This will not be a banner year for the real estate app Zillow. “We describe the home market as bouncing along the bottom,” CEO Jeremy Wacksman said in our conversation this week. Last year was dismal for the real estate market, and he expects things to improve only marginally in 2026. (If January’s historic drop in home sales is indicative, that even is overoptimistic.) “The way to think about it is that there were 4.1 million existing homes sold last year—a normal market is 5.5 to 6 million,” Wacksman says. He hastens to add that Zillow itself is doing better than the real estate industry overall. Still, its valuation is a quarter of its high-water mark in 2021. A few hours after we spoke, Wacksman announced that Zillow’s earnings had increased last quarter. Nonetheless, Zillow’s stock price fell nearly 5 percent the next day.

Wacksman does see a bright spot—AI. Like every other company in the world, generative AI presents both an opportunity and a risk to Zillow’s business. Wacksman much prefers to dwell on the upside. “We think AI is actually an ingredient rather than a threat,” he said on the earnings call. “In the last couple years, the LLM revolution has really opened all of our eyes to what's possible,” he tells me. Zillow is integrating AI into every aspect of its business, from the way it showcases houses to having agents automate its workflow. Wacksman marvels that with Gen AI, you can search for “homes near my kid’s new school, with a fenced-in yard, under $3,000 a month.” On the other hand, his customers might wind up making those same queries on chatbots operated by OpenAI and Google, and Wacksman must figure out how to make their next step a jump to Zillow.

In its 20-year history—Zillow celebrated the anniversary this week—the company has always used AI. Wacksman, who joined in 2009 and became CEO in 2024, notes that machine learning is the engine behind those “Zestimates” that gauge a home’s worth at any given moment. Zestimates became a viral sensation that helped make the app irresistible, and sites like Zillow Gone Wild—which is also a TV show on the HGTV network—have built a business around highlighting the most intriguing or bizarre listings.

More recently, Zillow has spent billions aggressively pursuing new technology. One ongoing effort is upleveling the presentation of homes for sale. A feature called SkyTour uses an AI technology called Gaussian Splatting to turn drone footage into a 3D rendering of the property. (I love typing the words “Gassian Splatting” and can’t believe an indie band hasn’t adopted it yet.) AI also powers a feature inside Zillow’s Showcase component called Virtual Staging, which supplies homes with furniture that doesn’t really exist. There is risky ground here: Once you abandon the authenticity of an actual photo, the question arises whether you’re actually seeing a trustworthy representation of the property. “It’s important that both buyer and seller understand the line between Virtual Staging and the reality of a photo,” says Wacksman. “A virtually staged image has to be clearly watermarked and disclosed.” He says he’s confident that licensed professionals will abide by rules, but as AI becomes dominant, “we have to evolve those rules,” he says.

Right now, Zillow estimates that only a single-digit percentage of its users take advantage of these exotic display features. Particularly disappointing is a foray called Zillow Immerse, which runs on the Apple Vision Pro. Upon rollout in February 2024, Zillow called it “the future of home tours.” Note that it doesn't claim to be the near-future. “That platform hasn't yet come to broad consumer prominence,” says Wacksman of Apple’s underperforming innovation. “I do think that VR and AR are going to come.”

Zillow is on more solid ground using AI to make its own workforce more productive. “It’s helping us do our job better,” says Wacksman, who adds that programmers are churning out more code, customer support tasks have been automated, and design teams have shortened timelines for implementing new products. As a result, he says, Zillow has been able to keep its headcount “relatively flat.” (Zillow did cut some jobs recently, but Wacksman says that involved “a handful of folks that were not meeting a performance bar.”)

Still, the meat of Zillow’s business involves searching for homes, and that’s where the company may be vulnerable. The problem for Zillow and its competitors is that real estate listings are generally public information. (I won’t get into ongoing complicated litigation—including lawsuits that Zillow is involved in—regarding how private listings are handled.) It’s hard enough for Zillow to stay ahead of rivals. But as users increasingly use chatbots as a front end to all sorts of information, it has to worry about customers bypassing its app and going straight to the big LLMs.

Zillow moved to stay ahead of this potential shift by becoming one the first third-party platforms to integrate with OpenAI’s platform. But when I used the chatbot to view homes for sale in one Western Massachusetts town, it took a few tries before it surfaced a link to activate the Zillow app. Without that activation, the links to homes for sale were distributed, seemingly randomly, between Zillow and competitors Homes.com, Realtor.com, and so forth. OpenAI is circumspect about what it will do with its newfound power: “It’s still early, and we continue to learn,” said spokesperson Niko Felix about how the company handles its apps. Which isn’t quite the same as saying “our developers can be 100 percent sure that we will never compete with them.”

Even scarier for Zillow is a recent move by the biggest hyperscaler of all—Google. Working with a real-estate analytics company called HouseCanary, the search and AI giant has been experimenting in several cities with putting home listings alongside Google real estate agent ads in search. Click on the link and Google shows its own Zillow-style staging, with accompanying critical information like square footage and photo galleries—as well as a link to schedule a viewing with a real estate agent advertising on Google. A Google spokesperson says it's an expansion of its existing real estate agent ads, supplemented with new information to make them more helpful. If the test works out, it’s easy to imagine that Google one day might bring the same data to AI products like Gemini. (Google does say that the experiment did not involve Gemini, and currently no ads run on the AI model.) Predictably, the Google experiment led to yet another dip in Zillow’s stock price. It also generated speculation that Google might buy Zillow.

Wacksman seems oddly sanguine about the nearly $4 trillion behemoth eyeing his business, dismissing Google’s experiment as just another way for the company to get more eyeballs and thus increase ad revenue. “Sure, they might grab some more marginal ad dollars,” he says. “But when buyers and sellers want to find a real estate site to use for the transaction, they find us, and that's why so much of our traffic comes direct to us. Once you want to consume a virtual tour listing, once you want to get preapproved, once you want to start messaging with real estate agents, you really need a really deep, integrated experience.”

Wacksman thinks that even in an AI-driven age, its human touch, based on its partnerships with local realtor agencies, will still keep Zillow afloat for its next 20 years. “Ideally, we will be helping to allow you to use the Zillow app for everything in the real estate transaction,” he explains. That assessment might underestimate how much change is afoot. Maybe AI agents won’t replace flesh-and-blood real estate agents. But it seems likely that the app paradigm—the house Zillow is built on, so to speak—will eventually be supplanted by some sort of omniscient AI-centric super-factotum, probably powered by corporate giants like Google. How services like Zillow find their way in that paradigm is anything but certain. For now, Wacksman’s ideal outcome is more prosaic: “Maybe we’ll get more people to actually move again,” he says.

This is an edition ofSteven Levy’sBackchannel newsletter. Read previous newslettershere.