Tag Archives: Loopnet

Zillow Acquired Diverse Solutions: Three Interpretations


So Zillow buys up IDX provider, Diverse Solutions.

First of all, congratulations to Justin LaJoie and the rest of the team at Diverse Solutions, as well as to Spencer Rascoff and the folks over at Zillow. I don’t know what the real motivations behind the acquisition were, but at a minimum, you can say that two great teams of real estate technology people are joining forces.

Second, I don’t have a whole lot of time to devote to deconstructing the Zillow acquisition of Diverse Solutions, but did want to present a quick reaction from three different perspectives: Friendly, Hostile, and Mine. I suspect most people’s response to the acquisition will fall into one of the first two buckets, while a very small minority (of one person perhaps) will fall into the third.

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[7DS] If By “Reinvent” One Means “Imitate”, I Agree

[Original post at 7DSassociates.com]

Bell Bottoms 2.0: What's old is new again!

There is a fascinating post on Find It Fill It blog (looks to me like this is a commercial real estate brokerage of some sort) about how Loopnet’s “crowdsourcing” model will reinvent commercial real estate as we know it:

This is like aiming a cannon to your competition that’s holding a pistol. If you leverage your user base to work for you and you provide them a better data service in the process, that’s the promised land of a business-client relationship. In technology terms, LoopNet is using a business model from the Web 2.0 period called, “Crowdsourcing”. Crowdsourcing is when a web software company provides the platform and the data entry/update is in part generated by the contribution of its users. So, let’s say an office building in LoopNet’s property database says that it was sold in 1999, but you (the user) know that it was just sold on November 1, 2010 for $2 million, LoopNet allows you to update that data yourself. Not only does this help you, but also you fellow professionals and in the end, LoopNet. This is very POWERFUL stuff. Having commercial real estate professionals who are “in the trenches” update this property data is the best quality in data that a commercial real estate data operation like LoopNet can ever wish for. Its competitors will be very envious and if they don’t move fast, they can lose ground quickly. (Emphasis mine.)

Interesting.  Well, I happen to agree with the FIFI blogger 100%, provided that by “reinvent” he really meant “imitate” the 100+ year old business model from the Telegraph 1.0 period called the “Multiple Listing Service”.

Read the whole thing on 7DSAssociates.com –>

Zillow’s Newspaper Gambit: A Possible Parallel

Eric Blackwell of Bloodhound picks up on this story that Zillow has entered into a relationship with a number of newspapers and asks a series of pointed questions. The comments section has some hot and heavy action going on therein, and it makes for an entertaining read.

I saw this deal cross the news earlier as well, and thought it was interesting on many fronts. For one thing, unless I’m very mistaken about the nature of the deal, it simply means a co-marketing arrangement where the partners simply add ammunition to their sales teams:

The agreement expands the network to include display non-real estate related advertising. Greg Schwartz, vice president of advertising sales at Zillow, said the Web site will focus on “moving-specific” advertisers like home improvement and furniture companies in search of national coverage. Meanwhile, newspapers, such as the San Francisco Chronicle, for example, can offer a furniture retailer additional coverage through Zillow’s San Francisco channel.

So a ad sales guy sitting in the LA Times office can sell a million impressions on Zillow.com, and a Zillow sales person can sell Home Depot on a package deal of Zillow ads plus say 150 newspaper ads.

It isn’t clear whether this covers only online, or print also, but either way, all we’re talking about here is a “Hey, you can sell my stuff, and I can sell yours” deal. Makes a lot of sense to me without a tremendous amount of downside.

Now, David G. from Zillow goes on to say in the comments of the Bloodhound post above that:

Today’s announcement relates to a large advertising network advertising for reaching real estate consumers but there are also technology and content aspects to these partnerships. Later this year, Zillow will begin to power the online real estate sections of our newspaper partners’ websites. And listing content is already pushed to Zillow via newspapers that are selling featured listings on the site.

This tidbit is interesting as well. Because as it happens, there is an almost exact parallel on this play that might prove illuminating (or not).

