You've Lost That Lovin' Feelin I have a theory... My theory is HomeStore is growing tired of being partners with The National Association of Realtors. Why? First a History lesson: In November of 1996 RealSelect (HomeStore) rescued RIN from NAR. NAR had just squandered 14 - 18 million dollars on RIN and they were desperate. So RealSelect gave NAR a 15% ownership in RealSelect for the lifetime rights to operate Realtor.com. Over the course of 30 months and the raising of necessary working capital this ownership was reduced to about 10%. This has proven to be a good deal for RealSelect, because NAR has been a very tireless promoter of Realtor.com. They have worked behind the scenes and placed pressure on many of the MLS's to sign exclusive deals to have their inventory sent to only Realtor.com, therefore shutting out other sites as HomeSeekers, CyberHomes, and HomeAdvisor. Because Realtor.com has almost all of the listings in the country and by spending a great deal of marketing dollars, Realtor.com has grown to over 6 million visitors monthly. These 1.2 million listings and 6 million visitors have made HomeStore the BIG time leader of the real estate sites on the Web. This BIG time lead allowed HomeStore to go public, and it currently has a market valuation of approximately 3.5 billion dollars (as of mid September 1999). This arrangement has been great for The National Association of Realtors. Today NAR's ownership is worth about 350 million! Not bad for a 14 - 18 million dollar disaster. Not bad for a nonprofit organization! (we will discuss that at a later date) So up to now, we have a great marriage. However, now I think NAR is singing "you're trying hard not to show it, but baby, baby I know it...You've lost that lovin' feelin." HomeStore may show every sign of loyalty to the NAR publicly, but behind closed doors, they may be wishing they could end this marriage. HomeStore has the middle age crazies and they are looking for a Porsche. As mentioned above, HomeStore is now a publicly traded company with their sole purpose to increase their stock price (shareholder value). The way you increase stock price today is by increasing revenues. Like almost all major Internet companies they would like to get into e-commerce. However, in their agreement with the NAR, HomeStore is forbidden to receive many types of transaction fees. This would include referral fees between Realtors and a piece of the loan origination fee. Loan origination fees are big business. Today's market valuation of E-Loan is 1.2 billion dollars. Keep in mind E-Loan has no homes to show and less than ¼ the visitors of HomeStore. Imagine what HomeStore's valuation would be if they could get a piece of the loan action. Stuart Wolff is no dummy. Obviously he has thought of this. Therefore, HomeStore is forced to pursue other lines of revenue which aren't nearly as lucrative -- banner ads and selling Realtor home pages (yawn). Many companies are starting to erode the home page market with free services to Realtors and there isn't enough space on Realtor.com to sell enough ads to justify a $3.5 billion valuation -- much less increase the price per share further. This puts the NAR in a tough position. Do they get a facelift and lose weight (and lose those restrictions) or do they just grow uglier and uglier? If they don't lift the restrictions, HomeStore has the listings and they have the traffic. What they need now is a divorce. "and there's no welcome look in your eyes when I kiss your lips"