Robert,

They are not actually selling a lead to you.  You are paying for placement and hoping that leads come your way...A

They do not need a real estate license ... they are selling advertising and not taking a referral fee on leads.

This is not rocket science. Realtors are paying for adversing spots and getting leads from it... very simple.

I see folks bashing Zillow on here all the time and I just laugh. If you don't like them, don't use them.  But Zillow works for me and I am laughing all the way to the bank.

One can make a decent living by what falls through the cracks everywhere in this great country...Its all there, waiting for someone to take it is one thought

For those that say advertising...this reminds me of prostituion where a woman can appear near naked and no law is broken. If she says the words money and sex act to an inquirer...she is arrested. You can advertise, you just cant sell...

Makes me sick that they use our information and then want us to pay for the leads our information brings...

The question to ask is

"Why can't you pay "Billy Bob" the lawn guy for 'leads". Billy Bob would love 200, 500, 1,000 for keeping his eyes open on your behalf. You would give him a handful of cards, maybe even a bumper sticker to put on the trailer. On the check memo line, you write 'advertising services.'

It is interesting how some defend their right to pay a company whose existence depends on misrepresentation, deception and stolen properties but will reject your right to let 'Billy Bob' do the job for you. Those willing to do business with such companies, .... well, I 'll let others fill in the blank.

See this blog and survey http://actvra.in/4M9f

However, pertaining to your question, the lead is the derived result of the service for which you pay, which is advertising.

Because they own a "free" site and can provide the traffic.  Capitalism, something is worth whatever someone will pay for it.  Zillow keeps getting a larger % of the real estate traffic, and they keep increasing the cost for agents to get those leads.   Sooner or later, they will price themselves out of the market.  Until then, enjoy the ride.  You dont have to like them, but agents would be wise to respect them.  They have the leads, for example I sold over $4million from Zillow leads in 2015 (I keep track).

They sell Leads and not asking for  a commission split

What Ron says but essentially that is what they are doing. They are a media company and are not foolish enough to become a brokerage. They make a lot more money being outside of us.

They sell advertising. Although it is zip code based it's not selling leads. They would only have to be licensed to get referral fees.

Yes, as others have said, they are selling advertising, not selling leads.  

Bob - this is a good one and I'll look forward to answers from others but I'm sure you know that they base their fees on the volume of consumers that use their website(s) to locate properties. The fees are for the 'privilege' of being led to those consumers. To be frank, Zillow is all about quantity but not much about quality.

My guess Bob, is that you pay for a lead generation service and they aren't charging a portion of a commission, but a monthly fee for access to their pool of buyers and sellers.

That is my guess.  Just word what you do in such a way as to not violate any regs.  Good old loopholes.  I imagine that companies like Real Estate Webmasters do the same thing for their lead gen sites.  Only so many realtors allowed in an area on certain products.  Not an uncommon or illegal thing.

Sure they can, and they do just like any other lead-genrating boiler room scammer.

Aren't they just selling placement in an area?  Do they charge or follow up on leads generated by the zip code to you? 

 Good morning VB. It seems as if Alexandria has the correct  answer to your question as I do know a real estate agent who used to do that.

Robert (Alaska Bob) Swetz - it's their business model and they do not sell leads for referral fees or commission, so they can, I think.

I am sure they have done their legwork very well....lol!

Their business model isn't the old referral model from broker to broker. That's how they get around it.

Basically they are selling you what amounts to a product. You can buy that product. They aren't collecting a referral fee which in my state would be illegal for me to do. 

I believe they call themselves an advertising company, and they are successful because there are more than enough agents out there who are willing to pay for any kind of a lead.

I get what you are saying - it's like paying a referral fee to a non-licensed person, which is illegal. Good question.

Good question

That is a great question, I wish I had a good answer but unfortunately they have the public fooled.

Bob,
It doesn’t matter what it is called. They have good attorneys’ and neither we practitioners or any states care enough to try and stop them. 

It's advertising.

They are selling leads, not real estate.

It would be interesting if some state real estate commissions prohibited this practice for those without a state real estate license.

Robert (Alaska Bob) Swetz The distinction is a lead vs. a referral. A lead is from someone who has not asked for your service and you are provided a name. A referral is from someone who is referred from an individual and is in need of your service. This is why you have more of a success ratio with referrals than with leads. Most leads are inquiries for information. Z sells leads and does not get paid on referral business. No license required.

The same way 100's of other media based companies can do the same. They either have a monetary relationship with the data aggregators, or with the MLS's themselves. The MLS's love the additional revenue—no matter who it's coming from.

Not much difference between that and selling addresses for farming.

Robert - I guess that I would have to agree with most of the others, and just say that it is no different than paying any other third-party company for real estate leads.

I think buyers start their search on Zillow, know about their inaccuracies and find a reputable REALTOR to assist them. 

I believe technically ther are not selling leads. They are selling advertising on their site which brings you leads.