Zillow (NASDAQ:Z) : It’s Not Just the Ridiculous Valuation – it’s the Ridiculous Business Model


When it comes to investing in Web 2.0 , the stampede is on – everybody wants a part of the Next Big Thing.  The rewards have been great for companies like LinkedIn. 

But the risks of investing in anything less are devastating.  The market has been unforgiving in punishing disappointers, as seen in recent collapses in Facebook, Groupon, Zynga Netflix and Pandora. 

So what determines the difference?

Investible Web 2.0 companies have all of these critical success factors:

1)   A new and disruptive way to use internet technology to meet a real market need

2)   Exponential revenue growth driven by viral buzz, solidly founded on genuine customer loyalty

3)   Soaring revenues free of heavy expense models – not dependent on overhead-heavy sales department headcounts

4)   Revenue transparency throughout the complete business model

Zillow (NASDAQ:Z) has had an incredible run, doubling since January based on the hope it will become a Next Big Thing. 

But Citron sees more than just shadows of doubt here – Zillow utterly fails each of the four points above.  While management glibly talks the Web 2.0 game, Citron sees major red flags in every one of the four criteria above.    

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Citron Reports on Zillow