Redfin Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 3, 2023

There are 7 speakers on the call.

Operator

Day, ladies and gentlemen, and welcome to the Redfin Corporation Second Quarter 2023 Earnings Conference Call. Our host for today's call is Meg Nunley, Head of Investor Relations. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. I would now like to turn the call over to your host.

Operator

Meg, you may begin.

Speaker 1

Good afternoon, and welcome to Redfin's financial results conference call for the Q2 ended June 30, 2023. I'm Meg Nunnally, Redfin's Head of Investor Relations. Joining me on the call today is Glenn Kelman, Our CEO and Chris Olson, our CFO. Before we start, note that some of our statements on today's call are forward looking. We believe our assumptions and expectations related to these forward looking statements are reasonable, but our actual results may turn out to be materially different.

Speaker 1

Please read and consider the risk factors in our SEC filings together with the content of today's call. Any forward looking statements are based on our assumptions today, And we don't undertake to update these statements in light of new information or future events. On this call, we will present non GAAP measures when discussing our financial results. We encourage you to review today's earnings release, which is available on our website at investors. Redfin.com for more information regarding our non GAAP measures, Call against the same period in the prior year unless otherwise stated.

Speaker 1

Lastly, we will be providing a copy of our prepared remarks on our website by the conclusion of today's call And a full transcript and audio replay will also be available soon after the call. With that, I'll turn the call over to Len.

Speaker 2

Thanks, Meg, and hi, everyone. In the Q2 of 2023, Redfin generated Our net loss of $27,000,000 was better than our forecasted loss between $35,000,000 $44,000,000 due to a $20,000,000 gain from purchasing our 2025 notes at a discount. But even as our share of online demand has increased sharply, we're Unlikely to get enough second half sales to earn the full year adjusted EBITDA profit that we had forecast coming into 2023. We now expect 2023's adjusted EBITDA loss to be about $45,000,000 This is an improvement of more than $140,000,000 Over 20 22's adjusted EBITDA loss with similar gains planned for future years, from July 2023 to June 2020 We plan to generate a full year adjusted EBITDA profit.

Speaker 3

We still expect between $4,200,000

Speaker 2

and 4.3 1,000,000 existing homes to sell in 2023. The Redfin's market share has been lower than expected After year over year share gains in every quarter since our 2017 public offering, we lost 2 basis points of share in the Q4 of Loss widened to 8 basis points, mainly due to one time setbacks. Agent layoffs forced us to reassign about a third of our active customers And the closure of RedfinNow eliminated about 12% of our listing demand. We expect market share to improve from quarter to quarter By the Q4 and perhaps as early as the Q3, throughout the year, demand largely met or We expect close rates to return to historical norms for two reasons. As customers adjust to higher mortgage rates, our sales will become more predictable and our plan to recruit and retain a more sales driven agent, which we'll discuss later in this call, will help compete better against brokers who have been hungrier than ever before.

Speaker 2

Our real estate gross margins have improved from 29% in the Q2 of 2020 to 31% in the Q2 of 2023. Once we stop hosting tours for so many people who canceled their home buying plans, Gross margins will go up more. Eliminating the homebuyer commission refund is one source of margin gain, but we've also lowered the ratios of Managers and support staff to agents and switched from employees to contractors for listing photography, improving our long term unit economics. One factor that will keep lifting margins, but at the expense of share is the shift of partners. We estimate that in 2024, as many as 55% of our customer inquiries will be served by a partner agent, up from 45% so far this year and 37% in 2022.

Speaker 2

A sale, whether from a partner or an employee, Has the same contribution to share, but our employees yield 40 plus percent more sales from the same home buying traffic. Since the sales we're shifting to partners are only marginally profitable for employees to handle, we can't worry about how many more closings an employee could have gotten. The share we're focused on is our share of significantly profitable sales. And regardless of how much demand we shift to partners or how much we limit Our growth can continue because its primary source has never been low cost capital, but building a better listing search site and then using that Offer online visitors better service. Even with a drastic reduction in advertising, redfin.com has been drawing visitors away from rival sites.

