Today it was announced that Zillow.com will be buying Trulia.com for $3.5 billion in a stock-for-stock transaction. Based on share of web visits, the biggest real estate website in the US has just acquired the 2nd biggest.

Both companies make the bulk of their money through advertising sales to real estate professionals (i.e. agents and brokers). But what was interesting to read in their press release is that, even with this merger, the combined revenue of both Zillow and Trulia still only represents about 4% of the estimated $12 billion that US real estate professionals spend on marketing each year. 

Zillow says it’s because the real estate industry hasn’t fully made the switch to online and mobile – and thus it represents a huge market opportunity for them. And from my experience I would say that this is likely the case. But it could also be because the real estate community is putting their marketing dollars elsewhere online. 

Whatever the case may be, Zillow.com (and its portfolio of companies) is now firmly positioned as the largest real estate website in the US. But even still, Zillow.com has never felt fully “net native” to me. It has never felt as if it were specifically built for the internet and that it’s only possible because of the internet. Instead, it feels like an offline model ported over to online. And the two are quite different.

The reason I feel this way is because there’s an inherent tension to the way the online residential real estate market works today. Virtually every lead generation tool (that agents use) is intended to funnel buyers and sellers to them. That’s why so many real estate websites have sucked for so long. Because the goal wasn’t to keep you locked into a website, it was to get you to connect, in person, with an agent.

Zillow and Trulia started to break with that tradition by offering a lot more information online. Before they came along, it was a lot harder for real estate consumers to do their own research. But at the end of the day, Zillow makes money when it’s an effective sales funnel for agents. And since that’s always been the way the market has worked, it doesn’t feel net native to me.

If my gut is right, then it means there’s still lots of opportunities in this space.