The year 2004 is shaping up a lot like 1999 - with online real estate marketing as the major target of publicly-held companies like Homestore and InterActiveCorp. While many existing and IPO-dreaming players are in business to capture the online marketing dollars of Realtors, these two companies pose the most interesting battle to watch because their marketing plans are so opposite in philosophy and execution.

Homestore's subsidiary Realtor.com is a pure advertising play for Realtors. Realtors pay their money up front for move-to-the-head-of-the-line enhanced marketing for their listings and personal Websites. IACI's LendingTree offers a pay-on-the-backend opportunity in which brokers participating in the LendingTree "network" are given "qualified" leads which are paid for at closing with up to 35 percent of the broker's commission.

Both companies can point to traditional off-line marketing ideas for the genesis of their business models.

Homestore/Realtor.com wants to replace local newspapers as the personal and listings advertising medium of choice for brokers and agents. LendingTree has created an HMO-type business model first used by real estate franchise relocation affiliates in which it funnels business to partners for significant referral fees.

In other words, Realtors can pay now...or pay later.

Pay the Gorilla Now

Long considered the 800-pound gorilla in online real estate marketing, due largely to its operating agreement with the National Association of Realtors (NAR) to produce, market and monetize the NAR's consumer-oriented Website Realtor.com, Homestore once bullied the online marketplace with exclusive agreements to get listings, making it the only place on the Internet where homebuyers can browse up to two million listings.

When paying as much as $3 to $4 per listing to MLSs in order to maintain exclusive rights to publish became too expensive, Realtor.com switched its approach and offered MLSs participation in its sales instead. So far, the site has lost very few MLSs and continues to have the most home listings in one location of any online portal.

Realtor.com is Realtor-friendly. Visitors to the site know they are visiting a Realtor site, not a site for FSBOs. There is no advertising or pressure on Realtors to lower their commissions, or to compete on commissions. The site has an open, friendly MLS-for-consumers feel. Listings are posted free of charge to Realtors, and Realtors aren't forced to enhance their listings if they don't want to, but for competitive reasons, many brokers and agents agree to Realtor.com's marketing plan which includes personal promotion of the listing agent and enhanced features for the listing.

Realtor.com's challenge is getting Realtors to pay more for advanced exposure when they already get minimal exposure for free. For example, an unenhanced listing on Realtor.com lists the broker's contact information, because industry practice dictates that the broker owns the listing. If the listing agent wants his or her contact information to be prominent so that he or she gets inquiries from the listing, then he or she pays for enhancements. Enhancements include multiple photos, detailed property information, agent photo and contact information and more.

Realtor.com has begun an aggressive campaign called List More Save More which will teach Realtors at association/broker seminars how to maximize their marketing dollars on the Web.

Pay the Lion Later

The "lion over the hill" is an over-quoted phrase that once applied to Microsoft. Soundly beaten by Homestore in the listings war, Microsoft retreated its HomeAdvisor brand which was developed to go mano e mano against Realtor.com, and folded HomeAdvisor assets into a bland housing channel on the MSN Website. What did MSN in was having to pay MLSs for listings, which nearly bankrupted both Homestore and MSN, but when Homestore cried Uncle first and announced that it would offer revenue-sharing instead of payment up-front to MLSs for listings, MSN suddenly didn't have to pay for listings anymore either. But, with no products for Realtors, MSN couldn't offer a similar revenue-sharing deal to MLSs. Bereft of listings, except for those expensively acquired broker-to-broker, MSN started to shop for listings partners.

Enter Realestate.com, a bankrupt company with the industry's coolest domain name, acquired little more than a year ago by media company Primedia for approximately $1.8 million. Announcing Realestate.com as a "full service consumer real estate Internet portal," Primedia was ready to enter the online real estate marketing industry. Realestate.com acquired agreements with both MSN and LendingTree to provide listings for the real estate channel, only there was a small problem - no listings. Serious missteps by Primedia and its subsidiaries 1Roof Technologies, HPC Interactive and Realestate.com management included purloining listings from The Real Estate Book. The listings showed up on LendingTree's site stripped of the original agent's contact information and The Real Estate Book's copyright, which resulted in a lawsuit and a scandal that made both Realestate.com and LendingTree the laughing stocks of the industry.

Although it is only speculation at this point, some mighty fancy footwork had to have been done to keep Primedia out of court with LendingTree whose reputation was seriously hurt.

All we know, is that The Real Estate Book settled with 1Roof Technologies, and despite knowing where the payments went thanks to weeks of depositions, The Real Estate Book has mysteriously declined to sue others who benefitted from 1Roof's/HPC Interactive's/Realestate.com's actions. Immediately following, LendingTree announced the acquisition of Realestate.com at what we can only guess was a firesale price, and Primedia is suddenly now out of the real estate portal (and listings) business.

What this means is that LendingTree is powering the listings for MSN, making it more attractive for broker participants. That makes LendingTree the new "lion" but it will face the same problem as MSN - where to get significant numbers of listings.

The LendingTree model is based on providing a synergistic broker and lender network to consumers where they can get participating members to "compete," presumably on fees and commissions. It's consumer-friendly because the site allows consumers to choose a real estate broker and lender at the same time in one easy step. There are also enticements for using agents in the network, such as American Express or Home Depot gift certificates.

LendingTree asks some prequalifying questions before passing the consumer on to a broker or brokers in the network. Brokers don't mind paying referral fees on the back end because they pass all or most of the costs of participation on to their agents. Participating brokers have said that they also don't mind LendingTree promoting its own brand over theirs and charging high "success-based" commissions because they view the business as "incremental."

While some brokers have decided they can live with both marketing approaches, the National Association of Realtors President Walt McDonald and Realtor.com president Allan Dalton are actively warning Realtors away from giving so much of their business proceeds to referral-fee models. Even if Realtors listen, it doesn't necessarily mean they will embrace Realtor.com's version of Internet marketing either. Realtor.com, even with heavy endorsements by the NAR, has never captured a majority of NAR's membership, but this could be the year the company breaks out as 2004 is the second year that more real estate consumers will visit the Internet for homes and information than any other source.

And all that is what will make 2004 an interesting year to watch as Homestore and LendingTree battle it out.

Which company will be better at getting consumers? Homestore and its traffic partner AOL, or LendingTree and its traffic partner MSN?

Published: January 7, 2004

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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.