Zillow Targets 75%+ Preferred Connections by End-2026, Signaling Q4 Revenue Headwinds

Impact of moving to 75%+ connections in Zillow Preferred (by end-2026): seasonality, revenue timing, and Zillow Preview adoption outlook (5% of new listings)

1) What “more than 75% of connections in preferred by end-2026” changes

Zillow Preferred is the monetization shift that moves a growing share of “connections” (agent/lender integrated experience) into a model where Zillow Home Loans (ZHL) revenue is recognized later (6–12 months after the connection) rather than upfront like the legacy ad model did. ¹

A. Seasonality becomes more like the underlying connection-volume pattern—and creates a Q4 headwind

Management explains a specific seasonal driver: connection volumes are typically 20% to 25% lower in Q4 than Q3, then increase in Q1 compared to Q4. ¹

They add that preferred revenue “follows this seasonality trend more closely versus our legacy advertising model”, meaning the shift makes Zillow’s revenue pattern track the seasonal connection-volume swing more directly. ¹

Because Zillow expects to accelerate to “more than 75% of our connections in preferred … by the end of the year,” management expects a 200 to 300 basis-point headwind to year-over-year for-sale revenue growth in Q4 attributable to this seasonality impact. ¹

They also state that this seasonality trend is expected to reverse in Q1 2027—implying the Q4 headwind should ease (or flip sign) as the seasonal reversal hits. ¹

Bottom line on seasonality/revenue: pushing preferred above 75% by end-2026 is expected to make quarterly for-sale revenue growth pattern more sensitive to the Q4→Q1 seasonal connection volume change, creating a Q4 200–300 bps YoY headwind, with a reversal in Q1 2027. ¹

B. Revenue timing lag compounds the Q4 effect (and is quantifiable as a “headwind”)

Separately from seasonality, management highlights the timing lag between connection delivery and ZHL origination-based revenue recognition. ¹

They quantify that lag as a consistent 200-basis-point headwind to for-sale revenue as preferred share increases. ² They further state it can worsen as acceleration ramps in Q3 and Q4 to 200–300 basis-points of headwind, and then “moderate” as the shift completes toward year-end. ²

For full-year framing, they reiterate that the combination of seasonality and timing of revenue recognition in ZHL is expected to translate to 400–600 basis-points of headwind to for-sale revenue (presumably around the periods most affected during the transition/acceleration). ³

Bottom line on revenue timing: the move to 75%+ preferred isn’t just a “calendar effect”—ZHL revenue recognizes 6–12 months after connection, producing a measurable headwind that can be ~200 bps (consistent) and potentially ~200–300 bps during Q3/Q4 acceleration, contributing to the overall 400–600 bps combined headwind expectation for for-sale revenue. ²³

2) Do you “start 2027 on a clean slate” for seasonality/compares?

Management does not characterize the transition as fully “clean-slate,” but they do indicate how comparability improves:

• They say the seasonality trend is expected to reverse in Q1 2027. ¹
• They also state the transition effect moderates in the second half of 2027 as you lap the transition, referring to preferred share lapping the shift from the legacy model. ⁴
• Additionally, they note for modeling that they included a chart showing quarter-by-quarter impacts of the factors (shift in revenue category, timing lag, and seasonal pattern), implying structured comparability effects rather than instant normalization. ¹

Interpretation tied to their statements: Q1 2027 should see the seasonal component reverse, reducing the Q4 seasonality headwind effects, while the transition-related timing effects are expected to moderate as 2027 progresses (especially the second half). ¹⁴

3) Adoption outlook for Zillow Preview (the “5% of all new listings” segment)

Zillow Preview is described as a pre-market exposure product that builds “demand and momentum” before a home hits the active market. ⁵

Current penetration and its trajectory

For the “5% of all new listings” question, management provides a clear current benchmark and direction:

• They call “5% of all new listings” a great initial milestone and say it is up from 2.5% a year ago. ⁶
• They explicitly state they expect to “continue to drive adoption” given product reception and ongoing testing across teams and 10 markets. ⁶
• They also provide context on broader listing-content adoption: “north of 10% share of new listings” for content-related components (“showcase and non-showcase,” as described in the transcript). ⁶

Separately, the general product framing explains Zillow Preview is supported by more than 100 brokerage partnerships and includes plans to syndicate preview listings to realtor.com later this summer, both of which are structural enablers for continued adoption. ⁵

Adoption outlook specifically for “the 5%” group

The excerpt does not give a numeric future penetration target for Preview (e.g., “10% by year-end”)—it provides a qualitative outlook:

• Expect continued adoption growth from the current 5% milestone, rather than a plateau. ⁶
• Ongoing expansion efforts and distribution enhancements (broker partnerships and later realtor.com syndication) are described as mechanisms that support growth. ⁵

How Preview connects to Showcase usage (a meaningful adoption flywheel)

While your question is about the 5% Preview listings, management ties the products together in the flywheel:

• They state that agents using Zillow Preview put Showcase on nearly half of all preview listings when the listing goes live. ⁷
• They separately note Showcase is “now on about 5% of all new listings.” ⁵ and that Showcase supports an agent benefit—agents who use Showcase on the majority of their listings win 35% more listings than peers who do not. ⁶

Interpretation: even without a specific future Preview percentage, management is signaling that Preview adoption at ~5% is an early stage and that continued growth is expected, supported by distribution expansion and the Showcase conversion dynamic at active-listing time. ⁶⁵⁷

4) Integrated takeaways: how the transition affects revenue while Preview adoption grows

• Preferred monetization acceleration (to 75%+ by end-2026) increases the importance of (i) seasonal connection-volume movements and (ii) ZHL revenue recognition lag, producing a Q4 200–300 bps YoY for-sale headwind from seasonality alone ¹, plus a broader 400–600 bps combined headwind to for-sale revenue from seasonality + ZHL timing. ³
• Zillow Preview adoption is currently at ~5% of all new listings, up from 2.5% a year ago, and Zillow expects to continue driving adoption while scaling distribution and integrating the listing marketing “flywheel” with Showcase. ⁶⁵⁷