Zillow, the fair haired real estate start up, read the tea leaves for real estate advertising and did not like what they saw. On Friday Zillow let 40 members of their staff go to survive what they call a major economic storm on the horizon.

My guess is that they have built out the infrastructure of the site and are now settling in for the long haul. With 160 employees and an advertising based revenue model Zillow could be burning cash. From my own perspective real estate advertising rates are down 40–50 percent since January and that is not counting the recent mess on Wall Street the past couple of weeks.

If I had to bet, the 40 will turn into 60–80 in 6 months if the economy remains sour.

Zillow.com, a real estate website, on Friday cut 25 percent of its staff, or 40 employees, in advance of what the company’s chief executive called a “major economic storm.”
“Despite having sizeable cash reserves, we deemed the responsible course was to meaningfully reduce expenses so that Zillow emerges from the other side of the recession in a very strong position, even if the recession lasts many years,” CEO Rich Barton wrote in a blog on the company’s website.
“The unprecedented economic events that are playing out on a global stage began in our own industry and have made a prolonged recession likely, in our judgment. We are a young company that is not yet making a profit.”
According to company spokeswoman Amy Bohutinsky, privately held Zillow has raised $87 million in financing, with its last round coming in summer of 2007. via Reuters.

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