House Values Stock Tumbles





The Seattle Times published a story about Kirkland-based HouseValues’ stock plunging last week, one day after the Kirkland company forecasted 2006 financial results that were far below Wall Street expectations.

Shares of the online real-estate services company sank $3.79, or 28.1 percent, closing at $9.71 on trading volume almost 10 times the recent daily average.

John Cook of the Seattle PI, in his Venture Blog, asks if it’s because of new competitor of online house valuations, Zillow.

Robbie Paplin at Rain City Guide asked some good questions and provides a link to this great website, The Rip-Off Report. Robbie asks : “Does management think an upcoming war with Zillow is going to hurt HouseValues earnings? Is the slowing housing market at fault? Have enough people seen Ardell’s “Bottom feeder post” to cause this market cap hemorrhaging? Can TheLoanPage.com mount a credible threat to LendingTree.com? Can Batman & Robin save us?”

I think the answer may lie in their business model, how they currently generate income, and the possibilities for continuing to do this in the future.

HouseValues started out selling entire zip codes to agents for a few hundred dollars a month. Civilians would click on a link that would generate a lead to an agent. That was a profitable business plan for awhile. But then HouseValues went public and had to generate increasingly more income for stockholders, they had to figure out a way to increase that cash flow. So, they started splitting zip codes. But kept the price the same or increased it for inceasingly smaller geographic areas. In exchange, HouseValues promised a certain number of leads to the agents, sometimes just two or three a month, depending on the amount spent and the geographic area.

The problems for agents are that “bad” leads are still counted as a legitimate lead (as far as the numbers promised), and most of these “leads” are months out, as far as becoming customers or clients. With individual agents spending hundreds of dollars a month, with no clear benefits in terms of listing and sales, agents get frustrated and discontinue service. There are just enough success stories to bring more naive agents into the system, but the pie (the geographic areas being sold) is finite. Unless HouseValues continues to carve up the areas into smaller and smaller geographic slices, and just starts selling certain streets, the number of geographic areas it can sell remains the same.

And some areas will never be viable as far as leads go. Rural areas where the concentration of computers could be small, let alone online shopping for a real estate agent or real estate. Certain suburban areas. Low or middle-income areas. In Seattle, this would mean that only certain zipcodes in the metropolitan area would be “saleable” and again, certain zips on the Eastside. The rest of the area would probably be pretty worthless.

Multiply this by XX across the country, and you’ll see that penetration for HouseValues may take years.

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3 comments

  1. Pingback: 360Digest » House Values Stock Tumbles
  2. Glenn Deka

    I am involved with the HV sister site “JustListed.com” I have receive well over 200 leads in the past 11 months. About 20% are non-viable (fake email or phone). About 10% already have a Realtor and are simply using JL to help their own Realtor. A good 40% never reply to emails or voicemails. Another 15% are not moving for 6mos to a year. Most of the rest are simply “tire kickers” and people who couldn’t get funding for a loaf of bread.
    I have sold 2 homes out of the 200+ leads. That’s not in any way, shape, or form what was presented by the people who con you into signing up for the program. They told me the average turn over was around 10% (which in the Real Estate numbers game isn’t bad).
    I’ve wasted an incredible amount of time contacting fruitless leads. My story falls right in line with the rest of the complaints at “The Rip-Off Report”.
    For $264. a year, I could accept the con, but for $264. a month I consider HV/JL as nothing more than a well organized group of scam artists.
    I am glad my contract is up next month. I will not renew, of course, and I have relayed my experiences to the agents in my office. To my suprise, many already knew what a waste of money HV/JL was. I just wish someone had gotten to me before I fell for this swindle.

  3. Frank

    Glen why do you still have a homepage site with house values?

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