Speaker 2

According to comScore, which we use to compare our traffic growth to others, 2nd quarter visitors to redfin.com increased year over year by 9% Compared to a 5% decline for the largest for sale search site and a 13% decline for the 2nd largest, The gap in year over year business growth between Redfin and these competitors averaged 12 points in the Q1 and 17 in the second. We know that this online traffic growth gives our sales force more bonafide opportunities to gain share because we track the demand from our all the way through to a sale, whether the customer closed with Redfin or switched to another broker. Comparing the first half of twenty twenty three to Our investment in artificial intelligence is one reason we're confident Redfin's traffic can keep growing. The software we've already built for estimating a home's value or recommending a listing is based on artificial intelligence. Artificial intelligence is why our engineers don't have to update that to recognize the growing importance of air conditioning in Seattle or the increasing likelihood that post pandemic homebuyers are looking further afield.

Speaker 2

The software updates itself. We're now extending this software from for sale listings to rental listings. In October 2022, We've also been at the forefront of conversational real estate search via OpenAI, Google and Microsoft Technologies. But since our company spends so much on labor to interact with customers, prepare offers and underwrite closings, the larger opportunity Maybe in helping homebuyers who have contacted us for service. We have explored uses of this technology to make the Redfin We believe the efficiency gains that a technology powered brokerage can get through the engineers we already have accessing low 1st disruption in real estate when Redfin first published listings on an online map.

Speaker 2

Even as we expect increasing yields from our technology Sales performance should also improve. We expect that our low listing fees coupled with our unrivaled ability to get online real estate shoppers out In person home tours can drive share gains for years to come in most U. S. Markets. But in higher price coastal markets, Starting with the pilot in San Francisco and LA, we're entering 2024 with a different approach to hiring agents.

Speaker 2

In the San Francisco Bay Area, our share is below 2 percent, but the share of people who bought a home and who had earlier contacted our agents for service is nearly 30%. It's even higher for purchases above $1,000,000 Anyone launching a brokerage today with that much demand would have a massive And to recruiting and retaining the best agents, entering 2024, we plan to give San Francisco and LA agents the lion's share of the commission on self sourced sales, While keeping for ourselves the high margins on RedfinSource sales, our goal is to hire and keep agents who can deliver better service and higher close rates for RedfinSource customers buying homes above $1,000,000 and incremental profits from their own sales too. If this model works in California, we'll extend it to other coastal cities with higher home prices, driving share gains in our largest most profitable markets. Coupling these changes with a normalizing housing market, whether that happens in 2024 or beyond, could have Formative impact on revenues, gross margins and net income. Beyond the improvements in our core brokerage We're making progress at broadening our online marketplace with for sale and for rent listings and at broadening the products we sell to the people using that marketplace With mortgage and title service, it's hard to be expansive through a downturn, but the result will be a more valuable company able to compete at the scale needed to win.

Speaker 2

The rental listings we've added to redfin.com are one reason overall traffic growth has accelerated. From June 2022 to June 20 The number of redfin.com sessions that included a visit to a rental property nearly doubled, all with virtually no ads promoting Redfin's rental search. Aided in part by this new source of consumer demand and even more so by an expanded product offering, strong value proposition and rejuvenated sales force, Rent's 2nd quarter revenues increased 19% year over year. More growth is ahead. Rent's 2nd quarter net bookings, which are the annualized revenues Rent added through sales to new customers less the annualized revenues lost from departing customers increased more than tenfold from 2022 to 20 Topping that number in the 2nd quarter has been especially impressive.

Speaker 2

From quarter to quarter, rents adjusted EBITDA losses narrowed from $9,700,000 to $8,700,000 keeping it on track to breakeven in the Q4. But our investment in a larger vision isn't just limited to our online presence. We also want to offer our customers more service so that Redfin can earn more income from a visitor than any other real estate company. This will take time to pay off just because Bay Equity, the lender we acquired in April 2022 is the Redfin business most affected by rising rates. Percentage of Redfin homebuyers who used the equity to finance their purchase increased from 8% in the Q2 of 2022 to 20% in the Q1 of 2023, But that attach rate dipped to 19% in the Q2 of 2023.

