Yahoo Grabs Slice of Real Estate Market
Yahoo Inc. is best known for its catalog of Web sites, free e-mail accounts and trademark yodel.
But Scott Gibson, president of Coldwell Banker’s Los Angeles division, sees the giant Internet portal in a whole different light: He thinks it’s one of the biggest threats to his Los Angeles real estate company and the rest of the established brokerage industry.
That’s because Yahoo, through partnerships with fledgling online brokers, makes available to its more than 200 million monthly visitors the same real estate listings used by traditional agents. At the same time, Yahoo’s partner brokers are undercutting rivals by offering rebates to home buyers and lower commissions to sellers than standard rates.
“Yahoo is a substantial competitor because they have the financial wherewithal to build up that site,” said Gibson. “That’s their business.”
Gaining Ground
In fact, Yahoo already has emerged as the second-most visited real estate site on the Web. It trails only Realtor.com, which is run by troubled Westlake Village-based Homestore Inc.
As Homestore officials have spent more than a year overcoming a series of legal and financial problems, Yahoo has beefed up its real estate services as part of a broader strategy to squeeze more revenue from the many people who use its portal for everything from job searches to daily horoscopes.
In addition to selling ad space, Yahoo Real Estate generates fees from online brokers or mortgage lenders that are linked to the Web portal. Yahoo officials won’t divulge any financial information about their real estate section, but it is considered an important element in boosting fee income and diversifying away from online advertising.
The Sunnyvale, Calif.-based company earned $43 million on revenue of $953 million last year, but is striving to reach $2 billion in annual revenue by 2006.
“Yahoo has been paying more attention to key [operations] that it considers to be quite critical,” said Safa Rashtchy, a securities analyst at U.S. Bancorp Piper Jaffray. “Real estate is one of them.”
Yahoo’s real estate expansion has not gone unnoticed by the Realtor establishment.
Realtor.com is owned by the National Assn. of Realtors, the industry’s dominant trade group, whose members include leading brokerages such as Coldwell Banker.
The Realtor group last year proposed making it harder for customers of online brokers to secure unlimited use of local sales listings shared by association members. Some analysts said the proposal was aimed at Yahoo Real Estate, which gained access to listings through its partnerships with member brokers.
Yahoo executives play down the controversy. But they make it clear that their firm -- which is licensed to sell property in California and several other states -- is in the real estate business for good.
“No matter what the rules are, we will adapt and go from there,” said Ryan Roslansky, manager of product strategy for Yahoo Real Estate.
According to the latest figures from Nielsen/NetRatings, Realtor.com attracted about 3.3 million visitors during December, more than triple the number of people using Yahoo Real Estate.
Homestore’s Challenge
Mike Long, chief executive at Homestore, which manages Realtor.com, said his company has not lost ground to Yahoo and others while the firm has worked on resolving numerous lawsuits and boosting the company’s balance sheet. In fact, he said, Homestore has strengthened operations by focusing solely on residential real estate, in contrast to Yahoo’s sprawling array of services.
“Companies that lost focus have had difficulty maintaining fairly consistent growth,” said Long, who was brought in early last year after the ouster of Homestore founder Stuart H. Wolff. “We think our specialization gives us a unique advantage.”
Still, some industry executives and analysts see a formidable long-term competitor in Yahoo.
In early 2002, the company ranked as low as No. 6 among real estate Web sites. But by late spring, the company had established itself solidly in the No. 2 spot, pulling ahead of rivals such as Home Gain, said Lisa Strand, chief analyst for Nielsen/NetRatings.
“Instead of being one of the pack, we saw them emerge as a leader,” she said.
Yahoo’s big advantage is that it can drive enormous amounts of traffic simply by promoting services and products to visitors in other parts of its Web site.
That’s how 30-year-old Los Angeles attorney Alexander Abbe started his online search for his first home.
“I use Yahoo for other things. It’s like my home page,” Abbe said. So when he began house hunting last fall, he typed in “real estate” in the search engine and was directed to Yahoo Real Estate.
Broker Partnership
From there, Abbe followed a link to Yahoo business partner ERealty Inc., a Houston-based online broker that serves the Los Angeles area.
Abbe searched real estate listings and used an ERealty broker to buy a two-bedroom, $300,000 home in Montecito Heights, a hillside neighborhood about halfway between downtown Los Angeles and Pasadena. He completed the purchase at the end of December and received a small rebate from ERealty.
Typically, such online brokers give buyers rebates of up to 1% of the purchase price. For home sellers, ERealty charges a commission as low as 4.5%, compared with the standard 6% for traditional brokerages. “I didn’t have any problems,” Abbe said.
For fledgling online brokers such as ERealty, which sold just 2,000 homes last year, the partnership with Yahoo Real Estate has proved to be vital. The number of people registering on ERealty has increased about fourfold since it linked with Yahoo last year, said Russell Capper, ERealty’s CEO.
“The kind we get are serious buyers,” Capper said of Yahoo referrals.
The Yahoo-broker connection, however, has raised concerns among many traditional real estate brokers. Although the National Assn. of Realtors denies it was Yahoo that prompted its proposal to restrict online access to listings, the group says there is an ongoing debate about the control and distribution of real estate listings.
“It’s an important decision for the future of our industry,” said association spokesman Stephen Cook.
Many association members are clearly partial to Realtor.com.
“Yahoo does a lot of advertising and they drive a lot of traffic, but the place for real estate online is Realtor.com,” said Tom Carnahan, a San Fernando Valley broker and president of the Southland Regional Assn. of Realtors.
Others, including Coldwell Banker’s Gibson, say it is enormous volume of traffic and the convenience of one-stop-shopping that make Yahoo and other portals such a big threat.
“People can go to one Web site and get all the information they need,” Gibson said.
