CoStar Group (CSGP) Stephens 26th Annual Investment Conference | NASH2024 summary

Residential strategy and market positioning

• Expansion into residential real estate is seen as a natural evolution, leveraging data and cross-platform synergies from previous acquisitions like LoopNet and Apartments.com.

• The focus is on empowering seller's agents with leads and marketing tools, differentiating from competitors who prioritize buyer leads.

• The "your listing, your lead" model aims to give listing agents full control and monetization of their leads, aligning with successful international models.

• Regulatory changes in MLS rules could further benefit the platform by allowing exclusive marketing periods for listings.

• Significant investment in Homes.com ($900 million in 2024) is allocated 60% to marketing and 40% to content, technology, and sales, with a focus on building brand awareness and agent education.

Execution, investment, and operational pivots

• Early sales efforts were broad but have since been refined to target agents with active listings, improving lead quality and reducing churn.

• Marketing and sales strategies have been adjusted, including hiring experienced leaders and revamping messaging to emphasize agent value.

• Brand awareness for Homes.com has rapidly increased, with unaided awareness rising from 4% to 33% in eight months.

• The company is committed to maintaining a $900 million annual spend on Homes.com, with clear communication to investors about timelines and expected returns.

• Performance metrics and KPIs are being established, with expectations for meaningful revenue data by the second quarter of next year.

Core business health and growth levers

• Core commercial platforms like CoStar Suite and Apartments.com are expected to accelerate as sales force distractions subside and market conditions improve.

• Institutional clients now represent two-thirds of CoStar revenue, with new products for lenders and owners expanding the addressable market.

• The lender product automates regulatory processes like CECL and DFAST, providing significant value to banks and financial institutions.

• Both lender and owner products are under 10% penetrated, indicating substantial growth potential.

• Sales force expansion and productivity improvements are planned to drive future growth.