Yahoo! Real Estate Web site has been gaining ground

Partner brokers undercut rivals with buyer rebates, lower sales commissions

March 09, 2003|By Jesus Sanchez | Jesus Sanchez,SPECIAL TO THE SUN

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 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 homebuyers and lower commissions to sellers than standard rates.

"Yahoo! is a substantial competitor because they have the financial wherewithal to build up that site," Gibson said. "That's their business."

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 the troubled Westlake Village, Calif.-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 real estate establishment.

Realtor.com is owned by the National Association of Realtors, the industry's dominant trade group, whose members include leading brokerages such as Coldwell Banker.

Last year, the Realtors group proposed making it harder for customers of online brokers to secure unlimited use of local sales listings shared by association members -- a proposal some analysts said was aimed at Yahoo! Real Estate, which gained access to listings through its partnerships with member brokers.

Yahoo! officials play down the controversy. But they make it clear that their company -- which is licensed to sell property in several 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.

Mike Long, chief executive at Homestore, which manages Realtor.com, said that 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 had ranked as low as No. 6 among real estate Web sites. But by late spring, the company 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.

For fledgling online brokers such as ERealty, which sold just 2,000 homes last year, the partnership with Yahoo! Real Estate has proven 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 chief executive.

"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 Association of Realtors denies that it was Yahoo! that prompted its proposal to restrict online access to listings, the group says there is a continuing 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.

Jesus Sanchez is a reporter for the Los Angeles Times, a Tribune Publishing newspaper.

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