Speaker 2

We've now entered a second slower percent levels for places like Atlanta, Salt Lake City or Maryland. Redfin and Bay Equity execs are visiting low attach rate markets and Bay Equity is hiring loan officers in capacity gated areas. It will take time to increase attach rates from here, but we believe we'll keep making progress. Bay Equity sales through brokers other than Redfin are projected to increase from the first half to the second, but Bay Equity is now Our title business is one reason we're confident that as pricing pressure eases on lenders, we can keep lifting attach rates for ancillary services. From the Q2 of 2022 to the Q2 of 2023, title revenues grew 54% with an attach rate exceeding 60% in markets launched prior to 2023.

Speaker 2

Beyond title service, the 2nd major component of our other segment is digital revenue, which in the Q2 grew more than 150% year over year, validating our plan to make more money from our online audience. About half of this money came from the ads we run on redfin.com. Much of the rest came from a mortgage marketplace for connecting homebuyers to lenders other than Bay Equity, which doesn't have the national sales center to handle online demand. By the end of the year, we expect a significant increase to add tens of thousands of new construction listings to our online marketplace. Redfin will get only a portion of the revenues Redfin will continue to prioritize digital revenue projects.

Speaker 2

We expect our digital revenue to grow faster than any of our other businesses, improving overall margins and reducing earnings volatility. Before turning the call over to Chris, Let's discuss the housing market. We should be careful in the months ahead about claiming victory from any year over year gain as we'll now be comparing the second half of twenty twenty three to a period in 2022 when the market was in full flight. Sales volume is near rock bottom. Home prices are stable or even rising due to low inventory, which is likely to remain low.

Speaker 2

July's year over year drop in active listings was the largest in nearly 18 months. There is enough inflation risk that the Federal Reserve will have to maintain the possibility of another hike through the fall, keeping mortgage rates near 7%. But the almost miraculously good news is this, most economists once viewed a recession as unavoidable and now see it as unlikely. When rates come down, the housing market will be poised to grow again. For now, The only way Rentsen plans to grow is by returning to our long history of methodical, glorious share gains.

Speaker 2

Take it away, Chris.

Speaker 3

Thanks, Glenn. We're pleased with our 2nd quarter results, which were in line with our expectations. We sold our last RedfinNow houses in the 2nd quarter and moved our properties business to discontinued operations. To simplify comparisons to prior periods, I'll be discussing results for our continuing operations unless otherwise noted. 1st quarter revenue was $276,000,000 down 21% from a year ago.

Speaker 3

Gross profit was $100,000,000 down 10% year over year. Total gross margins expanded by 4.50 basis points from 31.9 percent to 36.4%. This expansion was driven by a mix shift to higher margin businesses as well as fundamental improvements in real estate services gross margin. Real estate services revenue, which includes our brokerage and partner businesses, generated $181,000,000 in revenue, down 28% year over year. Brokerage revenue Revenue from home sales closed by our own agents was down 29% on a 33% decrease in brokerage and a 6% increase in brokerage revenue per transaction.

Speaker 3

The increase in revenue per transaction was driven by the elimination of our commission refund as well as revenue from Concierge Renovations, which more than offset a 6% decrease in average home prices for brokerage Transactions. Revenue from our partners decreased 4% on a 1% decrease in transactions and a mix shift to lower value houses. Real Estate Services gross margin was 31.1%, up 170 basis points year over year. This was primarily driven by a 410 basis point decrease in personnel costs and transaction bonuses, offset by 110 basis point increase In Seller Home Improvement Expenses, 40 basis points in Mileage and Fleet Costs and 40 basis points in Listing Expenses. Total net loss for the real estate services in the 2nd quarter was $9,000,000 up from a net loss of $19,000,000 in the prior year and adjusted EBITDA income was $9,000,000 up from a loss of $5,000,000 in the prior year.

