CoStar and the price of being a challenger
CoStar has spent heavily to break into residential marketplaces on two continents. Two of its largest shareholders think it should stop. Both sides have a point.
By Alberto García Martínez, Managing Director, Harbourline Partners
CoStar Group built one of the most profitable information businesses in commercial property. For the last few years it has been trying to repeat the trick in residential marketplaces, where the leaders are entrenched and the audience is expensive to win. It is the most determined buyer in the sector, and the most instructive, because its strategy tests a question every challenger portal faces: can money buy a position that network effects have already handed to someone else?
What CoStar has bought
Two acquisitions in 2025 show the shape of the strategy. The first was technology. CoStar closed its US$1.6 billion acquisition of Matterport, the 3D capture company, on 28 February 2025, paying US$5.50 a share in cash and stock. Immersive tours are a way to make listings on its own sites better than the same listing elsewhere.
The second was a market. CoStar agreed in May 2025 to buy Domain in Australia at A$4.43 a share, about A$3.0 billion, after taking roughly 17% in February; Domain reaches an average of 6.6 million Australians a month. The deal completed on 27 August 2025. In its own words, CoStar intends to build a better experience at a lower cost by combining Domain's local knowledge with its global technology.
What its shareholders object to
In the United States the vehicle is Homes.com, which CoStar has marketed heavily as an alternative to the established portals. In January 2026 Third Point called for board changes and a retreat from the Homes.com bet. On 4 February D.E. Shaw followed with a letter that estimated CoStar's spend on Homes.com at more than US$3 billion against about US$80 million of annual revenue and more than US$2 billion of cumulative losses. CoStar's own update in January had put Homes.com profitability at 2030. The company's response was that the business is embedded across the group, that most of the investment has been made, and that abandoning it now would be short-sighted.
The case for CoStar
Portal markets reward the leader so heavily that a challenger either spends enough to become a real alternative or does not bother. Half-hearted challengers lose money slowly and disappear. CoStar has chosen the other path, with the balance sheet to sustain it, and it is pairing the spend with product that competitors must answer. Its Homes AI assistant remembers properties a user has looked at and answers questions comparing them, the kind of feature that matters more as search becomes conversational.
The case against
Agents pay the portal where the buyers are, and buyers go where the listings and habits already are. That loop is hard to break with advertising. Revenue in the tens of millions after several billion of spend is the number activists point to, and it is a fair one. The risk for any challenger is that it trains the incumbent to improve while paying for the privilege.
Lessons for smaller markets
Few buyers in Southeast Asia have CoStar's balance sheet, and that is the point. In a market with an entrenched leader, the realistic routes for a challenger are to specialise, to own a segment the leader serves badly, or to become the most valuable bolt-on for someone with a different business. Buying a position outright is possible, as Domain shows. Building one from scratch against a leader is the expensive option, and CoStar's shareholders are now asking what it is worth.