YouSaid · the spoken record

Andy Florence

lines on the record: 94
first: 2026-04-23
most recent: 2026-04-23
sittings or episodes: 1
sources: podcast

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“The portfolio compared to we consider 5% to be about a full position. So yeah, all right. Well, this was fun. Definitely one of our longer episodes, Daniel. We appreciate folks for tuning in and staying with us the whole time. But with that, we'll close the book on today's episode. And before we do that, I'd like to leave you with a little quote from Mark Twain who says, buy Lant. They're not making it anymore. And it's a tongue-in-cheek expression, but I think there's also a pretty good argument for owning the company. at the heart of the commercial real estate industry too if you can get it at the right price, which we have a suspicion we might be getting. See you all next time.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“I got you to come around. I'm okay with it. Yeah, I'm a little nervous because there's so much to know about CoStar that I am 100% certain that there are a lot of things I don't know about the business, which is why we couldn't make it a full position, even if we were both really bullish on it. I think we should, as you kind of suggested, treat it as a tracking position where we give ourselves a little bit skin in the game, which is an incentive to pay close attention to the business. And if we build our conviction to a point where we want to allocate more money to it, then we should. And if the stock just kind of jumps around, but we're not really feeling more confident in the long-term prospects of the business, they're just dragging out the homes.com spending more and more things are kind of making the picture fuzzy than we should just drop it and maybe that'll be six months from now a year from now but i don't think it hurts a lot for us to do a tracker position in it which yeah would be one to two percent”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“And so, anyways, with the arbitrary probabilities that I use, the fair value I get for the stock is about $56 per share, which at current prices at the time of recording, the stock is trading at around a 20% discount to. So I think it could be a pretty interesting opportunity for us to consider as an addition to the portfolio the range of outcomes seem to be skewed in our favor, assuming management is rational and doesn't burn capital indefinitely, which I do think Andy Florence has earned enough legitimacy to deserve that trust. And the market is pricing a lot of continued pain with homestead.com. Plus, there's a whole narrative that AI will kill everything that uses software. And so to me, that explains a lot of the weakness here. And we're at a price level where I would probably be open to a starter position, but I could easily see this going in the too hard pile really for both of us.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Monetization of homes.com actually takes off. And that creates its own virtuous cycle. And if that comes to fruition, as the company has imagined, then I can say pretty confidently the stock is undervalued. And so obviously I'm making up these percentages with the help of being approximately right, but that I'll be almost certainly precisely wrong as our colleague Stig Broderson would say. And so if I see that as being slightly less likely, yeah, let's assign a 40% probability to that scenario. And so now we've got two scenarios that I would consider to be the most plausible. And then everything in between can sort of be rounded up into one of those two buckets. And now we need to reconcile those two scenarios into a single fair value estimate. And actually, this was some very basic modeling. I would say that CoStar would be worth more if it stopped spending on homes.com effective immediately, even if homes.com ends up working out decent.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“The thing is, you have to underwrite two scenarios at a minimum to be able to think about this valuation. It's a one is where the company just cuts spending on homestead comm and implicitly apologizes to investors for the mistake, a very pragmatic approach. And then you see them try to win back favor. And I would be speculating here. But to me, we already saw some indication of this. What that could mean is doubling down on capital returns with accelerated share repurchases. That would immediately help profitability in the short term. And then you would shrink the share count and that would contribute to earnings per share compounding longer term. And of course, though, the result of less growth spending is that the company will probably struggle to hit its streak of consecutive quarters with double digit revenue growth. So we call that one scenario, scenario one, and I'm probably slightly biased toward that scenario. Maybe there's 60% odds of that happening. And then there's a scenario where the monitor”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“In 2025 on a split adjusted basis, which again, yeah, that makes it very clear how Andy Florence's stake can become so diluted over time.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“I think it's a bit of a taboo in the value investing world, but equity issuance does not have to be a bad thing if it's done at a price above intrinsic value. And that's something Warren Buffett has very much emphasized over the years. When you look through the timing of when CoStar sold more equity in the company, they've generally been very opportunistic about when they would do so, with the stock being pretty richly priced at those times. And so, for example, we have a chart on screen where they did an equity raise in May 2020 at a price that's 50% higher than where the business is valued today, six years later. And so, yeah, the result, as you alluded to, is that CoStar has had persistent net dilution for a long time. But that is not necessarily the equivalent of value destruction. And actually, the word would be accretive. It's been a very accretive allocation process, even as total shares outstanding have risen from $197 million in 2008 to $420.