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How Matterport Will Change After CoStar Acquisition
Defining the future of real estate
Franco Faraudo
April 23, 2024
Propmodo Daily
By Franco Faraudo · Apr. 23, 2024
Greetings!
Big news broke yesterday about commercial property technology leader CoStar: the company announced its acquisition of Matterport, the premier real estate 3D imaging company, in a $1.6 billion deal. This news sent Matterport stock soaring, more than doubling the company's previous public market valuation. In today's email, we'll delve into the acquisition details and explore what this new ownership could mean for Matterport's future growth.
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Now, let's dig in!
How Matterport Will Change After CoStar Acquisition
CoStar hinted at a major acquisition in its recent earnings call, and yesterday, the details were revealed: CoStar agreed to purchase 3D imaging company Matterport for $1.6 billion. While this might not seem significant for a company worth over $34 billion like CoStar, it represents a 216% premium compared to Matterport's recent stock price. Furthermore, while $1.6 billion appears substantial, it's only about one-tenth of Matterport's peak valuation in 2021.
The acquisition rationale centers on strategic alignment. “CoStar Group and Matterport have nearly identical mission statements of digitizing the world’s real estate,” said CoStar Chief Executive Andy Florance. “I look forward to welcoming Matterport to the CoStar Group family and believe that we will be stronger together, in pursuit of our common mission.”
Matterport leads the 3D imaging space with over 38 billion square feet under management. Despite a softening real estate market, they've secured strong growth, with subscription revenue on track for a 23% year-over-year increase. While still posting losses ($0.04 per share), this represents a 56% improvement over last year.
Clearly, CoStar sees growth potential beyond Matterport's market leadership. The company has been a pioneer in AI-powered tools that can accurately measure rooms and convert images to editable CAD files.
As powerful as Matterport's technology is, the CoStar acquisition will have consequences. One potential casualty is the loss of a large client, Redfin, which has relied on Matterport for agent services since 2014. This relationship is likely to end now that Matterport is owned by a competitor (CoStar's aggressive push into residential markets since acquiring Homes.com). Zillow's launch of its own 3D imaging software, Zillow 3D, further highlights this.
CoStar's acquisition brings advantages for Matterport, like access to substantial resources and CoStar's customer base. Yet, it'll also hinder Matterport's ability to sell to CoStar's competitors. CoStar has a history of locking products to drive data subscriptions (like CoStar News). If not careful, CoStar risks hampering Matterport's growth without boosting the service that made it an industry leader.
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