Homepages.com – Now less bad

I was reading an article on HouseValues on the Motely Fool. I discovered they relaunched their site recently. Anyway, here’s a quick rundown of the things I noticed…

  • They are now using MS Virtual Earth instead of their old flash map
  • I like how they integrated “Home Buying”, “Home Selling”, “Loans” into tabs onto one site
  • Home value feature is still a lead generator for agents
  • More ads from non real estate advertisers (T-mobile, Dish Network)
  • Site feels sluggish

It’s a little better, but not by enough to change any business issues that the company has.

Where's Dogbert when you need him?

Before Reba posted her article on the upcoming House Values layoffs, I recently ran across an interesting article about HouseValues on MSN Investor. It was basically a press release from Zacks Investment Research that stated HouseValues (SOLD) made their list of the top 5 stocks to sell now. Needless to say, this is not a glowing recommendation.

Also during that same surfing session, I stumbled upon an article about AutoByTel (ABTL). At first glance, it may not be that germane to the issues that face HouseValues, but AutoByTel is essentially a variation of the HouseValues business model. AutoByTel’s business model is essentially, generate lots of internet traffic and sell leads to auto brokers/dealers. HouseValue’s business model is essentially, generate lots of internet traffic and sell leads to real estate agents/brokers.

A problem with this model (as the article noted), is that traffic acquisition costs are going up. The deals that a company like this are going to strike with Google, Microsoft, Yahoo or some other major internet portal that brings in a lot of traffic are increasingly low margin / high cost deals. After all Google, and it’s fellow portal competitors know what the value of their net traffic is (and it isn’t going to get any cheaper).

Furthermore, there’s the $50+ million gorilla on the horizon…. Zillow. They have a more customer centric business model,  superior technology, lower head count expenses (last I heard they were about 100 employees), and would probably fare better in a beauty contest as well. Even if HouseValues were to reverse course by attempting emulate Zillow’s business practices, I get the feeling that they’d be less successful than Microsoft’s search efforts have been against Google.

Another problem, is that nationally the housing & mortgage market is cooling down. I guess this means there are fewer agents out there who are able to buy leads from the company (either that or there are fewer agents out who willing to buy leads, which portends an even bigger problem). It’d be interesting to see if this problem corrects itself when the housing market heats back up again or if the company has hit a strategic inflection point.

[photopress:sales_dropping.jpg,full,alignleft]What’s also interesting is ABTL has 377 employees (and $116.6 million in annual revenues), while SOLD has 522 employees (and about $101.9 million in annual revenues). Even though HouseValues just laid off 60 employees, it still feels there’s more head count there than what they need. Especially since their Selling/General/Administrative expenses are over 8 times what their Research & Development expenses are! For comparison sake, AutoByTel’s ratio is closer to 2.5 times, Microsoft’s ratio is a little under 2, Google’s ratio is a little over 2. It appears that the PHB (Pointy Haired Boss) hired too many sales drones and not enough Dilberts.

Frankly, if I ran the company, I’d probably try to get InterActiveCorp (IACI) to buy me. Why? InterActiveCorp is a diversified internet commerce company with 28,000 employees and had revenues of $6.6 billion last year. They own many popular web sites (Ticketmaster, Ask, Match.com, Home Shopping Network, Evite.com, Lending Tree, RealEstate.com), and they used to own Expedia, Hotels.com, Hotwire, and other travel related properties prior to their spinning off.

Because HouseValues would complement IACI’s LendingTree / RealEstate.com business units nicely and since a IACI spin off (Expedia) is already located in Bellevue, I’m sure there’s a way that IACI could extract more value out of the combined company that than HouseValue’s current management could do alone. Perhaps there’s a way in which the HouseValues employees who stuck around would only have to change their Kirkland commute to Bellevue commutes?

So is this the beginning of the HouseValues death spiral, or is just a temporary hiccup on the road to better days?

HouseValues lays off 60 employees locally

Hmmmm, the Seattle Times article in today’s business section talks about HouseValues reducing staff because they’re moving out of selling leads to mortgage brokers and they had also overestimated where they’d be financially at this time on top of the fact that sites like Zillow.com have taken over part of their target site user. HV will now go back to the original focus of selling directly to real estate agents and I have a feeling they’ll have some difficult days ahead of them.

Not only was there a layoff but yet again there are upper management shifts. In the short time this firm has been in business they’ve had a lot of staff changes in the upper tier management and C-levels of the company.

Is HouseValues really gaining traction or are they just churning agents?