Cityfeet.com did this exact play in commercial real estate a few years ago. They went out and signed up newspaper partners, powering the online real estate sections of these newspapers for commercial real estate search. I’m guessing that Cityfeet couldn’t get the online residential real estate sections, because those were too closely connected to major revenue centers for the newspapers. That Zillow was able to wrest those away from the newspapers is extraordinary. And extraordinarily interesting as commentary about the newspaper business.

It appears that newspapers are headed for some sort of a cliff.

Thats a double black-diamond slope, son!

That's a double black-diamond slope, son!

The news industry is panicking, to say the least:

The new bad news is the decline in online revenues.

In the best of times, online never contributed more than 10% of most publishers’ total revenues, but with double-digit growth, it was the sole bright spot in the middle years of the decade, holding the promise that interactive revenues might some day make up the losses on the print side.

Unfortunately, most of the growth in the online revenues was due to “up-sells” from print classified listings. As the volume of print listings declines at an ever-faster pace, that means there are fewer opportunities for online “up-sells.”

Considering that real estate advertising in newspapers fell by a whopping 36% in Q2, if online advertising also fell for newspapers, it isn’t clear that there is a sustainable business here for the dead-tree media companies.

So… Cityfeet couldn’t wrest away residential real estate sections from newspapers. Zillow did. In large part, this is because Zillow is many times larger and better funded than Cityfeet ever was.

However, let’s pause a moment and consider this.

  • Newspapers lose 36% of real estate ad sales.

  • Newspapers lose online ad sales for first time in years.

  • Newspapers do a deal with Zillow that is essentially “We take 50% commission for selling your ad space, Zillow.”

  • Zillow stands ready to “power newspaper real estate sections” — meaning all of that traffic probably goes to Zillow.

This looks like a total abdication of the real estate space by the newspaper industry, at least to me.

While that’s a big win for Zillow, I have to sound a cautionary note.

Cityfeet, you see, sputtered along for a couple of years before getting bought by Loopnet for $15m. (Since Cityfeet at the time boasted 100 newspaper relationships, including the big names like New York Times, Boston Globe, and the like, that means each relationship was worth about $150,000. Maybe. It isn’t yet clear that Loopnet has made back its $15m investment in Cityfeet.) The reason, quite simply, was that the brokers and agents who listed on Cityfeet were not seeing a lot of traction. Newspaper readers and newspaper website visitors tend not to be serious consumers for commercial real estate.

Now, given the differences between commercial and residential real estate, this may not be a problem for Zillow. 80% of commercial buyers/lessees do not start their search on the Web, for one example. But this should sound some warning gongs:

“This partnership allows advertisers with our papers to reach not only local real estate consumers who live in particular markets, but also consumers who may be moving to particular markets, via their searches on Zillow.com,” Lincoln Millstein, senior vice president of Hearst Newspapers, said in statement. “This is a significant opportunity for advertisers to target a very large number of consumers on the verge of major home-related commerce.”

Um, Lincoln… I don’t know how to break this to ya but… I doubt that visitors to Zillow.com can be described as being “on the verge of major home-related commerce.” Maybe Zillow has statistics that prove me wrong, which I would welcome, but going to a Zillow or Trulia or any of the major consumer real estate websites strikes me as merely the first step in a fairly long journey that may or may not end in “major home-related commerce”. If by “being on the verge”, Lincoln Millstein meant “within three to six months” then his expectations are properly set. If he means more like, “a matter of weeks”, I think he might be disappointed.

And his advertisers might be disappointed. Will consumers remember seeing some ad for a mortgage product on Zillow.com three months later as they’re finally sitting down with their realtor and going over mortgage paperwork? I really, really doubt that one.

As with all prognostications, I might be dead wrong on this one. But all in all, I’m not sure I see this major win here that the newspapers and Zillow would like us to see. Time will tell, but the trends are not encouraging for either party.


Romance, Rejection, Drama! The Saga of CoStar and REIS

Am I being dramatic enough here?

Am I being dramatic enough here?