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“But still, Andy also makes a point that I think I find compelling when people bring up the capital allocation question and he says, quote, we have $4 billion in cash, zero debt, and a core business generating hundreds of millions of dollars of EBITDA per year. We can afford to invest in this. Our competitors cannot. And so the balance sheet that CoStar has actually gives them a degree of patience and being able to execute their long-term strategy that, yeah, I mean, look at Zillow in eight of the last 10 years, they had negative operating profits. And so historically speaking, Andy Florence has probably earned the benefit of the doubt. His internal rates of return on some of the largest investments in the company's history have ranged from 17% to 39%, which is very, very good.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“I don't think he's highly aligned with shareholders. And I think that when third point raises these concerns about truly independent directors, Andy has addressed that criticism seriously. And so on earnings calls, he will be really candid and he'll say things like, I know the results, haven't met expectations on the residential timeline. And we pushed ourselves too hard and too fast in some areas. And here's what we've learned and here's what we're doing differently. The $300 million reduction in 2026 investment in homes.com and the $700 million buyback to me are concrete illustrations of how he is listening to that criticism. And one other thing they've done is they've created a board called a capital allocation committee explicitly to evaluate significant investments and to confirm that financial targets can still be met, including spending on the home.com. So the board is absolutely taking a more visible role in monitoring the spending after some of these criticisms.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Andy was actually right, and the skeptics were wrong. And I don't want to say we should blindly follow every CEO because you can have these catastrophic mistakes, but there is a lot of inspiration to be taken from the quality of the decisions that Andy has made over the years.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Feel like the strength of it is that Andy has navigated co-star through all these different episodes from the dot com bubble to the financial crisis, COVID. You have multiple cycles in commercial real estate. And for the last 15 years, as we said a few times, he's never posted a quarter below 10% revenue growth. And he has this consistent long-term vision. I would say very deep institutional knowledge. And he does have an owner mindset, even if he doesn't have as much skin in the game as we ideally would like to see. And so at this point, to me, it is self-evident that he's not managing to quarterly earnings targets. He is managing to longer term goals. And he has a demonstrated track record of making these big controversial bets that turned out to be right. And so the apartments.com acquisition looked weird to many people at the time. Building out the field research operation looked expensive for that. It looked really inefficient and loopnet looked like it was going to cannibalize the core business. And each time, though,”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Exactly. And for a company whose entire value proposition is we have the most accurate and comprehensive database of physical real estate in the world, adding a 3D digital twin of every building, that's clearly very strategically valuable. And so if you imagine if CoSara subscribers could actually walk through any available office space or industrial building before deciding whether to fly out and visit, that would be a huge, huge value add. And of course it deepens the moat because now not only do you have the data about the building, you have an immersive representation of it.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Matterport to me is one of the more creative acquisitions that CoStar has made, and it's part of this idea, that strategy we talked about earlier following the apartments.com model and needing to have better data that nobody else has. And so trying to offer something that Zillow can't offer. And so this deal is closed in February 2025 for about $1.6 billion. And man, Matterport is really cool. It's a company that developed technology for creating 3D digital twins of physical spaces. And so the way that it works is you bring a Matterport camera into a building, you scan it, and the software creates a photorealistic, navigable 3D model that you can explore virtually. And so it's almost like a video game version of a real space. And by the time of the acquisition, Matterport had captured over 14 million spaces equating to 50 billion square feet across 177 countries.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“The US, they're not competing as directly with Zillow and have these dynamics in place between agents and buyers that better favor CoStars model outside of the U.S.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“I think it is. Yeah, domain holdings in Australia was acquired in August 2025 for about $2 billion or $3 billion Australian dollars. And it's Australia is the number two residential portal. And the thesis is very similar to homes.com. In markets where Zillow's adversarial model has not gotten entrenched, that you're listing your lead approach can really be positioned for success. And so Australia is interesting because the residential market dynamics are different there. And domain has an existing customer base, established brand recognition, and revenue of about $73 million a quarter, at least at the time of the acquisition. And so that is real money and bringing CoStar's platform capabilities and sales team and economies of scale and all the stuff that they can bring in to domain can really accelerate the monetization of that business. And so honestly, I think I would rather see them make acquisitions internationally and build the home.com brand outside of.