Just when it was assumed that LendingTree would take over the MSN listings space through a content deal previously executed by its subsidiary Realestate.com, new information has come to light that Realtor.com was the front-runner to occupy the MSN House and Home channel all along.

"It's been a long time in the works," says Allan Merrill, Homestore's executive vice president, corporate development group, "when we did the apartment and new home deal during the summer, it's taken some time to get Realtor.com there."

Realtor.com will be the exclusive provider of integrated home listings and Realtor® directory content to the House & Home channel on the MSN network, which gets about four million unique visitors monthly. The new multi-year agreement is expected to go live before the end of the first quarter, says the company.

The deal so far is the biggest announcement of 2004, and could have shattering repercussions across the online marketing space for competitors and Realtor advertisers.

MSN, once called the "lion over the hill," for casting its hungry eye on real estate was unable to compete with the NAR-sanctioned Homestore for online listings. Driving the cost of listings acquisitions to absurd levels with exclusive "gold alliance" agreements of up to $3 and $4 per listing in key metros, Homestore made it impossible for other companies to compete by paying equivalent amounts to MLSs for large compilations of listings. But the costs got to Homestore, too, and in the wake of a stock fraud scandal that devastated the company's shareholders, new Homestore management worked hard to modify those old contracts into revenue-sharing agreements instead of up-front payments.

The result was that Homestore lost very few MLSs and remains the listings giant to this day with about two million listings at any given time.

MSN, meanwhile, also tried to get out of paying for listings to MLSs, and signed an agreement with Primedia, its provider of apartment data for almost five years, to get resales listings. But, Primedia's subsidiary Realestate.com not only couldn't deliver, it embroiled the company in a listings scandal and lawsuit when other sister subsidiaries purloined listings from The Real Estate Book and gave them to Realestate.com.

Long story short - MSN awarded Homestore, its former nemesis, the right to power the apartments and new homes on the House and Home channel, and Primedia was out. The handwriting was on the wall for resale listings, and Realtor.com became the frontrunner.

When LendingTree was hurt by The Real Estate Book scandal, it was in a very good position to negotiate with Primedia for some key assets, including Realestate.com, which it may have obtained at firesale prices, as Primedia no longer had a credible presence in online real estate. The MSN contract was still in place, with an opportunity to option, which it was assumed that LendingTree would do.

But sources say that LendingTree had no intention of taking MSN up on its option and that the company felt that the amount MSN had charged Primedia a year ago, rumored in the neighborhood of $7 million, was outlandish.

At least two online advertisers with MSN have independently told Realty Times that what MSN wanted to charge for access its house and home channel wasn't worth the money. The traffic reports don't justify it, they both said, and they can't justify such an expense just for "bragging rights" as one advetiser put it.

Without listings, the lion turned into a kitten, a far roar from the days when it, too, boasted over a million listings.

LendingTree won't comment on the specifics of its deals except to say that the "expiration of that contract (with MSN) coincided with our acquisition of RealEstate.com. The RealEstate.com/MSN contract was never part of our deal to acquire RealEstate.com."

That doesn't mean there won't be participation for LendingTree on MSN and MSN House and Home channel.

"LendingTree and MSN have a great relationship; in fact, we'll continue to be a featured home loan provider on the House & Home channel," says the spokesperson. "Beyond that, our "Find-a- REALTOR®" product, along with our home loan, auto and credit card products, will continue to be marketed across the MSN network."

Explains the spokesperson, "The majority of our traffic comes to LendingTree through our "front door" when a consumer types www.lendingtree.com into their browser (this is driven in large part by the outstanding brand recognition that LendingTree enjoys - 73 percent nationally). We see that the most valuable asset we can offer our Realtors and lenders is more consumers, so we'll continue to look at cost-efficient ways to match more customers with our partners."

Meanwhile, Realtor.com has been revenue-sharing with AOL (all housing listings) and Yahoo! (for apartments and new homes only) and it doesn't want to pay any more to advertise resale listings than it has to, yet the company knows that portal deals like AOL and MSN are the quickest and most effective way to bring more traffic.

Realtor.com had to know that with the delivery of two million listings that it was in a much better negotiating position than any other competitor, including LendingTree. Only Realtor.com could help rebuild MSN House and Home channel into a serious competitor.

This changes the power dynamic considerably.

Once, only Homestore and AOL had two million listings. Now MSN has two million listings, and Realtor.com listings can be accessed without user agreements.

This puts significant pressure on Yahoo!. Yahoo! has tried to build its listings army one metro at a time through advertising deals with individual brokers. This is not only expensive, in terms of lost revenues from advertisers unwilling to pay up where there are no listings, but it gives Yahoo! consumers a poor user experience. Worse, brokers can only supply other broker's listings with permission, or in some cases, brokers opt out of allowing competitors to be the gateway to consumers. In any case, consumers have to click through a user agreement to see the listings, and only about 20 percent do so, say participants.

This is hardly the stuff to build an advertising portal upon.

Realtor.com's improved traffic positioning could also cause downward pressure on AOL when its content deal comes up for renewal in the summer. AOL's only other choice for listings is to go door-to-door which MSN has just proven doesn't work. Where else would AOL get significant numbers of listings to compete with Realtor.com's other portal partners? And have any hope of revenue-sharing at all?

Realtor.com is the only game in town.

Published: January 14, 2004

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