If Realtor.com were a cat with nine lives, it couldn't land on its feet any better. The question is why does operator Homestore take such risks with Realtor.com's remaining luck? The simple reason is that Homestore is a do-it-now-and-face-the-consequences-later kind of a company, and so far, its risk-taking has paid off.

The most recent example is the company's new pricing policy for Realtor.com marketing solutions for Realtors.

The company announced over a year ago that it was going to unbundle its Realtor.com marketing products, but didn't make it clear how that change would affect its Website customers. Instead, the company let its Realtor customers find out one renewal at a time that their exposure on Realtor.com would be priced primarily according to their market area and how many listings they have, and would go up substantially by multiples of what they had been paying, in many cases.

Realtor.com renewals aren't even for the same product anymore. The renewal is for listing enhancements. Webpages are an option, at an additional cost. That's what unbundling means. Instead of using PR to its advantage, the company left it to the sales representatives to deal with the screams on the other end of the phones.

Luckily for Realtor.com, it has some incredibly good salespeople, and Homestore could end up with more revenues than ever, which was the reasoning behind the new pricing policy. Homestore has been around since 1997, and has never made a dime. Management feels it's high time.

"We did the right thing and the fair thing," Says Allen Dalton, president of Realtor.com. "When you look at us vs other costs to disseminate that data for advertising reach, Realtor.com is an incredible bargain. The agents who pay the most pay the least per listing. The pricing was unrealistic for so long that the adjustment created some understandable discomfort for some, but we are having more Realtors tell us that they think our pricing is fair."

The new pricing policy centers around exposure instead of lead generation, which is a huge difference. Realtor.com pays for listings, and exposure on key portals such as AOL. Why should exposure for agents be free? As a technology company, Realtor.com beat every other real estate portal on the Internet, many into oblivion. Reinventing itself as the medium it always was, Realtor.com now plans to beat newspapers. The company is repositioning itself to be the first place, rather than an afterthought, where Realtors spend their advertising dollars.

While it riled some Realtors, the new pricing policy is a successful strategy - it only requires a fraction of renewals to meet previous revenue benchmarks. While few except shareholders are thrilled with the new prices, many Realtors are nonetheless renewing, because there is no other exposure opportunity comparable to Realtor.com. In June, Realtor.com had 2.1 million existing and new home listings - more than any other portal - from more than 880 MLSs, according to its monthly report to association directors. And, the site drew 5.7 million unique users, with over 15 million page views per day - again a record no other single source can match.

Even at multiples of what agents had been paying, that makes Realtor.com an exposure bargain compared to other forms of advertising, especially comparatively expensive and flat local newspaper display and classified ads which are only good until they line the bird cage the next day. To Realtor.com's way of thinking, why pay $1100 a month to a newspaper for image-and word-stingy classifieds when you can pay $1100 a year and get more exposure for your listings and more personal marketing, too?

But some companies, while agreeing that Realtor.com is a great advertising opportunity, don't want to pay more to help Realtor.com conquer newspapers. Will Realtor.com be hurt because some companies and individuals don't want to renew? Hardly.

Case in point: Realty Executives.

For the last three years, Realty Executives has purchased the rights to Realtor.com Websites in bulk to give to its agents. Paid for by the agents through an institutional advertising fund, the Websites were obtained at a tremendous undisclosed economy-of-scale discount. The first year the bulk purchase was for about 6,500 agents. Today, Realty Executives has over 10,000 agents and wanted to renew its million-dollar-plus contract with Realtor.com, accordingly.

But Realtor.com had done the math. At their new prices, they would only have to resubscribe less than 15 percent of Realty Executives agents to make up the loss of the Realty Executives' contract. That's 1,500 agents times $300 to $1800. Assuming an average sale of $1100 per agent, that's $1.65 million in revenues, well over the revenues generated by last year's contract. So when Realty Executives wanted to renew, Realtor.com held firm to its asking price of $4 million. (Realtor.com would not confirm the terms of its contract with Realty Executives, but Allen Dalton did agree that the less-than-15 percent renewal theory "is correct.")

At an impasse, Realty Executives negotiated with Realtor.com to keep the franchise's logo and office contact information on all Realty Executives' Realtor.com listings, but passed on renewing the agents' Websites.

"How it was before," explains Bill Powers, COO of Realty Executives, "is if the office didn't have a silver i-Lead page (I-LEAD is the name of the no-longer-available Realtor.com template Webpage package), the logos of the office wouldn't be on the listings. If the agents had an i-Lead page, then their picture would be on the listings, so we have enjoyed that the Realty Executives logo was on all the listings. We came back to them, and hats off to Rich La Rue was doing the negotiations. What we did was at the meetings at our convention we discussed with our broker/owners that we could negotiate our logos to be able to stay, and we entered into that agreement, so even though my office pages have fallen off already, and a vast majority of agent pages, our franchise logo will be on every one of our listings."

Seeing the handwriting on the wall well in advance, the Realty Executives team started informing its agents over three months ago that they would have to provide their own Websites when Realtor.com's contract with Realty Executives expired, meaning that the Websites, unless they were renewed by the agents, would go dark July 1. Realty Executives allowed Realtor.com to start calling agents June 1 to start renewing, an opportunity Realtor.com sales staff aggressively pursued, by some accounts.

"I was disappointed that we were unable to come to terms on the agent pages," says Rich La Rue, director of franchise relations for Realty Executives, "but they have changed their business model. We are light-years apart from one another, and we were not in a position to provide that for every agent, so we ended up going a different direction. We do want to provide a technology solution so we still have a national presence with Realtor.com and I am delighted we were able to negotiate this with Allen (Allen Dalton, president of Realtor.com) and his team."

With a month's advance notice to call Realty Executives customers, Realtor.com salespeople swung into action, and managed to renew quite a few. Neither Realty Executives nor Realtor.com provided a count of how many agents did renew with Realtor.com, but La Rue guessed the figure to be high enough that Realtor.com has already recouped its last year's sales to Realty Executives - and then some.

Dalton denies that Realty Executives were treated any differently than any other renewal and that there was no push to sign up as many Realty Executives agents as possible. He also declined to confirm the renewal number.

"We don't get into the numbers because the brokers ask us not to," says Dalton. "Sometimes what they are doing is something they wish to keep within corporate discretion. A lot of these figures get into the public domain and a broker or a national brand might be reluctant to say how much money they are spending on each listing because a competitor might try to use that against them in recruiting. The brokers don't want us to talk about them because it puts pressure on them."

To keep those renewals and new sales coming, Realtor.com has other challenges besides getting agents to understand that it is a media company that sells exposure. It has to show agents that it is more effective than what they are currently doing in terms of on and offline marketing solutions. As long as agents see newspapers as generating as many or more solid leads than the Internet, agents will continue to treat Internet solutions like Websites and listing enhancements as secondary. So far, NAR's latest figures show the Internet and newspapers neck at neck at 41 percent, in terms of which media homebuyers use to shop for a home.

The Internet will always be held accountable by Realtors for lead generation, which is something even Realtor.com won't be able to get away from, now matter how the company reinvents itself.

Published: July 8, 2003

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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. For more articles by Blanche, click here.