In real estate, it’s all about leads.
And there’s no shortage of leads on the World Wide Web. In fact, Internet-generated leads are what today’s fastest-growing online real estate companies have in common. Private companies ServiceMagic, ZipRealty, HomeGain and HouseValues are among the real estate dot-coms that have figured out how to make money from online leads.
Publicly traded online real estate companies Homestore and LendingTree had unprofitable first quarters, but their private counterparts have grown as much as 50 percent-75 percent a year since their inception, sources said. ServiceMagic, ZipRealty and HomeGain reported profits in the last year, and Deloitte & Touche named HouseValues the fastest-growing technology company in Washington State two years in a row.
The private online companies won’t disclose their financial statements, but evidence of their growth can be found in their expansion of services, product lines, markets and employees.
The Internet as an effective medium for connecting consumers to local businesses has driven ServiceMagic’s success, Co-CEO Rodney Rice said.
The company, which matches home buyers, sellers and owners to real estate agents, lenders and residential contractors, was profitable last year and is so again this year, according to Rice. Its membership network has grown to more than 2 million homeowners, 22,000 real estate brokers and agents, 23,000 service contractors, and 180 banks and mortgage brokers.
“Consumers really were just waiting for a better mousetrap. Direct mail, Yellow Pages and other alternatives for consumers to find local service businesses were pretty lacking and inadequate. The Internet has empowered consumers more than ever to find the right value,” he said.
ServiceMagic handles more than 500 different types of service requests from consumers in 44,000 ZIP codes for some 22 million combinations of service needs. The process of distilling those specific requests into qualified leads for local businesses is what makes the company valuable, Rice said.
“It’s very difficult for (businesses) to cost-effectively market online without an intermediary targeting the traffic,” he said. “That’s why I think we’ve been really successful.”
ServiceMagic is adding staff as well. The company is hosting a local job fair in Denver this week and intends to hire 60-70 more people in addition to its current 240 employees.
Online real estate brokerage ZipRealty also has found success on the Web and plans to grow more this year. The company in October said it achieved profitability for the first time and planned to add 1,000 real estate agents nationwide this year, tripling the number of agents it already had in 14 markets. The company secured $13 million in venture capital funding in January 2003, a time when few dot-com companies were attracting such investment funds.
The online brokerage declined to comment on its growth due to corporate activities that prevent employees from participating in media interviews at this time, a ZipRealty spokesperson said. That silence could mean they company has an initial public stock offering or other material event in progress, another indicator that online real estate is a burgeoning vertical.
ZipRealty uses virtual office Web site technology and offers commission discounts to home buyers and sellers who utilize its services.
HomeGain, which matches real estate agents with home buyers and sellers, also figured how to make money from online sales leads while it weathered the dot-com bust. The company recently celebrated five years in the online real estate business and achieved profitability in 2003. HomeGain said it increased its revenue 50 percent, signed up more than 200,000 prospective home buyers and sellers, and added 11,500 real estate agents to its service last year.
The number of real estate agents who use HomeGain’s services increased 19 percent from 59,000 at the end of 2002 to 70,500 at the end of 2003, the company disclosed. Agents pay a monthly membership fee to market their services to people who register through HomeGain’s Web site, then pay the company a referral fee when a transaction closes.
HomeGain SVP of Agent Success Glenn Houck attributed the company’s achievements to its focus on its core business model and conservative approach to the dot-com struggle.
“We’ve kept our focus on providing high-quality leads to Realtors and the tools to convert them,” Houck said.
HomeGain’s core service is Agent Evaluator, which enables home buyers and sellers to find and compare Realtors, he said. The company added Home Price Express, which provides exclusive seller leads to agents, in 1999 and launched Buyer Link, which connects potential home buyer leads to broker and agent Web sites, in 2003.
More than 2.4 million people have registered at the HomeGain Web site since the company’s inception in 1999. The company has generated more than 1.5 million leads for 70,500 agents from more than 3,200 national, regional and independent brokerages that have signed up for the service, according to a company statement.
HomeGain founder Bradley Inman is also the founder and publisher of Inman News.
Bellevue, Wash.-based HouseValues has received much recognition for its success in real estate lead generation. The Deloitte & Touche consulting firm last fall ranked the company among the 20 fastest-growing technology companies in North America. The award noted the company’s growth of 1,258 percent since 2000.
While the Internet is part of the company’s lead generation service, CEO Ian Morris said the vast majority of services it provides agents are in the form of television advertising.
“That’s a big reason for our success, and a big reason agents like to advertise with us,” he said.
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