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A $3.5 billion merger could change real estate forever

Zillow, an online real estate search engine, just bought one of its biggest competitors. The company bought out Trulia for $3.5 billion. I like Zillow. They deliver a neat product. You can check out my coverage of their mobile app here, or you can see my top 10 things to look for while buying a house if you're in the market for some real estate. If you're Zillow and Trulia's biggest customer, though, you'll actually be a "real estate tourist."

A "real estate tourist" doesn't actually buy real estate, they like the concept of buying real estate. According to Stefan Swanepoel, a real estate writer and consultant, they're Trulia and Zillow's best customer.

“Portals like Zillow and Trulia have created a whole new additional category of real estate lifestyle surfing for consumers who are interested in home prices and community information, even though they may not be in the market to buy or sell a home in the immediate future.”

Real estate search engines estimate that $12 billion is spent on online real estate every year. Zillow and Trulia make less than 4 percent of that number. I couldn't believe when I heard that neither company is actually profitable yet. Last year, Zillow posted a loss of $12.5 million and Trulia reported a net loss of $17.8 million.

Advertisers believe that sites like Zillow and Trulia attract looky-loo buyers, and that's making experts worried about Zillow's latest $3.5 billion acquisition. Both companies will have to pool their efforts if they want to actually start making money.

I'm not the head of a tech startup, but I was raised on the "two wrongs don't make a right" cliche. Spending $3.5 billion on a competitor that is also losing money will not, I suspect, be the next real estate search engine game changer.

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Source: Bloomberg
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