Thanks to a comment on my About page, I thought to look into the dance going on between CoStar and Reis. It’s fascinating stuff, actually. If the story weren’t being told through boring press releases, SEC filings, and dated news clippings, it might make for a great opera, full of passion and melodrama. As a matter of fact, I wrote a little story — it’s at the end of this monster post.

At least, I think it would, based on what little I can tell as a totally uninformed outsider who has not been following the story. But hey, when did being uninformed ever stop your faithful scribe?

The latest chapter in the tale is that CoStar has reiterated its offer to buy Reis for $8.75 a share earlier today (the press release is dated 2:38PM on Wed, August 13, 2008), for the total price of $96.1m. An important point here is that CoStar made the exact same offer back in June, and was rebuffed. A mere ninety minutes later, Reis rejected CoStar’s offer for the second time (the press release is dated 4:01PM, Wed, August 13, 2008), saying:

In the view of the Board, the price offered in the CoStar proposal is inadequate. The price is below the long-term value REIS could realize for its stockholders by the pursuit of its business as an independent entity and the continued disposition of its real estate assets, or by a sale of the Company.

Mr. Lloyd Lynford, CEO of REIS, stated: It is extraordinarily disappointing that, after our Board unequivocally rejected CoStars $8.75 proposal, CoStar has seen fit to come back with exactly the same proposal in a hostile fashion. To judge the value of our company by the daily trading prices of its relatively illiquid common stock makes no sense. We trust that our clear second rejection of CoStars offer will prompt CoStar to withdraw it. Our Board will, of course, review carefully any serious proposal from any responsible third party.

I believe words like “extraordinarily disappointing” and “unequivocally” and “makes no sense” are corporate chieftainspeak for “Fuck off, you loser!” Reading between the lines, you can almost feel the heat.

Initially, I was really puzzled. In normal course of business, getting a 97% premium over the last stock price (which hasn’t moved at all until the offer came in) is cause for celebration and a rush to the alter lest the groom come to his senses. I mean, imagine that your house was valued at $300,000 and some dude rolls up and goes, “Hey, I’ll give ya $600,000″. That’s normally a “Honey, start packing — we’re moving!” type of thing. But Reis was like, Talk to the hand:

The price is below the long-term value REIS could realize for its stockholders by the pursuit of its business as an independent entity and the continued disposition of its real estate assets, or by a sale of the Company.

Okay, so like, let’s go with that.

I spent the last 30 minutes or so of my life looking at stock charts and old new reports and such. Frankly, I hadn’t known that Reis was a public company at all. Back when I was still in commercial real estate, Reis was privately held, or so I remembered. Continue reading

Some Numbers That Make Me Go Hmmm…

(Management suggests you click play while you read this post.)

So while just browsing around looking for info (because I wanted to respond to something Alan Bernier of Rofo.com posted), I found something rather interesting:

We believe we are the leading online marketplace for commercial real estate in the United States, based on the number of monthly unique visitors to our marketplace, which averaged approximately 500,000 unique users per month during 2005, approximately 800,000 during 2006 and approximately 900,000 during 2007, as reported by comScore Media Metrix.

As of December 31, 2007, the LoopNet online marketplace contained approximately 560,000 listings.

As of December 31, 2007, we had more than 2.5 million registered members and more than 88,000 premium members.

For the year ended December 31, 2007, our registered members viewed property profiles on our website approximately 150 million times.

That is from Loopnet’s (NASDAQ: LOOP) 2007 10-K. Interesting data all around.

For one thing, 88,000 premium members is enormously interesting to me. Because Loopnet is the largest online market for commercial real estate, and really the only game in town, you have to imagine that any “real” commercial real estate broker (as opposed to someone who just dabbles in it from time to time) has to be a premium member. (Doesn’t s/he?)

As there is no real study of the size of the commercial real estate industry, I have to wonder if 88,000 is about the size of the full-time professional CRE brokers in the United States. Who knows, I guess, but it is an interesting number.

