Browsing To Buy
Online real estate listings will move $130 billion worth of homes this year. These clever companies have figured out how to grab a piece of the market.
(Business 2.0) – Online pornography has been lucrative for Dan Parisi. His adult website, the infamous www.whitehouse.com, attracts 2 million visitors a month and, he says, brings in revenue of more than $1 million a year. These days, however, Parisi is excited about an opportunity that's even hotter than cybersmut: online real estate listings. "It's time to move on," Parisi says. "I only went into adult content to make money." He now plans to sell WhiteHouse.com so he can concentrate entirely on nurturing House.com, the real estate website he founded in September 2003.
What makes the online real estate business so sexy? Shelter websites are popular destinations: ComScore Media Metrix, which measures Internet use, reports that more than 12.7 million unique visitors logged on to real estate sites during a single one-week period in late August, a figure that represents 9.7 percent of all Web surfers during that week. The National Association of Realtors says 11 percent of homebuyers in 2003 found their new houses on the Internet. And with real estate agents on track to sell a record 6.5 million existing homes in 2004, conservative estimates suggest that online listings will generate more than $130 billion worth of home sales this year alone. Here's how three savvy entrepreneurs are profiting from that opportunity.
Attract a Crowd
If there's one thing Dan Parisi learned while running adult websites, it was how to bring visitors to his front door. That turns out to be a transferable skill: Like the porn business, online real estate attracts plenty of Internet traffic, but it's also highly competitive, so Parisi's experience has come in handy.
Traffic is key to House.com's business model, which is hardly groundbreaking. Arguably, it's even prudish, following the lead-generation template pioneered years ago in the online auto-buying and mortgage-lending industries. Homebuyers log on, type in a few details about where they want to live and what kind of house they're looking for, and within hours receive contact information from as many as three real estate agents. The service is free for prospective homebuyers, but the 8,000 real estate agents who have enrolled pay $30 for each good lead generated by the site.
To make money, then, Parisi must attract as many visitors as possible to House.com in hopes that some percentage of them will solicit referrals from agents. He says he spends "in the low six figures" each month on House.com advertising, most of which is placed on search engines and portals like Google, MSN, and Yahoo.
And then, of course, there's House.com's easy-to-remember URL, which Parisi paid $400,000 to acquire in 2002. "People think they've heard of us, even if they really haven't," he admits.
Parisi's tactics are effective. ComScore Media Metrix says House.com, with its 1.1 million unique visitors per week this summer, has become one of the 20 busiest real estate websites, following closely on the heels of well-known destinations like Century21.com and Remax.com. Parisi says House.com is profitable, generating 15,000 qualified leads each month, or monthly revenue of $450,000, with a staff of 15 employees.
Rewire an Industry
Many home sellers are dissatisfied with the 6 percent commission traditionally charged by real estate agents. That helps explain why one in seven homes changes hands on a for-sale-by-owner basis, according to the National Association of Realtors.
Assist-2-Sell, based in Reno, Nev., helps do-it-yourself sellers by providing home-sale support on an à la carte basis. After franchising its network of discount real estate brokerages in 1995, the company evolved into an Internet-powered service that reduces transaction costs while offering sellers direct access to buyers. Assist-2-Sell charges a fee of about $3,500 or a 4.5 percent commission on the final sale price, depending on what level of service a seller requires. "I'm sure traditional brokers wish that we would just disappear," says Assist-2-Sell co-founder Lyle Martin.
The company's growth seems to bear this out. Assist-2-Sell handled 11,831 home sales in June, up 50 percent from the year before. Its network of offices has expanded to more than 400 local franchisees scattered across the country. (These are also a moneymaker: Owner-operators pay Assist-2-Sell $19,500 for a franchise, plus an additional 5 percent of the commission of every home they sell.) Assist-2-Sell reported revenue of $4.2 million in 2003, up from $2.8 million in 2002. The company's founders say it's already profitable and on track to generate revenue of $6.5 million by year's end.
Mine a Niche
David Lott had a cushy job. A writer for Golf Digest magazine, he got paid to visit golf resorts, spending weeks in Bermuda, Hawaii, Palm Springs, and other places where lush fairways spread out beneath blue skies. He visited dozens of golf developments and toured luxurious dream homes perched alongside the links.
That gave Lott the inspiration to pursue his dream of starting his own business. In 1999 he launched Golf Course Home Network, a site for golfers looking for homes in golf course communities. "These people were passionate," he says. "I knew that creating a site to help them find a home would succeed."
Today, more than 2,300 potential buyers visit www.golfcoursehome.net daily, and more than 100 golf communities have signed up to feature their available properties on the site. Though the scope of Lott's business is modest, he's doing well by carving out a niche and focusing on it exclusively.
And as niches go, he picked a good one. According to the National Golf Foundation, 26 million Americans tee off on a regular basis, and 3.7 million of them reside permanently within a golf community. Another 3 percent own a golf course residence that they use as a vacation home or rent out as an investment property. Best of all, golfers are a wealthy bunch; Fletcher Consulting reports they have an average household income of more than $70,000 a year.
Lott's company, based in Newtown, Conn., derives most of its revenue from the featured golf communities, which pay an annual fee of $2,975. In return, they get a steady stream of high-quality leads. Type "golf course real estate" (or an alternative, such as "golf course living" or "golf homes") into Google, and Lott's site shows up first—a feat accomplished through the use of search engine optimization techniques.
His paying customers seem satisfied—85 percent of the communities featured on Golf Course Home renew their contracts each year, he claims. Lott says the company has been profitable since it was founded, thanks in part to low overhead: Most of his workers are salespeople who work solely on commission.
Sources: Listed companies