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On Zillow, it's free to list a home for sale by owner or agent and to list a property for rent. Zillow's online and mobile search tools – including its smartphone app – let users search for property and view estimated property values for free, too. How is Zillow Group, Inc. (Z) able to offer all these services for free and still make money? Let's find out. (Note: Zillow is a wholly-owned subsidiary of Zillow Group, which also owns Trulia. This article is specifically about Zillow.)

One way Zillow makes money is by charging property management companies to advertise their listings on the Zillow Rental Network, which includes websites from Zillow, Trulia, Yahoo! Inc. (YHOO), Hotpads, MyNewPlace, AOL Real Estate, MSN Real Estate and HGTV's Front Door. Zillow sends qualified leads – prospective renters – to these advertisers to help them maximize the return on investment on their advertising dollars. The company has identified rentals as a large market opportunity, with property owners spending about $5 billion per year to get and keep renters. Renters move more often than homeowners, and property owners have to spend money on advertising and lease concessions to fill units. In structures with five or more rental units, about half of properties change tenants each year. (For more, see How to Rent Out Your Spare Room.)

Zillow charges $10 a month for its Premier Agent websites, which include free premium designs, integrated Multiple Listing Service search and a domain name. Real estate agents can also purchase advertising with Zillow. Ads targeted at users in agents' local markets help them get new clients who are buying or selling homes. The ads also provide agents with increased visibility for their listings to help them find buyers. (For more, see How To Find The Best Real Estate Agent.)

Real estate agents mainly pay Zillow based on the number of ad impressions delivered to users in specified zip codes. Premier Agent services are Zillow's main of revenue, and it is more predictable than the other s. Not only have more Premier Agents signed up lately, Zillow is also earning more per agent. The company had 62,305 Premier Agents in 2014, a 29 percent increase from 2013.

The Premier Agent program has three levels: platinum, gold and silver. All levels provide agents with a customer relationship management system to help them keep track of Zillow users who have expressed interest in working with an agent. The gold level gives agents featured results when a user searches for an agent, while the platinum level displays the agent's profile next to for-sale home listings within the agent's zip codes. Agents pay per impression for platinum advertising services and pay a fixed subscription fee for silver and gold advertising services. In 2014, Zillow earned an average of $338 per month per real estate agent advertiser.

Zillow also sells advertising space on its site to mortgage lenders and other businesses that want to reach Zillow consumers. These other businesses include interior designers, home organization retailers, general contractors. Most of these advertisers are in the real estate industry, but some sell telecommunications services, automotive products and services, insurance and consumer products. Display revenue depends largely on the number of monthly unique visitors Zillow receives. (For more, see Digital Advertising Is The Future, But Why?)

Mortgage lenders mainly pay Zillow based on cost per click (CPC) or cost per thousand impressions (CPM). A click means that after searching for mortgage rates, the user requests more information from a local lender, whereas an impression means that the ad appears on Zillow's online or mobile site. Consumers made 25.7 million mortgage loan requests through Zillow in 2014. Zillow also earns money from the subscription-based mortgage software company Mortech, which is owned and operated by Zillow Group, Inc.

So how much money does Zillow actually make from all this advertising? Since it's a publicly traded company, we can easily find out by consulting its filings with the Securities and Exchange Commission. According to Zillow's 2014 annual report to shareholders, the company's revenue was $325.9 million last year, an increase of 65% over the $197.5 million generated in 2013, which was 69% greater than its 2012 revenue of $116.9 million. This growth is mainly attributable to the Premier Agent program, though an increase in traffic to Zillow.com and the Zillow mobile app drove revenues.

Of the company's 2014 revenue, $239 million, or 73% of total revenue, came from services sold to real estate agents and property management companies; $58 million, or 18%, came from display advertising and $28 million, or 9%, came from mortgages.

The revenue numbers might look great, but to get the real picture of how well a company is performing, you have to look at its bottom line: What is its profit after paying all the company's expenses? Zillow was last profitable in 2012 when it made $5.9 million. In 2013, it lost $12.5 million, and last year, it lost $43.6 million. (For more, see Value Investing: Finding Value in Financial Reports and Balance Sheets.)

Most of Zillow's advertising relationships are short-term, so it can't take them for granted. Zillow's advertising revenue, on which the company's financial success relies, could suffer if existing advertisers ended their relationship and Zillow were unable to replace them. If Zillow's user base dwindles or its competitors become more attractive advertisers for mortgage lenders, property management companies and real estate agents, ad revenue could decline. Also, as the company relies heavily on ad revenue from its Premier Agent program, revenue could seriously suffer if agents stop seeing value from advertising on Zillow. Finally, a hit to the real estate market or a drop in consumer interest in home buying and mortgages, both of which are beyond Zillow's control, would likely reduce traffic to the site and lead to a drop in ad revenue. (For more, see Top US Housing Market Indicators.)

Zillow makes money by selling advertising on Zillow.com and the Zillow mobile app to property management companies with vacancies; real estate agents looking for buyers and sellers; mortgage lenders looking for borrowers; and general advertisers, especially ones in the real estate industry. While its revenue is sizable, Zillow isn't profitable, so it remains to be seen whether the model of offering free real estate listings and home value estimates to consumers is sustainable. Zillow will not be able to charge consumers for this information unless its competitors start doing so, however. (For more, see Zillow vs.Trulia.)