Speaker 3

The increase was primarily attributable to higher gross margins and lower operating expenses, which more than offset lower revenues. Our rental segment posted its 3rd straight quarter of growth with revenue of $45,000,000 and growth of 19%. Total net loss for rentals was $23,000,000 slightly worse than a net loss of $19,000,000 in the prior year, as higher gross profit was offset by higher operating expenses. Total adjusted EBITDA for the 2nd quarter was negative $9,000,000 And we still expect our rentals business to generate positive adjusted EBITDA by the Q4 of 2023. Our mortgage segment generated $38,000,000 in revenue, down 28% year over year.

Speaker 3

This result was within our guidance range and better An industry wide contracts from approximately 32%, indicating share gains against the market. Mortgage gross margin was 10.8%, down from 12.8 percent a year ago as cost reductions have not fully offset the impact of lower volumes. Total net loss for mortgage was $4,000,000 an improvement from a net loss of $6,000,000 in the prior year. Total adjusted EBITDA loss was $2,000,000 an improvement from a $6,000,000 loss in the prior year. Our other segment generated $11,000,000 of revenue in the 2nd quarter compared to $6,000,000 in the prior year as both our title and digital revenue businesses grew.

Speaker 3

Other segment gross margin was 44.1%, up from a negative 0.1 percent a year ago. Total net income was $3,000,000 compared to a net loss of $2,000,000 in the prior year and adjusted EBITDA was positive $4,000,000 compared to negative $1,000,000 in the prior year. As Glenn noted, we see an opportunity to continue to grow our digital revenue business, which should be nicely accretive with profitability of Redfin overall. Turning back to consolidated results. Total operating expenses from continuing operations were $148,000,000 down $36,000,000 year over year.

Speaker 3

The decrease was primarily attributable to $23,000,000 in lower marketing $11,000,000 in legal acquisition and restructuring expenses in the prior year that did not repeat in the current year and $2,000,000 in lower personnel expenses. Net loss from continuing operations was $27,000,000 compared to a net loss of $75,000,000 in the prior year. The impact from discontinued operations was negligible, so total net loss was also $27,000,000 This was better than our $44,000,000 to $35,000,000 guidance range due to A $20,000,000 gain on the extinguishment of notes as only $4,000,000 of this gain was anticipated in our guidance. Our adjusted EBITDA from continuing operations of negative $7,000,000 was in line with our guidance range of negative $9,000,000 to positive $1,000,000 Diluted loss per share from continuing operations attributable to common stock was $0.25 compared with $0.70 1 year ago. Now turning to our financial expectations for the Q3 as well as longer range profitability targets.

Speaker 3

Starting with the profitability targets, I wanted to underscore what Glenn said earlier. Given the challenging market conditions, we no longer expect to reach our target of being adjusted EBITDA positive in 2023. While our top of the funnel activity remains strong, our close rates and market Consumer demand for houses remains strong. We want to make sure that Redfin is positioned to capitalize on market recovery when it happens. So we're pushing out our timeline to achieve this goal, but still remain focused on running the business for profitability.

Speaker 3

We now expect to achieve adjusted EBITDA breakeven on a Trailing 12 month basis in the first half of twenty twenty four. Furthermore, we still expect to achieve net income profitability in 2024. For the full year 2023, we expect adjusted EBITDA loss from continuing operations to be closer to $45,000,000 And we expect real estate services gross margin to be roughly 27% with the potential for further expansion in future years. Turning to our expectations for the Q3 of 2023. We expect total revenue between $265,000,000 and $279,000,000 representing a year over year decline between 13% 9% compared to revenue from continuing operations in the Q3 of 2022.