I don’t know how many of you on this site have dealt with HouseValues as one of their subscribers but I saw some recent postings on the RE/MAX International message board (RE/MAX agents only) where they were getting hammered by agents for what they saw as predatory practices, lies, and now combative collections processes. Having written them off some time ago I am curious what others in the industry think of them and their business plan. I get their concept but I think their execution is heavily flawed – particularly when they hire lots of folks without training them on what life as an agent is like – particularly as it applies to how an agent is compensated.

[photopress:684401_buy_a_house.jpg,full,alignright]I’ll give you an example of a pitch I was given a couple of years ago, I’ll paraphrase it for brevity:

(salesperson) We don’t have the territory that you’re interested in available at this time but the whole Eastside has recently opened up.

(me) Oh, really, how many areas?

(salesperson) There are about 9 areas that one person had but he’s dropped all of them as of a few days ago.

(me) Hmm. That’s interesting. Do you know why he dropped them all? Oh, and how much were you charging him per zip code?

(salesperson) [she gives me the numbers but I’ll tell you they added up to over $5000 per month] I don’t know WHY he dropped them all because he made around $100,000 in commissions on these territories in the past year. However, he was using about 15 credit cards to pay for them all.

(me) Do you know what firm he was with and how long he’d been an agent?

(salesperson) Yes. [she tells me the firm] He was a new agent, maybe one or two years in the business.

(me) Ok. I can probably tell you why he dropped them all. He’s likely gone bankrupt.

(salesperson laughs)

(me) No. It’s not funny – if the guy owns a house he’s probably being foreclosed on now.

(salesperson is now very quiet and listening intently)

(me) The firm this guy works for likely has him on a split commission schedule. For our purposes let’s say he’s on the high side of a new agent split and he’s got a 60/40 going on. You say he’s made $100k on his leads from HV so if he is giving $40k to his broker and he’s only got $60k and he’s got to pay your firm for roughly $60k in lead generation he’s not got $0. And we haven’t even accounted for his quarterly taxes that need paying, his other out of pocket expenses or the cost of interest on those credit cards he’s using to pay for all of this. That poor SOB has probably lost everything or is about to.

(salesperson) Wow. I didn’t realize that’s how agent pay works.

(me) Well, it’s not the same in all cases but it’s common with new agents. Your firm should be training you on the various models so you guys (meaning salespeople) understand what you’re dealing with when you talk to agents and so you can have an intelligent conversation with them about what the long term contracts mean to them. I also HIGHLY recommend you never tell that story again – this poor guy is not a success story for using your program.

This was a REAL CALL I had with a HV salesperson in summer of 2003 before they went public. I had an investment firm contact me several times asking me what it was like to work with HV (I did use the service briefly and dropped it after realizing it was still too early to adopt the program because of kinks in it and the service/leads wasn’t great for what you pay), I told them what I thought about the service and I told them this story. I don’t believe in complaining for the sake of complaining. When me and the VC guy talked I gave him feedback that was clear and had good business basics behind it and how I related that to HV’s model. Basically, I told him that they’ll just churn through agents as long as there are lots of newbies in the industry that aren’t told to steer clear of them and there are plenty of those. With over 1,000,000 REALTORS(R) alone you’ve got a big pool to go after.

[photopress:leach.jpg,thumb,alignleft]Most stockholders (meaning the public) don’t know much about the inner workings of real estate compensation either so they’ll think there’s plenty of blood to suck so they’ll buy into it regardless of market highs or lows. Heck, they’ll likely get sold on the idea of HV because they’ll think that in a hot market we’ll need leads to compete and in a slow market we’ll need leads to survive. Whatever. While a few have done okay with the HV program (and good for them!) overall I consider it a less than adequate lead provider to agents on whom whose back they ride on and depend since the service is free to the public who uses it.

10 Great Conversations

Just for fun, I started recording notes on real estate conversations I enjoy following and I decided that when the list hit ten, I’d hit publish:

  1. David Smith has a great (no wining allowed) article about the housing bubble. I only wish David interacted with the real estate blogging community a little more because his stuff is great but easily missed…
  2. Continuing on the bubble topic, Dan Melson puts on a great effort describing why renting really is for suckers (and what yo do about it). For me, this is a great example of why real estate professionals should not write about the bubble (David Smith being the exception! 🙂 ) It reminds me of the “fool“ish investment advice so popular in 1999/2000 that said it didn’t matter what price you bought a stock at as long as the company was good, you would make money in the long-term. Here’s my problem with this argument… If rents are cheaper than the interest payment (i.e. both of these being the completely sunk costs) and home prices go down slightly in the near future (which doesn’t seem inconceivable for selected markets in the country), then no amount of number juggling will replace the fact that if a potential home owner would be best served waiting to buy until the prices bottom out. I realize there are more than a few “ifs” in my statement, but my goal is not to say that it is a bad time to buy, only that a blanket statement “it is always a good time to buy” falls on deaf ears.
  3. On a related note, it is timely that the NYTs notes that rents are rapidly rising across most of the US (with Seattle being a highlighted area!).
  4. Greg shows off his custom signs. I think these are brilliant marketing moves and every agent should look for ways to market themselves through their listings. Beautiful stuff…
  5. And talking of beautiful ideas, Claudia Wicks mentions a very simple marketing idea ($1.50 simple) that could go a long way… There’s a beauty in simplicity (and it reminds me of an idea that Anna and I were batting around a while back…)
  6. And if you really want beauty, Fraser Beach takes staging to a new level by hiring actors (beautiful ones!) to play house during an open house
  7. It takes a certain level of confidence to have fun with your previous mistakes. (Kris is clearly a confident agent and I like that!)
  8. ActiveRain is getting some hype from both the Real Estate Tomato and the Future of Real Estate Marketing. I definitely think that Matt Heaton is onto something interesting, and he doesn’t get particularly phased by either Greg or Joel, which I think is a great sign.
  9. Because I’ve been there
  10. Greg (Linden this time!) creates a list with (nearly) all the Seattle start-ups and their associated Alexa rankings. It is a list that is definitely worth checking out as you might be surprised at the massive activity within the Seattle start-up community! For those interested, the rank of the real estate sites were: Zillow (976), Homepages (21,720), Redfin (22,117). RCG was not included in his list, but we are ranked at 75,844. You might also be interested to know that despite the fact that we’re not ranked as high as some of the other sites, our reach is right up there with HomePages and Redfin. (not bad for a site with no paid staff and $120/year hosting fees!). And since I mentioned ActiveRain earlier (and they are based in Kirkland), I think it is interesting to note that they are seeing awesome growth in the number of pageviews that is blowing away all the local real estate sites save Zillow. Considering their Alexa ranking is only 108,655, they are obviously creating a sticky user experience.

Corporate Blogs – Yes please!

RSS IconDustin’s comments in his last blog post got me thinking (which is never a good thing). Dustin said “You just set my blogging efforts at Move back by a year or so”. To which I reply, “I hope not! You don’t have that much time!”

One of the cool good things that has happened recently is the rise of corporate blogging. What’s interesting is you’re finding them in places you wouldn’t expect. Did you know Dell has a blog, meanwhile Apple does not? I think it’s an excellent way for a company to get in touch with it’s customers (and vice-a-versa), without the reality distortion and corporate hubris that happens when communicating via a scripted “public relations firm” message.

You may be surprised to learn that even the venerable General Motors has blog (In case anybody from GM management reads this – Good luck turning the company around and keep up the great work at Cadillac and Saturn. I’m rooting for you). If a 100 year old company in the rust belt has seen the value of blogging, I have to wonder why hasn’t every large company? 

In case you doubt the potential of corporate blogging, look no further than Microsoft. Robert Scoble helped put a human face on the “evil empire”, by spearheaded Microsoft’s Channel 9 video blogs and wrote the book on corporate blogging. When he left Microsoft for PodTech, it created nearly as much news as when Bill Gates announced his “retirement”. An anonymous Microsoft employee, through his blog has changed the company for the better. Even though the Human Resources dept has a blog, and prominent engineers have them too, a small corporate blog can as useful as the MSDN blogging network is to the “Redmond Giant”.

I personally enjoy reading Zillow’s blog, RedFin’s blog, and Trulia’s blog every day. Even the HouseValues’ blog can be interesting on occassion (it seems like they have a fun corporate culture, even if they just sell leads for a living). But where is the John L Scott, Coldwell Banker and Windermere blogs? I know countless agents of those brokers and independent brokers blog and do it very well (I think I’ve seen most of them on Rain City Guide at one time or another), but where is the human voice of those companies? They should at least give me a way to search for their agent’s blogs. Are these brokers nothing but a logo for an agent to put on their marketing? They may not realize it, but I think they are losing mind-share (which may become market-share) by being silent in the blogosphere.

Which brings me back to my original question, regarding Dustin’s comment. When is Move going to get a corporate blog?