The thing I can’t quite understand is lining up the following:

  • 900,000 unique visitors in 2007
  • 2.5 million registered members
  • 88,000 premium members
  • 560,000 listings
  • 150 million listing views
Hmmm... these numbers...

Hmmm... these numbers...

The first piece of information I would want, were I an investor in Loopnet, is how many of the 2.5 million registered users had visited Loopnet at least once in the past 12 months for more than let’s say… 2 minutes (clear out all the folks who clicked on the wrong bookmark or something). Is it 100% of the 2.5 million? 75%? 50%? It would be great to know what the actual “active membership” is versus the “everyone who has ever registered, including those who have become Chicago voters by reason of death”.

The next piece of information I would want is the average number of views per listing. In connection to this, please note this interesting tidbit:

Enhanced Listing Exposure. Property listings submitted by basic members can only be viewed by premium members. Property listings submitted by premium members are available for viewing by all registered members and have premium placement on search results.

So even if some large number of the 2.5 million “basic members” still hung around, their listings are viewable only by the 88,000 premium members. Now, remember this:

For the year ended December 31, 2007, our registered members viewed property profiles on our website approximately 150 million times.

That’s 267 views per listing. But, to be fair, presumably there was some turnover in the listings stock at Loopnet through the year. So how many total listings went through Loopnet during 2007?

Now, I can’t find any data based on 15 minutes of Google searching (and I’m not really willing to invest more time than that) on statistics of the average time on market for a commercial property in the United States. But I did find this Investment Property Forum study (PDF) back in 2004 for liquidity in the UK commercial market. According to that study, the “average time from formal marketing to completion” was 10 months. But the authors noted that this figure was skewed, and thought the median time to sale, at 190 days, is more representative figure. Just getting from initiation of marketing to “heads of terms” took 88 days on average.

So… let’s assume for the moment that from the moment a listing is posted on Loopnet to the moment it’s taken down because it’s far enough along that the listing broker feels he can take it down is 90 days. And let’s also assume that every listing on Loopnet found a buyer in 90 days. That would give us 560,000 x 4, or roughly 2.25 million listings. That gives us 67 views per listing.

When you think about how search works, where people don’t go past the first couple of pages of results, that’s an astonishing number. In residential real estate, we know there are listings that get ZERO views simply because it doesn’t appear high enough on the search results page. Maybe Loopnet has a different, advanced search system that ensures 67 views for every one of its 2.25 million listings? Every MLS in the country should immediately license that technology.

Furthermore, the basic members can’t view listings by other basic members. Only premium members can view those. Add in the fact that in all likelihood, Loopnet’s 2.5 million registered member number does not mean 2.5 million active members. Taken together, these facts strongly suggest that the 150 million listing views is not spread out among 2.5 million, but some much smaller number of users… like maybe 900,00 unique visitors in 2007?

We’re talking about a rather lot of views then.  That’s 166 listing views per unique visitor.  Yeah, it could happen absolutely.  That’s only about 40-some views per quarter for someone in the commercial real estate business.  I just… well… it makes me go hmmm….

I don’t believe Loopnet is lying about these numbers (not in the age of Sarbanes-Oxley, not in a SEC filing).  I just wonder if they’re counting things correctly, or perhaps there’s something iffy in their traffic analytics package.

Or… maybe… could Loopnet be counting the traffic from its LoopLink product?  Seeing as how a large number of commercial brokerages (including the world’s largest, CBRE) use LoopLink to power their own websites (without membership limitations for visitors to their own websites) via a frame, that could explain a lot of the uniques and listing views numbers.

So the final number I would want to see, were I a Loopnet investor, is the traffic, unique visitors, and so on broken down by source: Loopnet.com, BizBuySell.com, CityFeet.com, and LoopLink.  That would give me a much better sense of where the growth is, where the traffic is coming from, and let me evaluate whether the company was deploying its resources properly.  It is absolutely relevant whether 100 million of the 150 million listing views or 10 million of the 150 million listing views are coming from LoopLink versus the main website.

But then… what do I know?  I’m just a blogger who uses Arsenio Hall pictures….