IAC/InterActiveCorp has announced an agreement to acquire ServiceMagic, Inc., an online home services marketplace similar to but different from LendingTree, the online lending/real estate lead generation company IAC acquired last year.

At first glance, it might appear that IAC is buying up competition to fold into LendingTree, but the strategy isn't as simple as that. Neither is the execution.

ServiceMagic will be split into two different, but distinct groups, explains Tom Reddin, president and COO of LendingTree.

"The first half of the business, ServiceMagic Home Services, will fall under IAC Local and Media Services Group, under the leadership of Anne Busquet," says Reddin. "This group contains CitySearch, Evite, Entertainment Publications Inc. and TripAdvisor as part of our mission to efficiently connect merchants with the millions of consumers who want their services. This part of the business includes the matching service between consumers and home improvement contractors only. IAC L and MS also oversees CitySearch and Evite.

The second half of the business," continues Reddin, "the lending and real estate services businesses, will fall under the IAC Financial Services and Real Estate Group, continues the spokesperson. From there, these two offerings will be again split up into lending and real estate offerings under the IAC FS and RE umbrella.

IAC formed the IAC Local and Media Services Group "to provide consumers with information, ratings, advice, connections and access wherever they are and wherever they are going so they can make well-informed decisions," explains company personnel.

Both the lending and real estate offerings will continue to be managed by ServiceMagic, laddering up to Doug Lebda, CEO of LendingTree and Reddin, under the IAC Financial Services and Real Estate umbrella.

ServiceMagic will be deployed on IAC's RealEstate.com site to attract consumers to Realtors and on the LendingTree network to attract consumers to lenders.

The short version of the story is that RealEstate.com leads consumers to agents and mortgage brokers while LendingTree lead generation services are for principals, like real estate brokers who want to manage and pass out leads to agents in their offices as a business generator, and banks. At LendingTree, brokers and lenders (except for a small lender service fee) pay on the back end at closing. ServiceMagic, while it was just beginning to cater to brokers, is a tool that appeals directly to agents and mortgage brokers. They pay for leads on the front end, regardless of whether they close or not.

This gives IAC what it believes is a distinct advantage over others in the lead generation industry who have either an agent-only or broker-only lead generation solution as well as multiple channels for those leads to come in.

It is certainly an advantage over companies like Homestore which is still stuck in committee hell discussing the right and wrong of charging for lead management at all. While Homestore and the NAR debate whether sex leads to dancing, LendingTree, ServiceMagic and other competitors are getting rich on the brokers and agents who are ready to commit the sin of paying a third-party for leads in order to have new sources of business. ServiceMagic came to the LendingTree party with no less than 22,000 agent customers for leads.

ServiceMagic folding into LendingTree isn't the first time business models will merge like second wives into one happy polygamous family. IAC bought GetSmart a little over a year ago, which was owned by the Providian credit card company.

"It matches consumers with lenders and the fee structure is similar to ServiceMagic," explains Rodney Rice, cofounder of ServiceMagic. "Lenders purchase the transmits as opposed to having a back-end closing fee, and we were going to take the best aspects of GetSmart and ServiceMagic on a single platform."

He adds, "IAC has gotten very serious about pursuit of local media and services and formed an operating unit called Local Media Services Group, for local search and Internet yellow pages, and what that has meant for us is that ServiceMagic fits into the heart of that strategy."

Lending

"The ServiceMagic lending business is very similar to the GetSmart product offering," says Reddin, "so the two name brands will continue to be marketed separately in online and offline channels to maximize reach to consumers. Eventually, we plan to merge ServiceMagic lenders into the GetSmart lender offering so lenders will have a single source to receive volume from both of these consumers brands.

Real Estate

"We will continue to build and support our "Find-A-Realtor" program," says Reddin, "and other relevant services through our broker partners. We will simply be adding ServiceMagic's agent-referral network as a choice to agents as well, on RealEstate.com."

The terms of the all-cash transaction were not disclosed. ServiceMagic will remain an independent brand within the IAC Local and Media Services Group.