Although, Rain City Guide is an excellent blog, it’s not the most appropriate venue for Move specific information (nor should it be). Why hasn’t Move added RSS feeds to any page that offers e-mail alerts? How are Move’s product offerings better than other things out there? What cool stuff is Move is doing? Why would a Software Engineer want to work there? Why should a realtor advertise with Move instead of one of these “Web 2.0 upstarts”? Heck, why not feature profiles of happy customers (something HouseValues does well)? I’d love to hear somebody explain the the Innovator’s Dilemma that Move faces to your constituency, so they’d understand why Zillow, etc are steeling the mind-share that realtor.com used to have. What’s the best MLS in the country to deal with and why? If Dustin or his co-workers explained why things are the way they are, maybe somebody in a position to change things would read the blog and start talking? After all if GM blogs, the CEO of Sun Microsystems has a blog, and Mini & Scoble can change Microsoft, I think anything is possible.

I’m not trying to pick on Dustin, but I really want to add the Move blog to my RSS feed reader and I can’t!

Real Estate Search Demographics

If you haven’t seen it, Microsoft released a demographic tool that gives the estimated demographic for a search term and/or URL. Just for fun I threw a few of the major real estate technology sites (as well as the search term [real estate], kept track of the results, and that pushed this chart out of Excel:


So, assuming that Microsoft’s numbers are correct, what patterns emerge?

  • The search term [real estate] tracked really low for people under 18 and high for people between 25 and 34 (kinda makes sense!), but none of the websites tracked near these extremes.
  • HomeValues and HouseGain… I mean HouseValues and HomeGain attract nearly identical audiences.
  • Trulia and Zillow attracted almost identical audiences as well (never off my more than 2% for any demographic)
  • Zillow had the most balanced demographic pattern with between 18% and 22% in each category.

Note the obvious: Microsoft only has demographic information on people who give it this information. This means that the data is just as suspect as the Alexa data.

HouseValues knows the hard sell

A friend of mine contacted HouseValues once to get the scoop on their system and now receives (actually pretty funny) high pressure emails sprinkled with phrases like

“If I don’t hear from you by end of day, I’ll ask the next real estate agent on my list – possibly one in your own office.”


“If you are not planning to be in real estate for the next year, then you are not the right candidate for us”.

The qualifications to work with them are pretty rigorous:

1. You can professionally handle 10 to 20 buyers and sellers every month.
2. Plan to be in real estate for the next 12 months.

Lucklily, they seem to find an additional 10 – 20 customers who need an agent NOW every week or two, so my friend feels like he can start picking these low-hanging fruits when he is good and ready.

What do real estate industry people talk about?

My 10-12 weeks of “blogging” have been quite interesting for me, in that for 15 years I mostly have talked about the real estate industry with other industry people, and talked about local real estate with my own clients and local agents. Blogging opens up talking to consumers generally about the industry, which is in and of itself, quite a revelation.

Given I will be attending the MIT dinner event tomorrow, I am contrasting the speakers of that event with the participant theories of my normal industry discussions. Tomorrow’s event will be “the newbies” Zillow and Redfin plus HouseValues, whom I wouldn’t call a “newbie”.

I am “lifting” this discussion of the past few days from the forum that has been around since 1995 or so, and I have participated in since 1998. I thought this particular discussion was a huge complement to whatever I may hear tomorrow night. For the benefit of those attending tomorrow night, you might want to read this beforehand for “balance”. I have removed the names, except mine, since I am “lifting” it out. I think at least Robbie’s interest will be peaked by that part of the discussion that suggests that the MLS may cease to exist as an end result to all of this.


Agent A says:

I would guess that there is not a large brokerage in the country that doesn’t have plans to withdraw from MLS depending on the outcome of the DOJ suit. I believe that many large brokers are considering withdrawing from MLS REGARDLESS of the outcome of the DOJ suit…

All across America, in every major city there are 3 or 4 large brokers who control around 80% of the inventory. If COURT mandated MLS rules don’t make competitive sense to those brokers MLS will END.

Even if you and Attorney Barry and the rest of the majority of the NAEBA are victorious your victory will be pyrrhic– MLS will be run YOUR way but it won’t contain enough listings to be a market force.

“Ardell” wrote:

What I am asking everyone one to focus in on is what “should be” as opposed to what “has been” since before buyer agency existed.


My major beef with the industry is that buyer agency was set into a system, parts of which should have been revised accordingly, and still need to be revised.

Agent B says…

Could it be that buyer agency will be given as the justification for the large brokers pulling out of the MLS? As Ardell notes, the whole system is a carry-over from a time before buyer agency. Does it really make sense to “cooperate” with other brokers in an adversarial relationship in the same way as when it was a subagency relationship?

One could argue that a listing agent is not truly acting in their seller’s best interest by making the property available to buyers working with their own agents until they have made every effort to find a buyer themselves. If a buyer agent is really going to save their buyer money, help them get more concessions, etc, isn’t it in the seller’s best interests for their agent to find an unrepresented buyer?