Speaker 3

Included within total revenue between $172,000,000 $182,000,000 rentals revenue between $46,000,000 $47,000,000 Mortgage revenue between $35,000,000 $38,000,000 and other revenue of approximately $12,000,000 For Real Estate Services, we expect gross margins to increase by 400 basis points to 600 basis points compared to the Q3 of 2022. Total net loss, including both continuing and discontinued operations, is expected to be $30,000,000 to $21,000,000 compared to a net loss of $90,000,000 in the Q3 of 2022. This guidance includes approximately 25 Adjusted EBITDA from continuing operations is expected to be between $4,000,000 $14,000,000 compared to an adjusted EBITDA loss from continuing operations of $51,000,000 in the Q3 of 2022. Furthermore,

Speaker 2

we expect

Speaker 3

to pay a quarterly dividend of 30,640 shares of common stock to our preferred shareholder. This guidance assumes, among other things, that no additional business acquisitions, investments, restructurings, convertible note or other stock repurchases or legal settlements are concluded that there are no further revisions to stock based compensation estimates. And now let's take your questions.

Operator

Your first question comes from Yigal Arunyan of Citi. Your line is open.

Speaker 4

Hey guys, good afternoon. I have two questions and I think they're pretty related. I'll ask them together. So first, On the overall market, Glenn, Chris, you guys I think are I know are much smarter on this on the housing world than I am, right? You live and breathe it.

Speaker 4

And you talked about a recovery, you're talking about I'm not seeing a recession and but at the same time talking about rates coming down. And I think this is something we've been kind of hearing From around the ecosystem, customers learning to adapt to higher rates and all that. But at the same time, you guys Put out a lot of things about affordability. There's no real incentive for people to move in the near term with the rates that they have. And I just struggle to find like where the logjam breaks on a recovery other than waiting for everyone's rates to just Kind of go away, especially on the adjustable side.

Speaker 4

And then there's not that much more Of an incentive to not move, although you still have the affordability problem. And then tying that into maybe expanding a little bit on the agent strategy. So with some of the shifts you're making here, are you going after more partner agents Ben, are you continuing to kind of freeze your full time agents, but not So, but not laying people off. And then I'm not sure I fully caught how the new structure, was it in LA and Seattle, LA, San Francisco helps kind of improve the financials the way you were talking about. So I know there's a lot in there, but hopefully 2 pretty important topics.

Speaker 2

Thanks. Great question. So first of all, on the housing market, we do not anticipate Any significant change in the housing market through the second half of twenty twenty three, you're absolutely right that high rates are going to limit the amount of inventory Available for sellers and for buyers, affordability is just going to be a huge issue. So we expect 4,200,000 units to trade in 2023, which is unchanged. We did say that we want to be prepared for a market recovery, but we also expect to be able to grow in this market just by gaining share, which should Start in Q3 or Q4 of 2023.

Speaker 2

We just have to lap some one time setbacks like the closure of Redfin now And laying off about a third of our sales force. So that is our basic take on the housing market, which is it's in a jam. It's unlikely to change anytime soon. The only good news is that the rate increase has not sent the whole U. S.

Speaker 2

Economy into a tailspin. So housing should be in a good place as rates ease, probably in the first half of twenty twenty four, who knows when. That's always hard to guess. As for the second issue, there are 2 elements to our strategy. 1, we've already discussed.

Speaker 2

1 is absolutely new. So the first element is that we're moving More of our demand to partners to make the business more resilient. So a year and a half ago, about 37% of our demand Went to partners by 2024, we expect 55% of demand to go to partners. That's part of a long standing strategy that we've Amply discussed in previous calls, it will affect our market share just because our employees yield about 40% more sales than our partners from the same home buying traffic. But those incremental sales wouldn't have been very profitable anyway And we don't want to carry the fixed costs.

Speaker 2

So we are shifting to partners. Here's what's new. This is what we talked about for the first time today, which is that we're hiring a more traditional type of agent. So usually the trade off at Redfin when we approach agents is You'll get more Redfin customers, but at a lower split. So you have to close more sales to make the same amount of income or more income.

Speaker 2

Now we're trying to offer agents the best of both worlds where we allow agents to close sales from their personal network At a split with Redfin that's similar to what they would get at a traditional broker, while retaining the high margins on Redfin store sales. So let's say an agent is closing 10, 15 sales in California above $1,000,000 they could come over to Redfin and earn about the same income, but we could help them meet Customers to close another 10 or 15 sales and that would be incremental and that would be at the Redfin margin. This is what our competitors fear we would do. It is one that they have always hoped we would not do. And we think it's going to let us close sales at significantly higher rates where we can go out and compete In these coastal markets where we're seeing about a third of all the customers who end up buying a house, about a third of them contact Redfin for service even though our share It's 1.5% or something like that.

