Online Real Estate Marketing = No Profit?

I was just looking at the financial reports and wondering “where is the profit?”  They show on their investor relations page ~$5mm in EBITDA on $242mm in revenue or a 2% EBITDA margin.  While I have followed this company for some time, I am always shocked by its lack of profit.  Should I be?  Probably not.

I took a look at the Comscore Real Estate category and here are the top players (traffic) in the space:

  1. Move (a little profit)
  2. Yahoo! Real Estate (probably just a little profit)
  3. AOL Real Estate (probably no profit)
  4. & ForRent (probably no profit at, see below for ForRent)
  5. MSN Real Estate (probably no profit)
  6. (not really real estate, all multi-family, probably good profit)
  7. (negative profit, or they would have crowed about their profitability)
  8. (negative profit, or they would have crowed about their profitability)
  9. Primeda (not really real estate, all multi-family, probably good profit)
  10. (not really real estate, all multi-family, probably good profit)
  11. ZipRealty (brokerage, not a lot of profit per CEO at Inman conference)
  12. REMAX (brokerage)
  13. NCI Interactive (see our financials at
  14. MyNewPlace (not really real estate, all multi-family, probably ok profit)
  15. HomeGain (would guess negative to neutral)
  16. LoopNet (commercial RE, good profit!)
  17. RealtyTrac (just announced cost cuts to return to profit)
  18. C21 (Brokerage)
  19. MLXchange (I have no idea)
  20. UHaul (not really a real estate site)

Holy cow – a ton of revenue, a ton of expense and a net negative number for profit!  What this says to me is that venture $$s have essentially subsidized online marketing for real estate agents and that at some point something will need to change.  Those changes will likely come as either:

  • A reduction in service to bring expense in line with revenue
  • An increase in price to bring revenue in line with expense
  • A consolidation of top players limiting options of the agents (less product, same price, reduced total market expenses)

All of this begs the next question – who is the beneficiary of all of this subsidy?  While I sat at the Inman conference I heard several creative, mid-sized brokers and agent teams talking about how they have creatively used the internet to drive leads and ultimately shift share.

I am not sure what will ultimately break the log jam that is online Real Estate listing marketing, but it is clear that there is NO EQUILIBRIUM in the market as it exists today.


4 responses to “Online Real Estate Marketing = No Profit?

  1. Great observations Todd.

  2. Pingback: If only I knew when you were getting ready to buy… | Dan McCarthy's ViralHousingFix

  3. Interesting perspective and well said. I also suspect the listing syndication model, rather than shifting Real Estate marketing $ from offline to online – is contracting the overall marketing $ in the category. I just don’t need to spend the same amount to market my listings that I used to when I needed to get it in the paper. So much free out there. Will that dynamic remain when boom cycle returns?

  4. Alex,

    It is clear that we are dealing with a smaller pie, it is just hard to attribute the source of the issue. With volume down from 7+mm homes per year to sub 5mm, prices down 30+%, agent commissions must be less than 1/2 of what they were. We all know that marketing spend and commission dollars move in lock-step. I would be curious to know if the marketing pie has declined at a faster rate than the commission pool.

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