Homestore-operated Realtor.com's previous extortionistic pricing policy toward virtual tour companies may have handicapped the growth of its ad sales, not to mention the adoption of virtual tours by its target customers -- Realtors. But a change of heart and a new policy should help facilitate a boom in housing imaging.

Realtor.com had been charging virtual tour providers $5000 a year, plus as much as $75 per tour to tour providers, to post tours on Realtor.com listing ads, but now that figure has dropped to as low as a few hundred a year and an Andrew Jackson ($20) or so per tour, depending on the volume and market of the tour provider, say ecstatic tour providers.

"I think they've made a lot of good changes to the program recently," says Brian Baldof, spokesperson for VHT, formerly known as VideoHomeTours. "In particular, allowing the posting of links as opposed to the actual files. This allows all different types of technologies and presentations to be displayed, which is good for agents and sellers. They need as many ways as possible to differentiate their listings and catch people's attention."

As Realty Times noted previously, the state of online listings was sorry, with as few as 10 percent of listings being enhanced with multiple photos and virtual tours. Realtor.com's mixed message was "Post more photography!" while photographers complained they couldn't afford to post their work product to Realtor.com. With few tour providers able to execute distribution, not including scheduling and availability problems, Realtors were less motivated to order tours, and therefore enhanced packages on Realtor.com. What's the point of paying three figures for a tour that few buyers will see?

Realizing it was shooting its business model in the foot, Realtor.com tapped longtime imaging expert Oliver Koechli to be the new director of imaging. His job, he modestly conveys is to "convert our offerings to make more sense to virtual tour producers."

"The virtual tour business has been very complex," explains Allan Merrill, Homestore's executive vice president of corporate development, "and we are trying to simplify it. There are three basic components to making virtual tours work well: the service of the photographer in capturing the image; the technology decision of what they are going to use -- bubble, streaming video, slide shows, etc.; and the third is how the tour is distributed, where it is shown. Whether it is on marketing sites like Realtor.com, each area has their own cost component. We understand why agents didn't adopt the tours widely before now. Under Oliver's leadership, we think things will be dramatically different. What we offer is the capacity for distribution, and a lot of providers say we have an affordable way to distribute the tours."

Beginning November 30, 2004, Realtor.com announced that Realtors "will be able to enhance their listings on Realtor.com in one of two ways: an expanded, full service hometour360º program or a new, more flexible "PicturePath" program.

Basically, the difference between the two programs is that Homestore acts as vendor on the hometour360º program and PicturePath enables other tour providers. One of the hurdles was an agreement with IPIX, which has since been modified to allow Homestore to host and distribute other kinds of virtual images besides the IPIX product.

"Homestore will continue to support IPIX's virtual image solutions," says the company, "but will now enable alternative imaging technologies to be used. At the same time, the current PicturePath product will transition to a link submission solution."

Why is this a big deal? "Historically, access to Homestore's hometour360º program was only available to virtual tour service providers that agreed to acquire the hometour360º Wizard software and keys needed to create IPIX 360-degree images," wrote Homestore in October. "Under the new solution, hometour360º service providers will be able to purchase virtual image creation software from a variety of technology providers, including, but not limited to, IPIX. Participating hometour360º service providers will be able to upload these images, along with property information, flat photos, and agent information to create the industry-leading hometour360º virtual tour. These tours will be hosted by Homestore, operator of Realtor.com, and disseminated across the Internet through the Virtual Tour Distribution Network (VTDN). Unprecedented in its breadth, the VTDN includes more than 600 national, regional, broker offices and branded real estate web sites that accept virtual tours from Realtor.com.

"All other virtual tour service providers will be invited to join the PicturePath program. These providers will have increased flexibility to deliver their virtual tours, created with any technology and hosted themselves, to Realtor.com for listing enhancement for a nominal fee."

The changes have virtual tour operators rejoicing.

Says Charleston Realtor and virtual tour operator, and service provider J. Warren Sloane, "Realtor.com is always catching flak from Realtors, but they recently made a change of policy that I feel merits praise. In the past, Realtor.com has required independent VT companies to register with their PicturePath program. The startup cost of $5000 was prohibitive for a company like my own. They were also charging between $50-$75 per tour added, depending on the number of pictures. To me, the costs far outweighed any value my clients would receive. We saw the benefit of the "red spinning house" -- we just did not see that much benefit from it."

Dropping the costs of the tours for providers has made a "huge difference in practice," says Sloane. "Another significant part of the equation is that instead of forcing VT providers to shoehorn their tours into Realtor.com templates, they now allow just an addition of a link. This allows the local tour provider and ultimately the Realtor to have more say in the look and feel of the tour. Realtor.com also dropped the requirement that Realtors wanting to add a tour must also be a subscriber of Realtor.com's enhanced packages."

While Homestore demurred on the question of whether previous policies hurt sales, the company is enthusiastic about the results of the new policy, which is clearly improving sales.

Explains Koechli, "We talked to two levels of customers, the business to business virtual tour operator, and our marketing customer, the agent. We worked hard on renegotiating contracts and lining up the two new products in November, and since then, I have received nothing but positive reports. The key point is on PicturePath, I would say it is choice and flexibility that are the two key components. We wanted our marketing customers to choose their virtual tour providers."

Since December 1, 2004, on PicturePath, Realtor.com has signed 102 contracts. Sixty-seven are with new virtual tour providers Realtor.com has never done business with before. And with hometour360º, there are now 107 providers, 45 of which are new.

"It takes time to ramp up and change their marketing messages," notes Koechli. "In May, June and July we would like to get back to you with numbers. We've created flexible technology choices, we are a competitive template solution, we have hosting, and then we have an unrivaled distribution network, where the tour is live as long as the listing is live."

How much does the change impact Realtor.com's enhanced listings sales outlook? "The more robust, the more consumers like it," says Merrill. "They stay longer and it is easier to get people to advertise. Imaging content is one of the things consumers rank the highest. Greater consumer satisfaction is hard to quantify."