Speaker 2

And so we can do much better, if we can increase close rates by hiring a better agent. We think this is going to unlock a lot of growth.

Speaker 4

Thanks. So you're hiring just to follow-up on that, you're hiring these agents or Of the agents that you currently have switching them over to this model. So I'm not clear if you're if this means you're hiring the people?

Speaker 2

We're doing both. So we're announcing the plan. We need to do better in coastal markets where the most lucrative home sales happen. So we have open requisitions in San Francisco So that we're going to aggressively start filling in the 4th quarter especially, and we're going to start hiring a different profile of agent With lower fixed costs, more variable pay, this is just a more traditional salesperson who wants to augment his or her income with RedfinSource sales and we're switching our existing agents in those pilot markets to this pay plan.

Speaker 4

Got it. Really interesting.

Speaker 2

Excited to see how that works out. Thank you. Thank you.

Operator

Your next question comes from John Campbell with Stephens. Your line is open.

Speaker 5

Hey guys, this is A. J. Hayes stepping in for John. Thanks for taking our questions. So you obviously changed your adjusted EBITDA profit target here, but can you just talk About your confidence in hitting this new target of hitting adjusted EBITDA profitability over the next 12 months?

Speaker 5

And then if things play out as industry forecasters are Currently expecting, are there additional cost levers that need to be pulled? Are you set to achieve this target without any further cost reduction efforts? Can you just Generally, just help or adjust to this new target?

Speaker 2

We've assumed there will be no Further cost reductions in setting this target and we've been careful about the revenue projections that we make. At some point, we do need to return to share gains, but we have a basis for believing that will happen in part by looking at pending sales. The trends are already positive, but also just based on some of those one time setbacks we already Scott, the closure of RedfinNow accounts for 12% of our listings. We need to lap that. We cut our sales force by a third.

Speaker 2

That disrupts Sales cycle for about 6 months. We're about to get beyond that effect. And then we just have really strong traffic growth powering us right now in terms of the top of the funnel. So all those factors combined to make us believe that we can take share And we're not expecting aggressive share gain when we made this earnings forecast. So Chris, I don't know if you want to add any color, but it's not a rosy forecast.

Speaker 2

So when you have to take the number down, you want to give yourself a margin there.

Speaker 3

2 other comments I'd make For the rest of this year and into the 1st part of next year also and that's that our rentals business continues to make profit Progress towards profits in the Q4 of this year, we expect to be adjusted EBITDA positive and we expect Continued growth into next year. So that's a place where that bottom line is changing for Redfin and that's making a difference and I And then the second is something else that we talked about on the call today And that is that our digital revenue has been increasing. We expect it to continue to increase. So that becomes an even more important contributor to profits as we move forward.

Speaker 2

A. J, the final thing to say about 2023 is that it's half over. So you always have more confidence in Your projections when you have 6 months on the comp instead of 12, especially when you've got about 40 days On revenue, a perfect visibility on revenue, at least in real estate services, mortgage a little bit.

Speaker 5

Got it. Great. Thanks for the color there. And then Chris, you touched on digital ad revenue. Kind of just want to explore that a little bit further.

Speaker 5

Has the introduction Have advertisements at all influenced the consumer experience from what you've heard? And then looking more long term, should we expect this to continue when housing RJ, it starts to perk back up and you might not need this additional high margin revenue stream. Just essentially trying to gauge, is it safe to assume that this is kind of part of the long

Speaker 2

And that's a trade offs that we're going to be very careful about just because it's been buttering our bread For so long getting traffic from Google, Bing, other places like that. So I don't know that we're going to be the absolute most aggressive about monetizing every single webpage with display ads. We have other ways to monetize that customer that can be very lucrative. But it's A long term component of our strategy, real estate services is so cyclical, Margins really get compressed in a down environment. And obviously, digital revenues can be a little bit cyclical, but not nearly as much.