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“CoSar Suite is genuinely hard to replicate, has very strong pricing power because it's so essential to professionals in the commercial real estate industry. That is substantiated by their very high renewal rates. Increasingly, they serve a global market at low penetration rates. And we can debate what exactly an appropriate estimate of that percentage is and unequivocally is growing double digits organically and has been for a while. And so just that business in isolation would be a very compelling investment at a premium price. It would deserve 32 times earnings or more. And then you added LoopNet, a market leader in commercial real estate, marketplaces with this massive upside from deepening monetization with its highest end listings and clients. And that's just another leg of the stool that very clearly has room to grow. And then there's a really...”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“It's not, and it does suggest management is balancing the long term vision with some responsiveness to near term capital concerns. And the question is whether it's enough to satisfy activists while still funding the residential strategy. Now we're in this kind of limbo. And maybe will they have to abandon the strategy altogether? And that means all the past spending has gone to waste that is the uncertainty hanging over CoStar's valuation at the moment.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Two forms during the Q4 2025 earnings call, Andy defended the thesis pretty firmly. He was very much not ready to concede that the homes.com bet was failing, it seemed like, but actually actions, as we know, speak louder than words. And alongside the 2025 fiscal year earnings, CoStar announced a $700 million share buyback. And that's the largest in the company's history. And they explicitly said they were reducing 2026 net investment and residential by $300 million versus what they had been spending. So even if he won't say it, that is a very tangible concession. And it signals to me that, yes, management has heard the message.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Single family homes is fundamentally a different area to compete in and it's less attractive because Zillow has already won the consumer mindshare battle. Then third point is right and they should just stop spending on this altogether. There's not a clean answer either way”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I've come to increasingly favor the third point view over the course of researching CoStar. And I want to be clear that even the bears would admit that the core franchise, the core business at CoStar is excellent. Nobody's arguing about that. And just the disagreement is over this residential bet. So homes.com and the potential of it and how value destructive it is and whether Andy Florence has lost his edge and all that sort of stuff. And the bullish counter argument is that this is exactly what people said about apartments.com. And look how that turned out. And so the apartments.com precedent is the crux of the whole debate. If you believe CoStar can replicate that playbook with better content, SEO, brand advertising, a dedicated sales force in residential for single family homes, then this current pain in the stock is temporary. And if you believe”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Cutting residential investment back significantly. So cutting back spending to promote homes.com. They want management to return capital to shareholders through buybacks and maybe even dividends and refocus on the core commercial real estate business, which already has these exceptional economics that we've talked about and just doesn't have any need to fight with Zillow. Zillow is not anywhere close to their co-star data suite on commercial real estate properties. And so the argument is basically you have a wonderful business. Stop burning cash to put it in places where you just might not be able to win and don't have much evidence yet of being able to win.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“For them, it's about a full board overhaul. Third point argued that the board does not have enough truly independent directors with the expertise and willingness to push back on management decisions from Andy Florence. And so they want new directors who can provide real governance oversight on capital allocation. But they also made a specific operational argument, which I think is worth engaging with seriously. And they believe the residential strategy is fundamentally misguided because CoStar is trying to compete in a market where a network affects leader, Zillow, already has an entrenched position. And so the capital required to meaningfully challenge that position is it really could be unlimited. And there's not a guarantee that the returns on the other side are going to be attractive.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“So Danelope has taken on companies like Sony, Nestle, and Disney before. And so these are not typically companies that you want to mess around with legally. And yet he doesn't back down either, or at least his firm doesn't back down. And so, yeah, third point has been building a position in CoStar. And in late January 2026, they published this open letter to the CoStar Board of Directors. And the letter is pretty blunt. The criticisms are that the stock has lost nearly 30% of its value over five years, while the S&P gained 94% and management has invested and accumulated $5 billion in residential real estate across all of its residential portals, but these assets have generated just $60 million in revenue as of 2024. And as we were saying, the original 2027 targets for homes.com have just been completely abandoned without really much of a clear replacement timeline. And despite all of this, management compensation has remained pretty generous.