Zillow gets $30M more for online real estate raising their total investment to date to $87 Million in Venture Capital following earlier rounds from Benchmark Capital, Technology Crossover Ventures and PAR Capital. That’s an awful lot of bones.

John Cook asks the one question I’ve been wondering about for a while – at a 10x return (a hopeful return on a VC investment) can Zillow seriously hope to become an $800 million company?

Just what is their end game?

IPO? Sarbanes-Oxley has put a damper on that option, but it’s an (unlikely) possibility.

Acquisition? Who’d buy ‘em? Google? Yahoo? MSN? IAC?

Maybe one of the big newspaper chains like Tribune or McClatchy. Both are bleeding real estate ad dollars (see McClatchy Reports August 2007 Revenues) and might turn to a web acquisition to recoup some of that revenue.

Profitability? Zillow CEO Rich Barton expects great things from this approach. From John Cook’s interview:

Those sales staffers are focused almost entirely on online advertising, a model that Barton believes will continue to grow despite the recent housing slump. “The volume of advertising dollars that are going after these people as they have these conversations around spending money, it is effectively infinite. It is so huge,” Barton said.

Meh.

I’ve always maintained that advertising can’t be a truly viable option for site as big and expensive to develop as Zillow is, especially in the current climate (see Storms Ahead for Real Estate Sites). Barton, in his Q&A with John Cook, even seems to indirectly undersell the popularity of their platform.

We have had over 6,000 advertisers for this local EZ Ads product which is this self-service product that Realtors or plumbers or mortgage brokers can use.

6000 advertisers each buying 10 bucks worth of ads does not an $800 million company make.

But Zillow’s biggest problem is it has become truly schizophrenic in what it’s aiming to do. It has duck and dived and morphed itself into all sorts of contortions since it launched.

Is it a home valuation tool? A home search site? A marketing platform for Realtors? A community conversation around real estate? And now soon to be a mortgage loan service too?

I hardly know anymore – Zillow’s value proposition for consumers has become so muddied.

And I don’t think I’m alone. Their traffic data alone seems to bear our this trend. Visitors to Zillow have plateaued while their competitors are steadily gaining ground.

Same goes for visitor’s engagement with Zillow. People don’t seem to be spending any more time there.

real/diaBlog also comes to a very similar conclusion.

Looking at the two companies, Trulia, who has remained laser-like in its focus to simply deliver a good real estate search experience (and has remained far smaller in terms of VC dollars taken in and the number of staff it employs), has now become the top traffic driver to real estate companies nationwide. Pretty good ROI, if you ask me.

So what does this extra $30 million from Legg Mason mean? Well, it allows Zillow to maintain Barton’s “go big or go home” strategy for a few more quarters anyway. Hopefully, it also gives them enough breathing room to start figuring out exactly who they are in the meantime.

Or maybe they know and they just haven’t told us yet.

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