Rich Barton
Zillow.com CEO

"The unprecedented economic events that are playing out on a global stage began in our own industry and have made a prolonged recession likely, in our judgment.  We are a young company that is not yet making a profit.  Despite having sizeable cash reserves, we deemed the responsible course was to meaningfully reduce expenses, so that Zillow emerges from the other side of the recession in a very strong position," wrote Barton.

According to Barton, Zillow.com had 5.4 million unique visitors in September, which is a 41 percent increase in traffic compared to the same time last year.

"One of the reasons this is so difficult is simply because the business continues grow," Barton wrote.

"While our revenues do not yet cover our expenses, those revenues have been growing at a rapid pace and we will continue to have open positions in areas that are directly tied to revenue, such as advertising salespeople."

The Seattle-based Zillow is one of the most heavily funded Internet startups and has raised an impressive $87 million from Benchmark Capital, Technology Crossover Ventures, Par Capital and others.

"Given the potential for an extended recession, we firmly believe that we are doing what is painful but necessary to ensure a bright long-term future for a company that," wrote Barton.