A prior version of this article incorrectly stated Zillow's IPO price. The Fool regrets the error.

Peter Lynch once said, "Never invest in any idea you can't illustrate with a crayon." In this first edition of Crayon Chronicles, analyst Justin Loiseau puts crayon to paper to examine the business model and investment argument for online real estate company Zillow.

Quarterly earnings hitting the presses next week, and Justin and analyst Austin Smith take a look at why Zillow is a disruptive force, where it's getting its money from, and whether it can maintain the fast growth that Zillow has seen in the last few years.

We see what Zillow has learned from the best tech companies out there, as well as some of the dot-com traps that it's managed to avoid so far.

We also take a look at some of Zillow's key distinguishing features, from its not-so-ad-based revenue model to its proprietary algorithms that keep Zillow's housing database robust and increasingly accurate.

Zillow stands out in the group of recently public tech companies for their strong post-IPO performance. The company now trades at nearly double their initial offering price, meanwhile Facebook trades for about half of theirs. While there are reasons for concern with Facebook, there are also huge catalysts for growth on the horizon. We've outlined them in our newest premium research report. There is a lot more to this company than meets the eye, so read up on whether there is anything to "like" about ittoday, and we'll tell you whether we think Facebook deserves a place in your portfolio. Access your report by clicking here

Austin Smith has no positions in the stocks mentioned above. Justin Loiseau owns shares of Zillow. The Motley Fool owns shares of Facebook, Google, LinkedIn, and Zillow. Motley Fool newsletter services recommend Facebook, Google, LinkedIn, and Zillow. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Mark Bloomfield

That was by far the worst interpretation and understanding of Zillow I have ever seen. You guys need to do your homework.

First, Zillow is an ad platform that is monetizing the content and intellectual property of brokers and agents. Oh, by the way, they don't pay for the content because the industry thought in the naive days that more exposure would be better for them. I once heard one of their executives say essentially that they couldn't afford to pay for the content. "Have you seen our financials", he quipped.

Now after a few years of realizing it's not helping them, their patience is running thin. Many have already pressed hard the "do not give Zillow access to my listings" button and many more have their finger on it. Without listing content, Zillow has no business. Period. BTW, the hardworking people who are creating this content by getting the listings, don't like Zillow. Not all, but if I were Zillow investor, way too many for me to sleep at night.

Another BTW... Zillow gets most of its listings from a listing syndicator which is now owned 100% by it's largest competitor, Realtor.com. Zillow will likely power through for a few more years because it has money in the bank nd it will take that long before enough feeds are pulled and superior models take flight (and they will). When it happens, it will expose the weak model they operate from, even to the crayonalyst at Motley Fool. All of the above is my personal opinion of course.

August 27 2012 at 12:15 AM Report abuse rate up rate down Reply