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While traffic to internet real estate sites is growing faster than traffic to normal internet site, those that have created business models to sell homes through the internet are finding that their business has also slowed down. And even for high flyers like Zillow, profitability is still in the distance.

And that makes sense. There is always an excitement by the early adaptors, such as you and I, when cool new ways of doing business arrive on the market. Concepts like Zillow, Trulia, and Zip Realty get our imaginations fired up. But as with the first wave of web businesses, there is a high rate of failure and shake out as these businesses find out what will and will not work. Amazon has always been the leader in online commerce, but it took years to find profitability.

So knowing which model will be successful in 5 years is impossible to know, but as we move forward the opportunity for success is there, it just is a long hard climb.

Founded amid the Internet hoopla of 1999, Zip couples an in-house discount brokerage with a consumer-oriented Web site.
But visitors to Zip’s Web site fell 8 percent in December 2006 compared to December 2005, according to comScore Media Metrix, a division of comScore Networks Inc.

And after netting more than $20 million on sales approaching $100 million in all of 2005, the company lost $3.3 million in the first three quarters of last year. In public filings Nov. 9, it cited declining transaction volume as one reason for its troubles. Its president and chief financial officer, Gary M. Beasley, resigned less than 30 days later, after five years in the post.
Home builders and traditional residential real estate brokers aren’t the only ones feeling the effects of slowing U.S. home markets. Web-based real estate companies, many of them new, are also feeling the change. For some, today’s less-frenzied environment is delivering up hard blows, cutting revenue and visitors to their Web sites. For others, however, upside is trumping the downturn, as less harried home buyers spend more time researching online and growing numbers of battered agents turn to the Web to try to shore up their businesses.
“The downturn in the market means there is less money for everyone, so it’s not great for the industry as a whole,” admits Pete Flint, a founder and chief executive of San Francisco-based Trulia.com, an online listing site that caters to brokerages and sells advertising.  via MLive

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