Nick Wingfield:

It is hard to overestimate how significant the shift to instant-buying is for Zillow’s business. For most of its existence, Zillow made money by selling advertising to real estate professionals who wanted to reach the home buyers and sellers flocking to its site to look up property listings and gawk at their “Zestimates,” the home value estimates it pioneered. That was a tidily profitable business, with around 93% gross margins.

In contrast, trading homes has razor-thin profit margins. Zillow charges sellers fees that currently average about 7.5% of the price the company pays for their homes. The upside for Zillow, though, is that the total addressable market, or TAM, for home purchases is much bigger than the advertising market. As its grows, Zillow could make better profits from related services, such as selling title insurance and mortgage lending.

Home purchases are “a mindbogglingly larger TAM—$1.8 trillion of secondary market transactions happen a year in the U.S. of homes.” he said. “That’s not rentals. That’s not title, that’s not mortgage. That’s just the homes.”

Barton said the goal behind Zillow’s transition to a bigger, lower-margin market is to turn it into something more like Amazon, which operates in a retail market far larger than advertising. “We have to move from a Google mindset to an Amazon mindset,” he said.