I haven't heard from agents that it does or doesn't, but to answer your question precisely we cannot measure them.

Okay. Thanks for that.

Thanks, guys.

Thanks. I was wondering if you could, Spencer, drill down a little bit on two of the ancillary areas a little bit.

So first, StreetEasy? Could you talk about the materiality of that?

When you think about it has been a multi-period ramp for you, where you are in terms of versus where you wanted to go. And then, on the rental side, I know you said the revenue was up 100% year-over-year, and I imagine that's off a really small base.

But, how small is that base? When could that be material for the business overall?

Thank you very much.

Sure. So let’s see – these are both relatively small businesses I think very rapidly with very significant TAMs.

I guess as I look out to $1 billion or $1.5 billion of total revenue, I think that each of these could be 10% contributors. When we're say at $1.5 billion of total revenue, I don’t know how else to think about it.

I mean certainly, the New York TAM, if you look at total commission dollars paid in New York or real estate media spend in New York it supports a couple of $100 million real estate media opportunity in New York and I'm pretty confident that it’s going to be Zillow Group with our StreetEasy Naked Apartments, Trulia and Zillow brands in New York City that captures that. With respect to rentals we look at other rental listing sites and can name three others that have over $100 million of revenue and I think two others that have over $200 million of revenue on smaller traffic volumes and so we think that it supports a very large rental TAM as well and that's why we're investing heavily in it.

I think that's probably the most detail I can get into Mark. I think we'll do one more operator and then we’ll go to a couple questions that come in on through social media.

Yes, good afternoon. Thanks for taking the question.

This is Rodney for Bob. Just wanted to follow up, one, on Mark's question from before, and then I had a second one as well.

Following up on the rentals opportunity, what steps or what tools do you think need to be put in place to turn where you are today into those $200-million type opportunities? And then, secondly, I wanted to talk about some of the newer products on the seller side of the equation.

Done a very good job of getting down to the buy side of the equation, but can you talk about any of the traction you've seen on the seller side with your new products in the marketplace? Thanks.

Sure. Yes, thanks Rodney.

So with respect to sorry, if I'm paraphrasing the question properly it’s so what do we need to do to achieve that rentals and New York City TAM. And in the case of rentals, one thing we need to do is grow our number of multi-family leads.

A significant portion of our rental leads go to single family which we don't monetize. It's free to post your home for rent but we charge property managers to post apartments for rent.

So we need more leads to pay multi-family and that's certainly a focus of ours. A key way to accomplish that is to get more pay multi-family listings on the site and so we have a sales team that does exactly that.

So that's the sort of gating item on rental revenue growth or actually it's not really gating item but sort of the thing we need to do to achieve our TAM. With respect to New York revenue, New York revenue growth is a little more complicated because we have a number of different business lines at StreetEasy and Naked Apartments and we are continuing to experiment with different models within New York and StreetEasy for example, you know we have a building expert and neighborhood expert app products.

We also sell display advertising to home sellers and listing agents where listing agents or home sellers can buy featured spots on the homepage for example, and we saw a number of other ad products on StreetEasy and then on Naked Apartments we sell a cost per – really a cost per lead model to rental brokers. So I'd say to achieve the New York City TAM, we have more business model experimentation to do in New York and then full build-out of a sales team across the multi-brand portfolio addressing New York.

So those are the – to do to achieve the TAM in New York. I think we'll take the next question from Twitter, I'll give this one to Kathleen, Juvenal or Twitter handle at saidquee [ph] asks on the 4Q call in mid February you guided to growing revenues faster than sales and marketing but the opposite is happening in Q1 is it due to a big March spend, can you explain?

So Kathleen can you take that one?

So what we we've guided for the quarter was that for the full year, advertising expense was expected to be growing slower than revenue. What you're seeing impact of there are a couple things.

One as I said we started a little bit earlier this year with Q1 spending and advertising to get a good start off to the year. In addition because our sales have been so strong, we had unexpectedly high sales commissions for new bookings and we’ll be recognizing that revenue in subsequent quarters.

So it's consistent with what we guided. There's a little bit of timing there but still overall growth for 2016 in advertising expenses is expected to be slower than revenue growth.

Operator, next question please.

Thank you for taking my question and congrats on the quarter. Spencer, what are some of the gating factors that hold you back from rolling out advertising units for sellers or sellers' agents to pay extra to promote their listing?

As you know, this is how most international real estate portals monetize is by charging sellers and/or listing agents for prominence. It hasn't been a focus of ours to-date because we have a winning business model in trying to connect consumers with buyers agents and listing agents.

And so it's really been a question of prioritization for us that we've been focusing on business models that has worked so well. I know that it's a – the subject of great investor interest which is why I think several of you have asked the same question in slightly different ways.

We'll see. It’s certainly hasn't gone unnoticed that this is how international real estate portals tend to monetize.

But for now we’re focused on our current very successful premier agent business model which connects buyers and sellers with individual agents.

