"Homestore.com's Future Is in Question," says Reuters, a view which raises an important issue: What next?

With many dot-coms the answer would be fairly obvious, a blank space on the Internet spectrum. But there's a catch with Homestore.com: It has actual revenues -- not enough cash coming in to cover costs, but a lot of dollars sloshing around. Could the company break even or perhaps even profit if it adopted a new business plan?

Homestore has in hand a number of assets which may have marketplace value -- the sale of these products, sites, and systems would raise cash, reduce staff, and slash costs. What remains would be a far smaller firm, but perhaps one which the real estate community could support.

For brokers, the interest in Realtor.com, a site operated by Homestore, was driven initially by one factor: Amazon. Amazon showed the power of the Internet as a marketing platform and demonstrated the web's ability to destabilize traditional and local businesses such as bookstores, travel agents, and stockbrokers.

Could the same thing happen to local realty brokers? A few years ago no one denied the possibility. Internet firms -- with massive support from Wall Street, the benefit of new technologies, and a different cost base -- were perceived as a viable competitive threat to local brokers.

As other industries were Amazoned there was much initial support within the real estate community for Realtor.com and its operator, Homestore. The attraction was a national site which would provide consumer access to all NAR members without favoring one over the other. Realtor.com would also do something else: It would provide an alternative to other site developers and listing aggregators.

Had Homestore simply operated Realtor.com, it's probable that a large number of people in real estate would have been very happy. With a supportive broker community, Homestore could have emerged with a solid piece of the mammoth real estate industry, a very nice position.

As a niche business, Homestore would have had little need to acquire other companies or expand its employment base. While revenues would be smaller, costs would be reduced.

The problem with the niche approach is that Wall Street prefers big companies with massive valuations. Small companies with a limited horizon don't have the panache of category killers. This is a concern if you want to lure employees with stock options or buy companies and services with stock instead of cash.

But now there is no choice. As this is written shares with an original IPO price of $20 -- shares which last year sold for more than $120 -- are now worth less than $3.

So how would the new Homestore work? Its product lines would look like this:

• We host Realtor.com.

• We sell web sites.

And that's it.

With this formulation there is no need to sell advertising -- there would be no commercial messages to compete with brokers for visitor time and attention. The site would be less complex because there would be no need to have a platform for ads or a need to promote corporate siblings or "strategic partners."

Looking ahead, the revised company must have a far-smaller staff. It needs new management with a clear understanding of the real estate industry. Cash from the sale of current divisions and assets can be used to fund the transition. In the end there will be a business with a clear purpose, understandable economics, and the possibility of success. This may not produce cheers on Wall Street, but it would be welcome by the real estate community.

For more articles by Peter G. Miller, please press here.

Published: November 6, 2001

Use of this article without permission is a violation of federal copyright laws.

Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Peter's weekly columns appear in more than 100 newspapers nationwide, he is also published in a variety of other media outlets and he is a frequent speaker at national events and conventions. Peter welcomes your questions, comments, and news releases via e-mail at .