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“House, I didn't actually realize that something different was happening and that it was a new precedent for me to be signing a deal up front. And so, yeah, I just don't think people realize that they can negotiate. It wasn't presented to me as a negotiation. It was basically like, hey, here are the terms of working with me. Are you good with it? And then I signed it. It didn't feel like an invitation to negotiate. So yeah, I just think there's a lot of inertia to overcome with what people are used to and how they think you're supposed to go about the home.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Certainly, some stories of sellers saying that their agents have warned them that buyers might avoid their home if they don't make an offer to cover the buyer agent's costs. And so despite all the hopes of reduced realtor commissions and the idea that the status quo would dramatically shift to favor CoSar's monetization model for homes.com, only 27% of recent home buyers negotiated with their agent about fees or try to, according to a redfin survey. And personally, we did not try and negotiate, especially as first-time homebuyers, we were thinking, hey, we found a great realtor. If this is what the terms are, this is what the terms are. And I think that's common, right? Most buyers don't interview multiple agents historically. And there's just not a ton of shopping around for real estate agents. Once you feel like you have somebody you trust. And so honestly, I'm really not sure if buyer education has caught up on this yet. And even just a few months ago when I was buying a”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Dramatically in practice. And so if you're wondering why, well, I would say that old habits die hard. And even if the buyer is responsible for their agent's compensation on paper, sellers still often agree to cover it to keep the buyer pool as broad as possible, especially when buyers are cash constrained. And before the settlement, listings of homes for sale and industry databases included information of what the seller intended to pay the buyer's agents. And so buyers rarely had to negotiate fees with their own agents because, again, the fee was essentially set by the seller and was all just baked in. And in the new system, these databases no longer include information about fees. And that's so buyers and their agents can discuss fees up front without being swayed by what a seller is willing to cover. But in reality, what we've actually seen happen is that agents can still, of course, communicate to each other about fees offline.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“And it also ensures that the discussion occurs off of the MLS by phone or email or something like that, but their commissions cannot just be baked into the listings automatically anymore, which they were for a long, long time. So now you see buyers signing agreements upfront with agents. And I did this too personally, about the scope of the representation and the term length and the exclusivity and exactly how the buyer agent gets paid, whether it's a percentage, a flat fee, hourly based on minimums, whether the buyer will ask the seller to cover those costs. And with all that said, the measurable impact on commission rates that thus far has been much smaller than expected. Analyses from third parties like Redfin have largely found that buyer agent commission percentages have basically barely budged overall. And so while the rule changed increased transparency and negotiation rights, average commissions have not fallen.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's a little tangent, but we can do it. The big structural change is that commissions stopped being pre-baked into the MLS. And we're not referring to soccer league. The MLS stands for multi-listing service. And it's like a behind the scenes database of all available homes for sale that can only be directly accessed by licensed realtors. And so after August 17th, 2024, when those court ruling happened, MLSs now can't display offers of compensation to buyer brokers. And so buyer agents must have a written representation agreement in place before touring any homes. Going back to that point I mentioned a moment ago about having to sign a contract directly with your agent as a home buyer. And so basically this is forced buyers and their agents to have compensation discussions earlier in the process.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Helpful and it was great because they were a family friend and we didn't have that same confidence in being able to trust our broker in that same way. We might have approached things differently.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Despite what some people had hoped and what real estate agents in the US absolutely feared, that is actually not come to fruition, at least this anticipated disruption where buyers agents are significantly less involved in the buying process and earning a lot less money. But if we do move in that direction over time, then Zillow's model of monetizing the buy side broker would theoretically die and co-star's bets on this alternative model focusing on the sell side agent would look very prudent. And so following the court ruling, buyers now have to sign an economic contract with buy side brokers. And so many thought gone would be the days of simply clicking on a buyer's agent link on Zuo listing. And yet when I bought my house as a first-time homebuyer, we were really willing to sign a contract with a buyer's agent. And they were actually very”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“They laid out some very ambitious targets in 2022 for what the residential business would look like by 2027, which is now next year. It's hard to believe. But rather than admitting defeat, they've simply really just pushed back and revised their targets. And I don't find that to be particularly inspiring. And to be honest, I think there's a lot of sunk cost biases here. If they had known how much capital homes.com would eat up and what the results after three years would look like. I can guess pretty confidently that they would not have acquired it in the way that they did. But now they have already made that spending and they've made some progress. So in theory, you could say that they should stop, but that would mean all the spending before would really be for nothing. Whereas clearly they do have some optimism that even if it's going to take longer than expected and be more expensive, they have achieved enough traction where they can eventually displace Zillow.