Thanks.

Thanks. I think a lot of mine have already been addressed, but maybe just a couple of smaller ones.

In terms of the implied revenue today, the yield for a converted lead, what kind of upside do you think? I'm looking at maybe the drivers of your revenue simplistically on the Premier Agent side of number of leads and converted leads and revenue per lead.

On the revenue per converted lead, where do you think that that can go to over time when you look at the economics of an agent and the economics of a converted lead? And then, secondly, I think you have a deal with Yahoo, and I believe they've recently announced they were going to exit that businesses.

Does that have any impact on your business this year or next year, et cetera? Thanks.

Sure, I’ll take it Mark. So firstly on Yahoo, I mean we power several other sites including Yahoo Real Estate, AOL, MSN, Leju in China and several others.

Zillow and Trulia have become such huge brands that those partnerships provide a very small portion of our total Premier Agent leads so they are generally nice partnerships but are not material to our lead volumes. And that goes for Yahoo as well as the others.

On lead conversion, and the ROI to Premier Agents I think you're thinking about the business in exactly the right way which is we generate leads some of them become commission checks and agents pass on a media model for access to those consumers. We think that the typical Premier Agent is probably earning about a 7x return on investment, so they spend about $5,000 a year with us on average and we think they make around $35,000 a year on average.

I will observe that it’s quite uncommon for a media model to generate such a large ROI for their advertisers and I'd also observe that the more one spends in advertising typically the lower ROI they're willing to accept because they are achieving significantly greater scale with their ad spend. So for example, a real estate team that's spending $50,000 a month buying media from Zillow Group should be very pleased with a much lower than seven fold ROI, because they're making so many – such large dollars in their ROI.

So I don't, it's very difficult to measure the ROI, because it's very difficult to measure lead conversion, so it's hard for me to say what will happen to this in the future but certainly we're focused on growing total lead volume and trying to make sure that we get paid for generating those huge volumes of leads to real estate agents. Next question please operator.

Great, thanks. A couple of questions.

I think you went over it a couple times – or, just in terms of the Real Estate growth or the other Real Estate – nice sequential growth there as well as mortgage really nice sequential growth. Can you give any more details around the drivers behind that?

And then, also display revenues, slightly better than expectations. If you can give a little more color on that as well.

Thank you.

Sure. So on real estate growth, we are finally recognizing the benefits of the combined platform selling across Zillow and Trulia and there's significant efficiency there, so that's great.

We're also seeing the benefit of the growth as we said in the cohort of our high spending agent who continued to grow both in number and in spend. On the mortgage front, it's a little bit different which is we had some product enhancement that I mentioned that simply make the leads more valuable.

So while we're sending fewer loan information requests because those loan information requests have a much higher value with a higher level of detail we are able to monetize them better resulting in 113% increase in the average revenue per request. So that's where a lot of that growth is coming from.

Sorry, go ahead, Aaron.

Any update on the display revenues coming in, it looks like slightly better than expectations?

Yes. And I think that's a good characterization slightly better than expectations.

We've not shifted strategy here in terms of our continued de-emphasis of the display business that being said the performance has been strong. We do expect over time that will by design continue to decline as we focus our attention even more to a contextual base advertising that's more useful for consumers and ultimately more lucrative for us.

But for right now, it was strong relative to what we expected.

Got it. Great, thank you.

Hi, great. Thank you.

I just had a couple of questions. First, is there any way you could quantify the impact of some of the acquisitions that you've recently done in terms of their contribution to the first quarter?

And then, secondly, obviously you posted some very strong audience growth in the quarter, and just curious about how you're thinking about the addressable market for audience going forward? And, how much runway you have left as you continue to grow audience and leads?

Thanks.

Sure. I’ll take the acquisition question.

Unfortunately probably somewhat unsatisfying answer because we really haven't specifically broken down the contribution of each but just a few highlights that we're seeing. Trulia is returning to very strong traffic growth so we're seeing benefit there and as we said significant contribution to our overall lead volume, disproportion at contribution in fact.

As the product team there works to improve that product that just keeps getting better and better and creates more value for us. We look at it now really on a holistic basis other than traffic and leads that are easily broken down.

We look at the Premier Agent performance overall and we do believe there have been benefits in that we will continue to re-benefit from the scale and from selling across the brand. As for StreetEasy, Spencer talked a little bit about the TAM there.

Again we are not breaking out that revenue but we have made significant progress in terms of capturing more benefits in the New York market and the Naked Apartments acquisition will certainly contribute to that. I think I'd characterize that as an acceleration of what we expected to be able to achieve in the New York market by adding those incremental listings.

Let me take a pass at the M&A and then set it to the audience TAM. I think your question was really focused on materiality with respect to Q1 results but I would like to tick through the strategic importance of the acquisitions we've done because I'm actually incredibly proud of our M&A track record.

