Zillow stock falls as Google tests new real estate ad format

Investing.com -- Zillow Group Inc (NASDAQ: ZG) stock fell over 5.5% Monday as investors reacted to news that Google is testing a new real estate advertising format that could potentially compete with Zillow's services.

The search giant has introduced a mobile-centric real estate ad format that provides comprehensive property details, options to request home tours, and displays similar listings directly within search results. This new format allows users to schedule home showings with "top-rated" local agents through a "Request a tour" button, with an expected response time of 15 minutes.

Goldman Sachs analyst Michael Ng noted that while the immediate impact on Zillow may be limited, the development represents a potential long-term risk. "While we don't expect a direct near-term impact on Zillow's business, given that most of Zillow's traffic is direct and Google's new product is currently limited to select markets and mobile browsers, we view this development as a long-term risk for real estate portals like Zillow," wrote Ng, who maintains a Neutral rating on the stock.

Google's new ad product is a collaboration with real estate analytics and brokerage firm ComeHome, which sources listings reportedly from the Multiple Listing Service rather than directly from listing agents. The format directly competes with Zillow's Premier Agent program by facilitating lead generation for buy-side agents from prospective homebuyers.

The new Google feature embeds capabilities typically found on real estate portals, including filters for bedrooms, bathrooms, square footage, price, and new listing status, potentially challenging Zillow's position as a go-to destination for home searches.

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