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Over to this massive decline in recorded profit margins we've seen for the overall company just because they're pouring so much money into these homes.com ads.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Think this is a concern at the heart of the bear case. The hundred million dollars in annualized revenue is from essentially a standing start three years ago, which sounds like pretty good progress, but the math behind that is very painful because CoStar has invested more than a billion dollars in marketing to drive that growth, which is what caught Dan Loeb's eye, right? And he's this famous activist investor we mentioned earlier, and he wrote an investor letter where he made some very damning criticisms of this spending, I think is fair to say. And so if you look at CoStar's SG&A spending, so think of that as their overhead. And that includes their marketing and promotional spend on homes.com, they're basically just buying eyeballs at the top of search results, but that's not necessarily translating into consistent organic traffic. And you can see that their cost of sales have absolutely exploded accordingly. And it's more than doubled since 2022. And that maps.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think that's right. I mean, I don't have high conviction in what they're doing with homes.com. My thesis is that they could entirely stop spending on homes.com and it would be a good investment.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“So, the engagement numbers do speak for themselves to an extent, even if the monetization is lagging. They're also replicating the content first strategy from apartments.com. So homes.com has been building out really rich content profiles about every home in America, not just the active listings, but neighborhood profiles, school information, market data, property history. And so the goal is to win organic search traffic before you invest heavily in paid marketing.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Funny because the early reaction was really poor because agents didn't quite appreciate the difference in the models. And so they felt like they were spending money, but not getting in return what they were expecting in the same way that they had spent money on Zillow. But there are definitely some early signs of traction. So as of February 2026, CoStar said homes.com had more than 31,000 agent subscribers and was generating nearly a hundred million dollars of annual run rate revenue. But the bear case remains that the company has spent very heavily to get there and investors still do not know whether homes.com will ultimately produce attractive returns on that investment. And lead volume to listing agents was up 48% year over year in January 2026 and leads to what they call member agents of agents who are paying for enhanced visibility. Those are up 187% year over year.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah. And so Zillow still manages to dominate web traffic, but CoSar's pitch is that Zillow's monetization model creates these frictions and conflicts of interest with listing agents. And so when a buyer clicks contact agent on Zillow, that inquiry is often routed to, as I've been saying, a paying premier agent, a Zillow refers to them rather than the original listing agents. And so homes.com's counter positioning is really simple then. Your listing your lead, that's the whole sales pitch, right? And so if a buyer expresses interest in your listing, that lead goes to you.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Better or worse, that's pretty much exactly what happens. And you can imagine how much listing agents resent this dynamic because they've invested the time and money into putting together a beautiful listing and they're paying for the exposure. And when a buyer shows interest, that lead could go to a competitor, basically.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“This is where I think the strategy gets really interesting. Zillow is dominant, yes, in terms of traffic. There's no question about that. But Zillow has a structural problem with its business model that CoStar thinks they can exploit. And so the issue is that when a home buyer comes to Zillow and clicks on a listing, Zillow sells that click as a lead to a partner agent and that agent may or may not be the listing agent for the property. And so in many cases, it's not. Zillow takes the buyer lead that came in because of the listing agent's property and then sells it to a competing agent.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
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2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