So StreetEasy speaks for itself, portfolio provided us with the management team that runs StreetEasy so portfolio was incredibly successful [indiscernible] from a management standpoint. Naked Apartments I think we've spoken about Naked Apartments acquiring the second largest rentals website in New York is allowing us to achieve audience scale.

DotLoop we're just getting started but the strategy around DotLoop is that real estate agents who close more business are better advertisers and agents close more business if they use electronic transaction management software. And so acquiring the leader in electronic transaction management software in the real estate industry is all about helping real estate agents be more effective and efficient so DotLoop is an important part of the strategy.

HotPads was an incredibly successful acquisition because it generate a significant portion of our rental leads and it’s a very important brand and grown incredibly quickly. And Mortech is the basis for our mortgage pricing engine and mortgage strategy and much of the mortgage success over the last five years can be traced to the Mortech acquisition which at the time I thank was not really well understood by investors and has been just a jewel in our portfolio.

The Trulia acquisition speaks for itself obviously that's about growing building another brand but also growing Premier Agent lead volume and rental lead volume. Diverse Solutions was a fantastic aqua hire which created incredible engineering team in the Irvine office which built lots of different features and products across our portfolio.

Postlets provides us with rental listings was a very small acquisition with very strategic in terms access to rental listings and on. So anyway, I’m very proud of our M&A track record and each of them contribute in different ways.

On the audience TAM, the unique user number, the 166 million unique users in Q1 to be clear that’s really unique machines. Okay so because Google [ph] on the list it doesn’t do a good job of de-duping people when they visit say from their iPhone and their PC.

So I don't know what a reasonable total TAM is because I can't predict how many devices people will have in the future. What I do look at though is the share of transaction side that we think that we’re responsible for generating.

So we think last year, we were responsible for generating 3.9% of all real estate sites in the U.S., so that’s – they got a 11 million transaction sides in the U.S. a year, we responsible for that 3.9% of them.

So we have a significant runway in front of us in terms of growing the total amount of real estate commissions that we’re responsible for helping generate how many devices will be used to generate those – I really don’t know. I think operator next question please.

Thanks for taking the question. If you can just maybe put in context the 4 million leads you guys got this quarter and help us understand that number in the context of about 5 million to 6 million homes sold a year in the U.S.

What do you attribute to getting almost as many leads in a quarter as homes are sold in an entire year? Is that just kind of agents are slow to respond – some of the laggards?

And so, people put in a lot of different lead requests before they get a response? You take phone numbers and e-mail addresses so maybe you have a better sense of a de-dupe number that you could share or contextualize that figure for us?

Sure. I think a lot of buyers are pinging agents on multiple houses.

A lot of owners are pinging agents to get a better opinion of their own homes valued for the purpose of generating or becoming a listing so selling their home, and then of course people shop for multiple months, so they're shopping for three, six, nine, 12 months over an extended period of time so they are generating many loads off a multi-month period of time and only resulting in one transaction. So that's why the number of leads a year is always going to be significantly larger then the total number of transactions.

I don’t know what the total TAM is for real estate leads per year I do know what’s the TAM is for real estate sites per year because I feel confident about the 4.5 million, I’m sorry the 5.5 million home sales per year. Yes, so anyway that’s sorry to answer that way.

I think one more question or two. Okay last question please, Operator.

Hi, thanks for taking the question. Can you – I apologize if I missed this, but can you just talk us through where we are through the process if we're moving the legacy or the low-performing agents off the platform?

I'm just curious if that is mostly complete? And then, of the 4 million leads, is there any more context you can break down between leads from Zillow and Trulia, and maybe how those changed year-over-year?

Thank you.

Sure. So I guess the way I think about connecting or consumers with the best possible agents it’s a forever project.

Because we’re always trying to up-level the education agents the ability of agents to convert internet leads into transactions and we have lots of training initiatives around it. We have sales tactics around trying to make sure we're selling to the best agents et cetera.

So its not something that we’ll be done one day, that having been said, it was a huge focus of ours over the last year or two to reduce the number Premier Agents and we are mostly through that big effort that heavy lift but its not something that’s ever completely done. On the – second part of the question was about – was about right.

So leads across Zillow and Trulia. So about two-thirds of our leads come from Zillow and about one-third of our leads come from Trulia.

And that’s been pretty consistent over the last couple of years during 2015, when Trulia traffic was challenged, Zillow was more than two-thirds and Trulia was less than two-thirds. Now it’s around two-thirds, one-third.

So that’s some texture or context around lead volume. I think with that, there are couple other questions that coming through Twitter which will take in just a second offline after we get off the call.

But I would just say for now to end the call. Thank you for joining us.

We are very excited about 2016. We promised accelerating revenue growth and we delivered on it.

We’re excited about extending our category of leadership and we'll give you another update on our progress in August. Thanks very much everybody.

Thank you all. Ladies and gentlemen, thank you for your participation in today’s conference.

This concludes the program and you may now disconnect. Everyone have a great day.