Barry Diller, CEO of InterActiveCorp, will speak at Real Estate Connect 2004, July 28-30 in San Francisco.
A computer screen is not the silver screen, but to Barry Diller it’s golden.
Diller, a Hollywood mogul turned interactive emperor, has amassed a formidable group of online mortgage, real estate, travel, lodging and dating sites. Diller’s InterActiveCorp owns LendingTree.com, RealEstate.com, Expedia.com, Hotels.com, Hotwire.com and Match.com, to name a handful of Internet destinations, and this month added ServiceMagic to the list.
ServiceMagic links consumers with prescreened contractors, real estate agents and lenders via the Web. Home Shopping Network, HSN.com, Citysearch and Ticketmaster are also a part of InterActiveCorp’s cross-media conglomerate.
In May 2003, InterActiveCorp made a bold foray into the business of online lending with the purchase of LendingTree, which runs an online site that matches consumers with lenders and real estate agents. The deal was valued at about $700 million. Building on the LendingTree acquisition, InterActiveCorp quickly assembled a range of online real estate sites in a buying spree that added RealEstate.com, GetSmart and Domania to its arsenal.
LendingTree’s strategy for referring real estate agents to consumers is based on a system that cuts into overall real estate commissions. LendingTree earns a referral fee for linking consumers with agents, and consumers realize discounts in the form of gift cards from Home Depot and American Express for using LendingTree-assigned agents. LendingTree takes a real estate brokerage referral fee of up to 35 percent of the local broker’s commission.
RealEstate.com will function as the umbrella for all of the company’s real estate-related services — everything from for-sale listings to home-price comparisons to choosing a real estate agent, lender or home-repair contractor.
Though Diller’s background is in television and movies, his quick rise to real estate fame is not by accident, say industry observers. Diller backs his vision with money — and lots of it. He is for real. And his impact and influence upon the industry is spreading, they say.
“He has used his financial net worth to leverage himself into a position of power,” said Dirk Knudsen, broker-owner of RE/MAX Metro in Beaverton, Ore., which is a member of LendingTree’s network of brokerages. “He’s put both legs in the water here. He’s now in the pool.”
And whether Diller is the “lion over the hill” or an “800-pound gorilla,” his biggest accomplishment is in bringing confidence, by way of solid financial footing, for the online real estate companies he has purchased, Knudsen said.
“He’s buying things that work. He’s buying things that are profitable. He and his company brought a long-term perspective to LendingTree. He’s made it so the creative minds and powers that be do not need to worry about quarterly reports, annual reports and what’s going to happen next year, (so they) don’t have to sweat the small stuff while getting to the goal.”
What does Diller represent to traditional real estate brokerages? “Traditional firms, beyond a shadow of a doubt, now have to understand that this is not going away,” Knudsen said. Online platforms and referral systems will likely continue to grow in popularity, he said.
“In many ways (Diller) represents the changing face of our industry. He’s not old guard, he’s not Realtor.com, not a member of (the National Association of Realtors). As an industry we’ve been stuck in the past. This is sort of the ultimate wake-up call for the rest of us. It’s best to try to learn what he’s doing. Many of us will try to emulate what he’s doing,” Knudsen added.
Diller’s entry into real estate “is completely significant and doesn’t surprise me,” Knudsen said. “The average Realtor does not understand the inner workings of what’s happening. Most of them don’t know who Barry Diller is…all they know is they’re having a hard time earning the amount of money they earned in years past.”
The National Association of Realtors should pay attention to Diller’s progress in online real estate, he said, “because he is a threat.” The National Association of Realtors is affiliated with Homestore, which runs Realtor.com, one of the top home-listing sites on the Internet. The future of home-listings on the Internet is a complex debate that has yet to be fully played out, he added, as efforts to consolidate comprehensive lists of for-sale homes could stimulate a backlash of fragmented listings.
Robin Antonick, a Realtor for RE/MAX in Batavia, Ill., said that the agent-referral model that Diller brings to the table is a “solution for the bigger companies and the managing brokers,” but may not be suited for independent brokers and their agents.
Those companies that get paid “for redirecting traffic” don’t offer much value to agents, he said. “They’re going to have to do something more than just grab the traffic off of the Internet.”
Diller has “a mass market approach” to the industry, Antonick said. “(He) is a powerful player. Managers at Homestore are very concerned about him. Hopefully he’s got deep enough pockets to last there.” And Diller seems to be right in thinking that the online real estate industry is ripe for growth, Antonick said. “(The Internet) is a much larger advertising medium than any other medium we know of.”
The online business models that will catch on will likely be the models that do not commoditize agents, said Antonick, who spent 20 years in the high-tech industry. “What we need is to act and be treated like professionals — not like a bunch of people waiting out in the dark. You wouldn’t have physicians waiting out for people in the sitting room.”
Companies that “will help agents focus on what they do really well — focus on the local marketplace,” are the most likely to succeed, he said. “The MSN’s and eBay’s of the world aren’t going to be able to turn us into travel agents because everyone wants to see the house. I think Realtors in general are looking for an advocate on the Internet, someone who is really truly going to look out for their best interests and partner with them.”
Don Junkin, CEO and founder of OnMonday.com, a site that assists home buyers and home sellers in buying and selling property direct, said Diller’s 180-degree leap from Hollywood to real estate wasn’t a free fall at all. “Here’s a guy putting his money where his mouth is. You have a lot of real estate companies going online. He saw the need in real estate – there was no entrenched leader,” Junkin said. Diller’s approach to the industry appears to be from the consumer’s perspective, he said.
“He’s got big plans – real big plans. He’s not being secretive about it. LendingTree is just one of his acquisitions. As big as LendingTree is, there is still a small percentage of people going online for their loans. There is huge, huge room for growth,” Junkin said.
Branding is obviously important to Diller, Junkin said. “LendingTree was a recognizable name,” he said, and name recognition is a priority in drawing consumers to Web sites. “He’s a very unconventional guy,” Junkin said of Diller. “It’s hard to say where he’s going or when he’s going to finish this.”
His prediction: “Ten years from now he’s going to be the Charles Schwab of real estate. Barry is going to create a name for himself. He is going to be one of the leaders. He is the only person who has embraced the online community with his full commitment and checkbook.”
Despite his gains, Diller may still be viewed as somewhat of an outsider to the real estate industry, Junkin said, and he “hasn’t surrounded himself with top people in the real estate industry.” Cendant, the real estate powerhouse that owns such brands as Coldwell Banker, Century 21 and ERA, could be the company to challenge InterActiveCorp, he said. “They’ve got the money to do this thing right.”
Not all real estate professionals expect Diller to dramatically impact the real estate industry, or even to remain in the industry. Adam Thompson, managing owner-broker of Rainbow Realty Corp. in Chicago, said, “Many large, medium and small real estate companies have accomplished the same business model for ‘one-stop client shopping’ using the Internet” and also traditional face-to-face contact.
“Mr. Diller is accomplishing now through his company what so many others have done and are currently doing, which is encapsulating a business base of services aimed for the Internet consumer to have the option of one-stop shopping entirely through the Internet world,” he added. “I feel a small percentage of consumers have been and are leaning toward doing their real estate transaction and other add-on services, such as mortgage approval, through the Internet alone, without any contact other than through their computer.”
By and large, consumers still expect and accept referrals for real estate-related services from their real estate agents, Thompson said. “Over the last several years I have seen business models such as InterActiveCorp come and go, bought and sold, money made and money lost,” he said. “I look forward to seeing how long InterActiveCorp holds these companies before spinning them off and/or selling them to another seeking to build the same business model.”
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