Consider this hypothetical situation:

Large brokerage with a state-of-the-art website and large advertising budget decides that they will take all of their listings as exclusive, non-MLS, non-cooperating listings for 45 days. No lockbox, the listing agency will conduct every showing, and there will be no showings to buyers who have not gotten a mortgage pre-approval. During this period, they will not do dual agency, and will attempt to find buyer customers for their listings. If they do not sell in 45 days, the listing will then be entered into the MLS. Their justification for this is that they believe that this maximizes the chances that the seller will get an offer that is in their best interests. Is there anything that would be illegal or unethical about this?

I think it is very easy to come up with scenarios in which the MLS becomes the dumping ground for the bottom of the barrel properties and over-priced dogs. It’s also easy to see scenarios in which MLS entries are very bare bones affairs with just enough info to generate a lead from Realtor.com, but not enough to be useful for other agents anymore. I find it very hard, though, to picture a scenario in which the large brokerages will just happily keep providing data-rich, picture-laden MLS entries for all of their listings, if they lose control over how and where these listings will be used and displayed.

I thought this might be food for thought for those who have not considered how the industry might change in order to counteract the events currently taking place with regard to mls access.

Something’s Afoot in the Real Estate Business – but what does it mean and where is it going?

(Editor’s Note: I few weeks ago, I sat down with Chuck Reiling to discuss an MIT Enterprise Forum he is helping to organize that will feature leaders from some of the top real estate technology firms. His excitement at the idea of bring people from Zillow, Redfin and HouseValues together to discuss the future of real estate was obvious and contagious. Hence, I asked him if he would be willing to give some background on the project, which led directly to this post. Interestingly he’s not the only one who is excited about this forum as he the story was already picked up by both Robert Gray Smith and John Cook. Chuck and his wife are local RE/MAX agents.)

There’s been lots of local and national press lately about new online real estate offerings like Zillow and Redfin. With lots of investor money moving into the arena, we know there is change afoot. The question is, how much change, and for whom? Change for the consumer? Agents? Both?

As Ardell described recently in her “History of Real Estate” articles (Part 1, Part 2 and Part 3), the residential real estate business is always in a state of change. Ten years ago the online MLS systems caused a lot of change. The listing books got thrown away, and a few agents who couldn’t adapt went with them. Then the MLS derivative sites started appearing, with MLS download data becoming available to the public. People could start doing their own online searches without having to call an agent, or cruise the streets on Sunday afternoon looking for open houses. So change is ongoing, and maybe there are only a few real (no pun intended) points of stability.

My daddy and my uncle were both brokers years ago. The only points we still have in common with their businesses seem to be clients, agency law, and the For Sale sign in the yard; almost everything else has changed. For a long time, ‘public’ records in boxes in warehouses were not very publicly accessible for most of us, but government agencies (state, local and federal) are rapidly putting their public records information online to support their operations, and incidentally help us too. And new services like Redfin, Zillow and House Values make that data even easier to use in support of their own business models. As we see locally, the big four real estate companies, Windermere, Coldwell Banker, John L. Scott and RE/MAX are also exploiting that data in conjunction with MLS data on their sites. None of this has changed the basic business model of professionally assisted transactions with buyer and seller agent commissions. While the traditional model has been a subject of debate for a long time, and a lot of creative alternative business models and offerings have been tried, the industry is still seems to be running on business as usual.

However, there is also a lot of technology-driven change right now. Someone with a background in the high-tech industry might observe that real estate looks like just one more industry about to be disrupted by the Internet – changes caused by dramatically improved information availability, rapid communications and online business models. But residential real estate is still dominated by local interests, its product is both expensive (understatement) and unique, and there are a lot of local and national consumer protection laws on the books – some good, some bad, and more coming. So who is right, and what will happen next?

To try to pull together a picture of the impact of these changes, and where they might lead, a local organization called MIT Enterprise Forum is focusing one of its dinner programs on the topic of Online Real Estate (clever title). The Forum focuses on highlighting business issues and opportunities for tech-driven companies and entrepreneurs. The Online Real Estate program will be on Wednesday, March 15, at the Bellevue Hyatt Hotel. See www.mitwa.org for program details and reservations.

These MIT Forum events typically draw 200 to 400 attendees, and this one will probably be on the larger side. For better or worse, it seems like everyone is interested in real estate these days. The program will be panel-based, with a traditional real estate broker, a top online agent and execs from Redfin, Zillow and House Values, with an open Q&A session at the end. I’m on the program team that is pulling the program together, and I’d have to say I expect a very lively conversation on the stage that evening. 🙂