An (irrationally?) exuberant land grab
Business 2.0 Magazine looks at the booming market for online real estate and wonders if it's for real.
(Business 2.0 Magazine) -- Online worlds like Second Life have made a successful business out of getting people to buy and sell 3-D virtual real estate.
But can the same business model be made to work on the regular old Internet, where the "real estate" being traded is nothing more than a webpage? A Montreal startup called Weblo thinks it can--and claims that its plan will pull in $2 million in the second quarter of 2007 alone.
Weblo's pages represent states, cities, and buildings in the real world--and are in finite supply. For example, there's a Weblo page for the Empire State Building (bought for $1 by city worker Rick Bujold, who later flipped it for $250), a page for Seattle (bought for $2,000 by Seattle real estate loan analyst Padraic Slattery), and a page for California (bought for $53,000 by lawyer Michael Edelson).
All told, Weblo has attracted 10,000 speculators so far. Weblo CEO Rocky Mirza, who got $2.6 million in VC funding, expects to hit $10 million in revenue by the end of 2007. "It's Monopoly on steroids," Mirza says.
But is there any inherent value to Weblo pages, or are they as worthless as Monopoly properties? The pages are supposed to be mini travel guides to the locations they represent, with photos and starred reviews from users--though currently most pages offer very little content.
Owners keep the ad revenue generated by their pages but have to pay a slice of it in "taxes" to the owners of the city and state pages where their properties are located. For example, Chris Gingras, a network marketer in Toronto, spent $16,900 to acquire Ontario--and is making back $700 a month in ad revenue and taxes from the province's subsidiary properties.
All of which has analysts scratching their heads. "I don't see the economics," says Barry Parr, a media analyst with JupiterResearch. "You can't value things simply on the ability to sell them to someone else. I don't know what's going to drive the audience. It doesn't feel like a sustainable business."
But if Weblo has somehow managed to siphon off a bit of the irrational frenzy endemic to the real-world real estate market, it just might have found a profitable niche.
More from the April 2007 issue of Business 2.0:click here.