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2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“We've gotten to the LSN of the room finally. And the most tangible reason why a company is strong as co-star has seen its stock down more than 40% in almost 50% in the last year. So yeah, homes.com has co-stars attempt to enter the residential real estate market. And to understand why that's such a big deal and also such a big controversy, you need to start with the size of the price. Residential real estate is the largest asset class in America. That's a fact. The total value of U.S. residential real estate is something like $40 to $45 trillion. And real estate agent commissions alone are in the neighborhood of $100 billion a year. See what I did there? Neighborhood? That is an enormous, enormous market, much larger than commercial real estate where CoStar has historically played in. And so any Florence calls it the largest and most important untapped market opportunity the company has ever seen. And from a purely top”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Get me started, Daniel. That's a rapid hole. We'll never get to homestock.com because I think land.com is super cool. I saw 10 acres of land for sale on land.com on this private island off the coast of North Carolina. And it was in the outer banks for anybody who knows the area. And it was for $500,000. And so I texted a bunch of friends and family. I was like, guys, come on, this is our big chance to own an island together. And it doesn't matter if there's no house or no plumbing installed. We'll figure that out all later. And yeah, I don't know. Apparently nobody found that to be a compelling sales pitch, but I was ready to do it. And all thanks to my research into co-star.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Make diligence and bidding more efficient and then CoStar monetizes the completed transaction at the end of the day with a fee tied to the sale price that they facilitate via 10x. And so strategically, having a part of the business to really make their services an end-to-end offering is definitely valuable. But 10x does make up about less than 4% of their revenues. And some since it's transaction-based is a very different type of revenue stream from the rest of the company. So economically, the X model should have attractive incremental margins if volume scales, because once the platform and the traffic and the data infrastructure are all in place, each additional transaction can be processed at relatively low incremental cost. And so the trade-off though is cyclicality because unlike subscriptions, transaction fees are very, very closely tied to CRE deal volume, which can be very, very simple.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Actually, submitted $103 million bid. And the facts for it apparently slid under the table. And so he lost $2 million because a piece of paper slid under a table. And I would be a rate. It would be nice to have $100 million though, but I would be a rate if I lost the $2 million. And so in his words, he said, that's why we bought 10x. And so for context, you can think of 10x as the transaction engine that brings the entire CoStart ecosystem together. And so as an overall business, they attract listings from brokers and owners, distribute those listings to a very large buyer audience through LoopNet, while customers can use Coaster.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“That's right. And there's this quote from Andy Florence from a few years back where he says something along the lines of, he sold an office building for $101 million in 2009, but a German investor, I don't know if you know him, Daniel.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“High margin as well. So LoopNet is this interesting situation. You have the market leader by traffic with what looks like a very low penetration of their highest value clients, some of their highest value clients at CoStar. And if they deliver on execution, it could become a very, very valuable part of CoSTAR's overall business.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Is and I agree with you, but at least to indulge the bull case. Andy Florence would say that there really are big opportunities here. And so for context, institutional landlords like Brookfield, Blackstone, and these other big RETs require very specialized high-end sales relationships. So you're not just going to sell them with a cold call. You're selling them with data-driven ROI presentations and these relationships that get built over time. And so CoStar has been deliberately building out that premium sales force over the last few years. And Andy says it'll probably take another two to three years more to fully build it out. And once those clients come on, though, the contracts will be very large, probably very high renewal rates. And as they expand their use over time, right? Like there's kind of an entry into the CoStar ecosystem that leads them to start trying other products. That comes at a very”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“It is similar, and so brokers and property owners pay for enhanced listing exposure. And again, that means getting better placement on the site and in search results or photos to show off, video options, interactive floor plans, and more things like that. And so it's actually the number one commercial real estate marketplace by traffic in the US with around 11 million monthly visitors and revenue is several hundred million dollars a year. So that's very material for CoStar since they do about $3 billion in revenue each year. And so for context, across CoSTAR's entire portfolio of sites, they generate about $140 million unique web visits per month. And so LoopNet is an important part of that. And the thing with LoopNet, though, is that it's dramatically underpenetrated, even among its target market. Among the top 1,000 most valuable commercial properties in the United States, the trophy buildings where every dollar of marketing.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT
“Net is more like the top of the funnel marketplace, or somebody starts their search and they provide very different user experiences at very different price points for very different audience segments.”
2026-04-23 · We Study Billionaires · TIP809: The Real Estate Data Empire Making a $5 Billion Bet: CoStar Group w/ Shawn O'Malley & Daniel Mahncke · IDENTIFIED FROM THE TRANSCRIPT