When a company is valued at 115 times next year's earnings, it had better come up with stronger revenues quickly. So it is no surprise that Homestore Homestore is turning to its prize hog Realtor.com to bring home the bacon.

Realtor.com is the official Web site of the National Association of Realtors that Homestore operates by agreement. While Homestore gets one third of its revenues from advertising, the other two-thirds come from subscription sales, mostly to Realtors. Homestore's new initiatives are additions to its primary subscription product, the I-LEAD lead generation Web page, about $300 to $700. Why do I-LEAD pages need value-add-ons? Because they weren't working as they were for many Realtors.

Why I-LEAD needed retooling

Realtors already know from recent surveys that 56 percent of consumers searching for a home used the Internet in 2000 (Fannie Mae, National Housing Survey-2000.) That's up from 2 percent in 1995 (National Association of Realtors bi-annual housing survey.) And Realtor.com gets a lion's share of those home hunters. In March 2001, Realtor.com announced that it drew 3.3 million unique users to its "Homes for sale" area.

Yet for a variety of reasons, Realtor.com's huge traffic numbers have failed to attract many Realtors to market themselves online, and those who did buy I-LEAD Web pages found they didn't get many leads. While blame can be put on agents who never answered their e-mail or returned calls from "Internet buyers," Realtor.com's business model also had some problems.

Realtor.com was too listings-centric. Realtor.com aggregates listings from over 750 of the approximately 800 multiple listings services nationwide. Brokers are the point of contact, but if listing agents want Realtor.com visitors to find them, they must purchase I-LEAD Web pages so they can be featured as the contact on the listing. This may have sold some Web pages to active listing agents, but it eliminated buyer's brokers, agents who were low or sold out of listings, and agents with listings in limited price ranges from being found by Realtor.com's visitors.

Realtor.com was too busy. Realtor.com set up a complex highway of lead generation opportunities which sometimes inadvertantly work against agents. An agent may buy one lead generation package, only to find him/herself in competition for a lead with another agent who purchased a different Realtor.com tool. While these conflicts have been eliminated, it created an atmosphere of distrust by I-LEAD customers.

How Gateway and XLerator are meant to change I-LEAD into a true lead generator

Realtor.com's new initiatives are good - a Broker Reciprocity solution called Gateway and XLerator, a blind consumer referral program, but they have a long way to go to make a big difference for Homestore.

Broker Reciprocity

Broker Reciprocity is the NAR-endorsed Internet Data Display policy by which participating brokers can share MLS data on their personal Web sites. Realtor.com is a national aggregator of MLS data for the public, and feels it can leverage its experience and relationships with MLS organizations to assist MLSs, brokers and agents with custom solutions through its Gateway products. While a business model hasn't been announced, the company is expected to offer the solution to MLSs free of charge and charge agents and brokers for customized solutions for their personal Web sites. Gateway listings may even be offered as a free enhancement for a Realtor.com I-LEAD subscriber (I-LEAD is Realtor.com's lead generation package about $300 to $700.)

The advantage to Gateway for agents and brokers is that they can be in control of their personal marketing, and offer a basket of listings to online visitors whether their company has listings or not. This levels the playing field for all brokers and allows buyer brokers a chance at Web marketing because it isn't dependent on personal listings.

However, Broker Reciprocity solutions are soon going to be as common as frogs after a rain. Realtor.com has the home team advantage as the official Web site of the NAR, but some competitors such as HomeSeekers have been doing Broker Reciprocity for years, under the sub-brand Citynet. Other MLS information service providers such as VISTAinfo, Inc. also have solutions as well as transaction management companies, Web site vendors and application service providers. Some MLSs and Realtor organizations such as the Traverse Area Association of Realtors and the Florida Association of Realtors are providing their own low cost or free solutions to members.

When a field gets this crowded it gets confusing for customers, and Realtor.com will have to distinguish its solution in a big way.

XLerator

The second product is ready for market. Called XLerator, the product enables brokers and agents with Realtor.com Web sites (I-LEAD pages) to post information such as profiles and offers to consenting anonymous Realtor.com visitors. Essentially it is a blind referral program where the consumer gives permission to share their anonymous search results with Realtors, giving Realtors an opportunity to offer similar listings, make proposals, and otherwise try to capture the lead. When the visitor returns to Realtor.com, s/he can view the proposals and profiles and select a Realtor to communicate with. While the product is free of charge it only offered as an enhancement to I-LEAD subscribers, which should stimulate further sales of I-LEAD lead generation packages.

XLerator is significant because it makes Realtor.com accountable for leads as long as agents understand that consumers are sharing their search information voluntarily. But again, Realtor.com does not have first mover advantage. HomeGain has grown to number five in overall real estate traffic online and is currently the largest referral service online. But where Realtor.com has the advantage is that its business model is based on selling I-LEAD pages, not referrals, so Homestore plans to offer the referrals free of charge to I-LEAD Realtors only. HomeGain, a licensed brokerage, collects referral fees when participating consumers close their homes using a HomeGain-referred agent.

While the value add-ons are strong enough that they can convince some agents that the I-LEAD packages are worth buying, Homestore may have to bring them to market at a loss in order to sell more Web pages in order to beat the competition.

And how that will accomplish higher revenues in the end is anybody's guess.