Investors vs. CoStar, and the $4 Billion Challenger Portal
A pair of multi-billion-dollar hedge fund activist investors, Third Point and D.E. Shaw, have recently demanded CoStar significantly curtail – or divest – its Homes.com business.
Why it matters: This episode highlights the ultimate question surrounding Homes.com since day 1 – what does it take to unseat an incumbent real estate portal?
The main thrust of the activist investors is shareholder returns, creating or destroying value, and stock performance, all of which lie outside of the scope of my expertise and this analysis.
My focus is on the question above, which can be answered with data.
According to D. E. Shaw and Third Point, CoStar has invested around $3 billion in Homes.com since acquiring the business in 2021, with the business generating “roughly $60 million of revenue in 2024 and $80 million in expected revenue in 2025.”
In terms of a return on investment for the past two years, that’s the equivalent of spending $12 to generate $1 in revenue.
But is the business growing?
In its letter, Third Point says, “...in 2025 the Company cut Homes.com subscription pricing by over 30%, further underscoring challenged customer traction and product-market fit.”
In its rebuttal, CoStar states, “The Homes.com platform is demonstrating strong momentum, with subscribers increasing 337% since Q1 2024” – and both statements can be true.
Customer numbers are up: from 8,000 in Q1 2024 to 26,000 in Q3 2025 (and most likely higher today).
But the increase in customers is not matched by a directly proportional increase in revenue.
Average revenue per customer has dropped from $1,588 in Q2 2024 to $788 in Q3 2025, a result likely driven by price cuts and a more diverse product mix (ex: the direct to consumer Boost product).
Even with increasing customers, Homes.com’s revenue is still a fraction of its portal peers – a ratio that has barely changed over the past two years.
With revenue 17x higher, Zillow remains the undisputed leader, and has exuded a quiet confidence throughout the Portal Wars.
For instance, while CoStar mentioned Zillow 41 times on its last earnings call, I can find no instances of Zillow ever mentioning CoStar or Homes.com on any of its earnings calls.
The path forward isn’t clear: after losing $850 million in 2025, CoStar is estimating sinking another $1–$1.5 billion into Homes.com before reaching breakeven in 2030.
CoStar has already put forward a plan to slash spending by hundreds of millions of dollars, but it isn’t enough for these investors.
Dig deeper with Third Point’s letter, CoStar’s response, and D.E. Shaw’s letter and presentation – all interesting, enlightening, and entertaining.
The bottom line: Unseating a dominant real estate portal is an incredibly expensive, time-consuming, and ultimately unlikely proposition.
Not only that, but if you believe CoStar’s latest projections, building a self-sustaining real estate portal takes about $4 billion over nine years, just to break even.
CoStar is one of the largest real estate technology companies in the world and has spent more than anyone else, ever, and the results are inconclusive (aside from leading to a shareholder revolt).
Challenger real estate portals will come and go, but this is the clearest case study yet in how difficult a proposition it is, and suggests resources may be more profitably spent elsewhere.