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LendingTree firmly planted in real estate

January 8, 2004

News analysis: RealEstate.com, Domania likely to thrive under new ownership

By Marcie Geffner
Inman News

LendingTree's decision to buy RealEstate.com and Domania was no exception to the longtime pattern that data, traffic and leads determine the direction of online real estate. Indeed, the two acquisitions capture assets LendingTree could leverage into its existing and new businesses for many years to come.

LendingTree today consists of two core business: The online lender marketplace allows borrowers to submit one loan application to multiple lenders, and the online find-a-Realtor system enables prospective home buyers or sellers to obtain proposals from LendingTree-affiliated Realtors, who pay a closed-transaction fee for those leads. Both businesses depend on LendingTree's ability to sign up lenders, mortgage brokers and Realtors and to attract borrowers, buyers and sellers. In effect, the company is a giant online middleman that facilities realty customers' selection of realty service providers.

LendingTree's hook for consumers and point of differentiation among such services is the airline miles, retail gift cards, eBay points and cash rebates consumers can collect for using LendingTree's services.

LendingTree is a jumbo jet on the real estate radar screen due to its parent company Interactive Corp., which acquired the real estate service last year in a stock deal worth some $700 million. Interactive reported revenue of $1.6 billion and net income of $19 million in the third quarter of 2003.

The Tree has been growing. The company last month bought RealEstate.com and this month is buying Domania, both of which were sold by Primedia, which purchased them just 13 and 15 months ago, respectively. Primedia reported revenues of $323 million and a net loss of $43 million in the third quarter of 2003.

RealEstate.com's principal asset is its domain name, which generates large quantities of traffic even without a viable business model. The domain changed hands repeatedly during the dot-com years, but no one turned it into a profitable entity. Primedia managed to land in a lawsuit over its botched attempt to redistribute the Web site's listings data to LendingTree and Microsoft's MSN.

Domania's principal assets are its HomePriceCheck service, which aggregates sold-home data in an online searchable database, and its lender customer retention programs, which use analytics and profiling to help lenders keep borrowers on the books.

Both Primedia units appears to be smart buys for LendingTree not only because they provide data, traffic, leads and technology, but also because Primedia wanted out of the businesses and the (as yet undisclosed) sale prices likely were downright attractive.

The contrast between Primedia and Interactive is startling. Primedia is a print magazine publisher that wanted to crash into online real estate, but had no idea how to utilize the assets it purchased. The corporation had neither a clear understanding of the space nor a discernable strategy for RealEstate.com or Domania.

Interactive owns Expedia, Hotels.com, HSN, TicketMaster, Match.com, CitySearch and Hotwire, among other online properties. Print offers few synergies with online businesses, but multiple online businesses can be leveraged together. And realty and mortgage brokers themselves have demonstrated how to capitalize on the crossover opportunities of their respective operations.

Those dynamics suggests RealEstate.com and Domania will be far more formidable and valuable under LendingTree's canopy than they were in Primedia's stable. RealEstate.com will generate traffic (read: leads) for LendingTree's find-a-Realtor service. Domania will give LendingTree new product lines (read: revenue), and LendingTree's data will be so much more raw material for Domania's analytics. (It's worth noting that LendingTree ditched the RealEstate.com employees, but kept the Domania crew, including founder and visionary Steve Kropper.)

LendingTree holds several U.S. patents on its online lender marketplace, and that protection blocks competitive services from replicating its business model. But the company is not without competitors. QuickenLoans, Mortgage.com and E-Loan are among the other services that enable borrowers to shop online for a mortgage.

HomeGain, the original online select-a-broker service, is a head-to-head LendingTree competitor on the brokerage side. Realtor.com, AgentConnect, HouseValues, ServiceMagic and Homes.com, among others, also compete with LendingTree in the sense that they offer real estate salespeople a way to promote their services online and obtain business leads though the Internet, although each utilizes a different business model.

LendingTree's most entrenched competition may well be traditional offline marketing outlets that lenders and Realtors have utilized with success for decades. Newspaper and radio advertisements, flyers, newsletters, open houses, giveaways, bus benches, referrals, networking and a plethora of other tactics still generate plenty of business for lenders, mortgage brokers, real estate brokers and salespeople.

LendingTree so far has been an anomaly among real estate dot-coms in that it has thrived without using for-sale homes data to attract traffic. Instead, major media advertising has been LendingTree's ticket to brand name recognition and growth.

But LendingTree's no-listings days definitely are numbered. The corporation has attempted to get listings from some MLSs around the country and holds real estate licenses in more than 30 states, where it can join the MLSs, then utilize Internet data exchange (IDX) and virtual office Web site (VOW) technologies to display listings data online. RealEstate.com is yet another source of content and traffic because it has deals with “Homes& Land” magazine and the powerhouse MSN portal, among others.

It's only a matter of time before LendingTree begins using some format of for-sale homes information to pump more traffic through its systems. And that can only entice more lenders, mortgage brokers, realty brokers and salespeople to take a closer look at what LendingTree offers. Whether more of them will decide to do business with the online giant is another matter as well as being a subject of much controversy and debate. Either way, the Tree's roots are deep and its branches don't break in the wind.

Copyright: Inman News Features



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