The technology shake-out which began a year ago in March is still continuing, with survivors attempting to master the uncharted hydroponics of growing a business without soil in the storm-tossed Internet. Some of these companies are in the process of evaluating what makes sense for them and what does not and are doing what is necessary to get profitable.

Only recently, some IPO hopefuls have regrouped to make a new run at doing business. HomeAdvisor has gone back under original investor Microsoft's umbrella while the software giant works out a plan to buy out HomeAdvisor's other investors. HomeGain.com has announced that it is raising its referral fee from 15 percent to 20 percent, and is also introducing a new agent-to-agent referral model to boost revenues.

Public companies are also looking at costs. Homestore and Homeseekers have both let go personnel and consolidated site locations in an attempt to eliminate redundant positions and operating costs.

Yet, curiously, there is one operating cost that some of these companies are reluctant to cut - the payments they make to MLS organizations for aggregated listings.

At $1 a pop, listings add up to big money quickly, particularly when they turn four times a year, according to Realtor.com estimates. That means that Realtor.com, with 1.4 million listings, is paying out $5.6 million a year for listings content. While Realtor.com can afford such an expenditure, sitting atop a $1.8 billion valuation and $400 million in cash, HomeSeekers, market capped at $3.7 million, and with 1 million listings, is positioned to pay out more for its listings than its company value! Does that make sense?

Fortunately for HomeSeekers, it isn't on the hook for quite that much money. While Homestore claims to have listing contracts with about 750 MLS organizations (out of about 800 nationally) HomeSeekers has listings agreements with about 340 MLS organizations. While HomeAdvisor will disclose only "several hundred" MLS listings contracts, both they and HomeSeekers get their listings from a variety of sources which they don't have to pay, including broker direct input, homes magazines, and strategic partner sites.

That's why paying for listings has always been an iffy expense model because it is like paying someone to do a service for them, but that depends on your perspective. For most companies trying to provide a marketing opportunity for agents on the Internet, the payments are well worth it.

Steve Ozonian, president of Realtor.com says, "We are continuing forward, and I do not see our contracts changing in the near future."

Ozonian would not disclose how many of these contracts are Gold Alliance (exclusive rights to publish listings) contracts, but competitors estimate that Realtor.com has exclusive listing agreements with about 100 of the largest MLSs. Some contracts could be for more than the $1 per listing contracts. Some competitors claim that Realtor.com pays up to $3 or more a listing to some MLSs to maintain exclusive status. "Not necessarily," says Ozonian.

In an uncommon accord, HomeAdvisor agrees. "The MLSs are providing a valuable service, which is the aggregation of listings," says a spokesperson for HomeAdvisor.

But the listings services are providing a valuable service for MLS members, too - free advertising and promotion on the Internet, a fact which has gone unappreciated by some Realtors who are confused at why they should pay marketing fees associated with putting their listings on the Internet. To service providers, this is baffling, particularly in light of the fact that more than 50 percent of homebuyers are going to the Internet to look at listings. "They don't seem confused by newspaper advertising," says an industry insider."What they have often done is failed to curtail their newspaper spending to include Internet marketing, so they find it a financial burden."

In the early days of Internet real estate marketing, listings were (and still are) the gold standard. It was the advantage big brokers had over smaller brokers - more listings, more exposure. It was also the way listing agents could be found on the Web. The more home listings a national listings service had to show, the better it could compete. Everybody wins with online listings - until now.

A year ago, the national listings space was robust, but suddenly the downturn of the technology sector and other causes left services like Homes.com and Realestate.com in bankruptcy, according to news reports. Another Internet pioneer, CyberHomes.com, is laying dormant, waiting for a buyer.

For MLSs depending on payments to share their listings, these sites can no longer be counted upon. And soon, they won't be able to count on others who are looking to survive the dot-com shake-outs.

Says John Giaimo, CEO of HomeSeekers,"We are paying the fees that we have contracts for, but we been pushing the payments off to 60 or 90 days in some cases," he explains. "This is just a situation that occurs when economics start tightening up."

And it's not going to stop there. While Giaimo reports that sales are tracking upward, "I'm down to about 240 people and that is where I want to be so we have sufficient staff to manage our business," he says. "But it would be nice if we didn't have to pay for listings anymore. It is to the point that as a business model, HomeSeekers is providing a wonderful service and it is difficult to pay fees to provide a service."

Instead, Giaimo is looking for ways to turn fee-paying into revenue-sharing. "That can be successful for MLSs and take the heat off for having a payable," says Giaimo. "The point is I need to make a real business here as it relates to MLSs. If we are paying $5,000 a month to XYZ MLS and we are only able to generate $4,000 a month in revenues, then I have to make a business decision and that is to stop doing something that hurts."

Are some contracts not being renewed? "We have not discussed this with the MLSs at this point but we are thinking along these lines," says Giaimo. "We work very hard to do updates and there is a lot to the process of posting listings. There's the back office and we have to have fiber in this building. Other real costs associated with paying for the listings are engineers, the scriptwriters - there are teams who work in the photo department, data processing, on the downloading side, updates every couple of hours. I can show you when I have to pay $1 a listing, we are losing money, yet consumers have applauded that this is a great place to go for listings, so that makes it valuable for agents. Now I can still take a percentage of this loss and put it into marketing but I'm still stuck with a $900 loss on that MLS to explain to shareholders.

"The push-back may be - "That's your problem,"" says Giaimo, "but, then I'll have to say, "It's been a good relationship. but we have to run it as a business would run."

"It costs me about $1.20 a listing to manage them," says Giaimo, "and I do come out ahead on some MLSs where we sell more Web sites and other services. But the bottom line is every service has a value and my argument has always been that agents should be in as many magazines as possible, but it just comes to a point where we have to realize it as a real business and we have to evaluate each MLS for its ability to help us make money.

"I would argue that if they went on a revenue-share basis, that some MLSs would make more money from us that they currently do," says Giaimo. "But there are a lot of markets who don't have a zillion people looking at homes in the community. We hate to lose them but we won't be able to service them."

So far no MLSs have walked away.

Ozonian explains why. Realtor.com has received its share of criticism for charging Realtors for marketing on their own listings which were acquired from MLSs, and for acquisitions such as Move.com, he says, but "people in the industry who have tried to do things on their own end up understanding this is complex and difficult, and it is not an easy team sport to play. The bigger the team, the more success. The reason some others are having a hard time is that you can't give things away forever and you can't say the hell with the rest of the industry and you can't do it on your own. We are happy to see that what we thought the right thing to do is aggregating listings around Realtors. That's proven that Realtors remain strong in the transaction process, and that they are not being disintermediated. The Internet is providing the consumer with value and wealth of knowledge compared to pre-Internet and the professional can be more productive by being an advisor so there has been a great change for the better."

And that's the bottom line. In order to provide marketing opportunities for Realtors, service providers also have to make a profit. Now if only Realtors and the MLSs can see it that way.

Published: April 4, 2001

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.