Speaker 2

And so just having that green money come in month after month has been really good for our P and L.

Speaker 5

Thanks, Glenn. Good luck for the rest of the year.

Speaker 2

Thanks.

Operator

Our next question comes from Bernie McTiernan with Needham and Company. Your line is open.

Speaker 3

Hey, this is Stefanos Crist calling in for Bernie. Thanks for taking Questions. Just a quick one on the mortgage attach rates. Is there any more detail there and puts and takes and maybe expectations for the rest of the year?

Speaker 2

Mostly what was in the prepared remarks. So we think we can move that number up Because we've seen some markets that are sustainable rate of 30 plus percent, but it is going to be hard. So in some areas, Bay Equity just doesn't have enough loan officers. They need to recruit more. In other areas, we need to make sure that we just have really good sales execution by having Visit those offices, but it's a challenge we're taking personally and flying to markets that have low attach rates To make sure that I understand exactly what's wrong from the Bay Equity side and the Redfin side and just showing up makes a statement all by itself.

Speaker 2

So I don't think we're going to see a 7 point jump in attach rates from quarter to quarter, But I do think we're going to keep moving up. There is just incredible price pressure on lenders too right now. So that's the final issue is that there are still lenders willing to buy the business, willing to loan money No profit or at a loss, just because they're still trying to keep their underwriters busy. So as the market normalizes, I think it will be easier to drive attach rate too. We just can't wait for that.

Speaker 2

So we're rolling up our sleeves and fighting hand to hand, door to door.

Speaker 3

That's great. Thank you.

Operator

Your next question comes from John Colantoni of Jefferies. Your line is open.

Speaker 6

Hey, guys. This is Vincent on for John. So on web traffic, you're clearly making some nice strides there. Can you help us think about where that growth is coming from, whether it's folks looking for rentals or new homes or financing or if it's really just Largely, the core portal. And then as a follow-up, if you could share with us how you expect the partnership with Zillow to contribute on And then any other thoughts you have on what that partnership means for your business that would be appreciated as well?

Speaker 6

Thanks guys.

Speaker 2

Sure. Well, the main reason we're getting more traffic is that we're competing as a national scale portal. At some level, Redfin had been We had very strong traffic in coastal markets, but because of our retail model, we had been slow to launch In places like Cleveland or Kansas City, and so expanding across the United States, offering a better listing search experience, making sure the site loads very And just being at the center of every real estate conversation in terms of our link building efforts, our public relations, all of that has helped establishredson.com as one of the top places to go for for sale listings and then adding rental listings has just broadened our authority, so that when people are searching For housing, generally on Google, we are relevant not just for people looking for for sale listings, but rental listings. I'd say expansion of inventory on 2 different fronts, geographic and then inventory type for sale and rental I've been a big part of this. And then just offering a better listing search site is another big part of it.

Speaker 2

It's always been outrageous to me that we're the number 3 site for sale traffic when We think our search experience is so good. So that's why we're just going to continue to take Search share, we hope. And then as far as the Zillow partnership, it's just very consistent with that whole thesis One of the ways to compete for traffic is just to have more listings and working with Zillow let us get more listings fast. We could have hired our own sales force to approach the builders for all the listings that they don't put in multiple listing services. It would have taken years.

Speaker 2

The industrial logic of working with Zillow was really strong. We have to split the pot. They'll get some of the revenue that we help them generate And they should because they've helped us sign up those builders with their sales force. But we think it gives us better digital revenue now and even if we move it over 5 years. This is a deal that is more profitable than building our own sales force.

Speaker 2

So, even though we've sometimes Plugged it out with them for traffic. We are glad to be working with them on this. It's been a good partnership in its first All righty, everyone. I think that's it. We appreciate you tuning in.

Speaker 2

We're going to go work our tails off To make as much money as we possibly can. Thanks for everyone's support and we'll talk to you in a quarter.

Operator

This does conclude today's Redfin Corporation Second Quarter 2023 Earnings Conference Call. Thank you everyone for attending. Have a wonderful rest of your day.

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