• by Mark Walsh  @markfwal, September 8, 2008

Real estate site Zillow.com and its newspaper partners will begin selling each other's premium online ad inventory in the latest phase of their nearly year-old alliance.

Under the new initiative, Zillow's 282 affiliated newspapers including the San Francisco Chronicle and The Philadelphia Inquirer will be able to sell targeted display ads across Zillow.com. At the same time, Zillow's sales force will offer display units on the real estate sections of the newspapers' Web sites.

The two sides will split ad revenues roughly 50-50 under the cross-selling agreement.

Previously, the newspapers had offered existing real estate advertisers the option of also buying classified and featured listings on Zillow.com. Newspapers could also add Zillow features to their own sites, including the company's "Zestimates" tool for finding home valuation estimates.

The newly formed Zillow Ad Network will focus on brand advertising and extend to potential new marketers as well current ones. Greg Schwartz, Zillow's vice president of sales, said the effort would allow newspaper advertisers to reach not only consumers in local markets, but those moving to new markets.

"We can target ads to where people are searching for homes, not just where they are," Schwartz said. Zillow has more than 5 million monthly visitors--with 90% owning a home and two-thirds buying or selling within the next two years--while the newspaper sites collectively reach an audience of 63 million nationwide.

A San Francisco furniture retailer, for instance, could target the 750,000 Zillow visitors who research San Francisco Bay Area homes each month on Zillow.com while also reaching the San Francisco Chronicle's online audience. Advertisers can segment audiences down to specific ZIP codes, neighborhoods or individual homes.

Furthermore, Zillow can target ads to registered users who appear to be preparing to put homes up for sale based on activities such as updating home listings on the site with new photos or information. "There are a lot of people who want to reach them before the home actually goes on sale," said Schwartz.

Home improvement stores such as Home Depot and Lowe's, for example, might want to show ads to Zillow users who are planning to renovate before placing their homes on the market. The real estate site has a total of 80 million U.S. homes in its database and 3.1 million for-sale listings.

Zillow's newspaper consortium spans 11 newspaper companies including Hearst Newspapers, Lee Enterprises and Media General. The partnership is just one that newspapers have formed in the last couple of years with Internet properties to offset eroding print ad sales.

In the first quarter of 2008, total print revenues fell 14.38% to $8.4 billion, according to the National Association of Newspapers. Worse, major newspapers' online revenues are growing more slowly than expected.

Schwartz said its newspaper alliance so far was progressing according to expectations, although he declined to provide details. "We're finding the newspapers to be quite modern and digitally focused," he said, adding that more are expected to join the group in the coming months.

Zillow has raised $87 million in venture capital to date from investors including Benchmark Capital and Technology Crossover Ventures.