Homestore made news this week by reaching a year-long high following the incredible run-up of its stock shares on Tuesday, closing with a whopping 46 percent increase to $2.62 per share. The increase is even more significant considering that it took place without any news, announcements, or rumor-mill activity, (except that traders are gleefully speculating that the class-action shareholder suit is close to being resolved or that media mogul Barry Diller has his eye on the company.) The shares closed Wednesday at $2.58 after profit-taking, still over three times the volume of its daily average.

Allen Dalton, president of Realtor.com called the run-up "pleasantly stunning." He offered no reasons why Homestore stock is rising so dramatically, although he did hint that Realtor.com's new pricing strategy may have been of some interest to stock investors.

That makes it a good time to examine Realtor.com's future, apart from its role in Homestore's comeback. What is in Realtor.com's favor and what challenges remain?

Realtor.com - online real estate leader

Realtor.com is one of the most precious operations at Homestore, if not the lead pack camel in the caravan. Licensed by the National Association of Realtors for operation by Homestore, Realtor.com enjoys enormous advantages and suffers only a few limitations via Homestore's contract with the NAR. (Most limitations, Realtors find favorable - no banks, mortgage lenders, or FSBOs can advertise or compete with Realtors directly on the site.)

The site posts aggregated listings, many exclusively, from 880 MLSs, courtesy of its unique relationship with the NAR. The site has the largest number anywhere - 2.1 million listings, and it drew 5.7 million unique users last month, with over 15 million page views per day, a record no other single real estate source can match.

That makes it the single greatest source of real estate classified ads that there is. The listings are posted free to Realtors, who pay the site and other vendors for content-rich enhancements such as personal marketing information and virtual tours, to name only a few choices.

While some Realtors are upset with Realtor.com's new pricing policy, the site's first obligation is to be profitable, so that it can continue providing service to consumers and its Realtor and other advertisers as the official Website of the NAR. While it may lose some renewals, the company can afford to do so, as it only has to renew approximately 15 percent of existing customers to meet previous revenues. For growth, it has another ace up the sleeve.

Realtor.com is among the first advertising opportunities new Realtors get to see due to its affiliation with the NAR and most MLSs. The nice thing about new Realtors is that they are becoming members of the NAR at a rate of over 10,000 per month, they're eager, more likely to tow the party line (support Realtor.com over an outside competitor) and aren't burdened with historical relationships with newspapers or other online vendors. New Realtors don't have a large referral base, which means they are more likely to rely on advertising and would be more open to Realtor.com's marketing pitches. That's a nice stream to fish, and a significant competitive advantage for Realtor.com over online competitors.

It is this unique affiliation with the NAR that has enabled Realtor.com to trounce competitors, driving many including Realestate.com, Cyberhomes, and others into oblivion, and formidable competitors such as MSN, Homes.com and HomeSeekers into retreat. In the world of online real estate, Realtor.com is the 300-pound gorilla.

Realtor.com's challenges

Realtor.com's goal is to beat newspapers at their old game - to become the only advertising medium of choice for Realtors at the local level for listings and personal agent marketing.

In most markets, there is only one newspaper or leading newspaper, and most have done poorly at embracing the Internet to extend their services. That's a tremendous plus for Realtor.com, except for a small problem. The fact that the newspaper is the only print game in town makes it very attractive to Realtors, who have shown no signs of curbing their spending on newspapers, despite the fact that as many buyers turn to the Internet as local newspapers, according to the latest buyer/seller survey by the NAR.

The irony of this is that some Realtors don't want to pay the high cost of print, but they do - to please sellers, and because it is proven advertising medium, and because it is easy. Most agents' budgets have to stretch for advertising in other mediums which require a learning curve (learning to use the Internet, using e-mail, learning how to take virtual tours, etc.) and which has confusing possibilities for error.

An agent who doesn't use e-mail regularly, doesn't own a Website (and almost half of Realtors don't) and doesn't understand how the Internet works is likely to be discouraged by the tremendous number of advertising choices there are online.

Unlike the local newspaper, Realtor.com isn't the only game in town, and it competes with a variety of business models that not only confuse Realtors, but dice their advertising budgets in more pieces. While Realtor.com offers one solution - enhancing listings, other companies offer advertising in the guise of referrals (Lending Tree, HomeGain.) Still other companies offer Website solutions, which opens another can of worms, the most daunting of which is how to get the Website found by consumers. Some Website vendors provide search engine placement, while others rely on traffic partners, which are getting fewer all the time. The sheer variety of advertising opportunities through directories, search engine placement companies, portal advertising, banner ads and more is exhausting to sort through, and the more choices there are, the less likely Realtors are to be loyal.

Realtor.com's future is to overcome a formidable task - to convince agents (and sellers) that their addictions to print can be cured with a patch, and that the clear choice for advertising listings online is Realtor.com.