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Can Move Move Up?

Posted on Thursday, Jul 12th 2007

National Association of Realtors (NAR), whose over 1 million members are Realtors, is a century-old powerful trade association of real estate agents and brokers in US.

Besides owning the word ‘Realtor’ as a registered trademark, the NAR has sufficient clout among the decision makers, which stems from its being the US’ third largest donor to political campaigns, having given in excess of $30 million since 1990.

But the NAR’s real strength lies in its formidable database, culled and nurtured over many decades. So, in November 1996 when Stuart Wolff founded Homestore.com to tie up with the NAR and put its home listings online, it was thought of as a smart move. That was in the early dotcom era.

Much of the agreement Stuart had to operate NAR’s website Realtor.com, by RealSelect (part of Homestore then) still remains in force. It has seen the test of the time.

In the meantime however, journeying through the topsy-turvy world of ‘online realty’, Homestore.com lost its moorings when in June last year, Stuart was convicted of conspiracy and insider trading to illegally prop up Homestore’s revenues and stock price even while depleting its cash reserves. He now faces an impossible 175 years in prison.

In February 2006, Homestore came to be known as Move, Inc. (Nasdaq: MOVE), after its acquisition of Moving.com. Move.com debuted in May 2006. It now has several websites under its stable to address nearly all real estate segments it operates in. The company did $290 Million in 2006 revenues, and $71 Million in Q1 2007.

As of Q4-2006, Move’s two principal business arms, real estate services and moving related services have respectively contributed 72% and 28% of its revenues. It has several important tie-ups to its credit including powering content for Home & Real Estate Channel for America Online, Yahoo! Real Estate, and the House & Home Channel for MSN.

That may seem compelling, but in reality it doesn’t reflect much value. Though it has Realtor.com under its belt that boasts monthly unique users numbering more than 6.5 million, and despite the cushion of high margins it enjoys in US real estate markets compared to other places, Move’s current stock market showing is pretty dismal to say the least. The stock is trading at $4, close to its 52-week low of $3.80.

We have reviewed the Online Real Estate market in detail, and it is a vibrant segment. We have also reviewed Move’s feature-functions which are okay, although nothing exceptional. The valuation on the company is a rather affordable $620 Million, pegging this as yet another potential acquisition for an Internet conglomerate like Yahoo, NewsCorp, or IAC, or even for a new one in the making via private equity intervention or a public company roll-up.

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Some corrections:

Stuart Wolff did not found RealSelect. Richard Janssen did.

Stuart Wolff did not negotiate RealSelect’s agreement with the NAR. Richard Janssen and Ann Bailey did.

People seem to eager to credit Wolff with the creation of RealSelect (then Homestore then Move), without bothering to look it up and realize that Wolff came in after most of the basics had already been set up.

Also, the NAR doesn’t have a database of home listings (those were acquired by Realtor.com by deals with over nine hundred multiple listing services across the country, using the NAR relationship as a reference), and that Move’s AOL partnership may be ending soon. Other than that, good info.

Ernie Tabel Friday, July 13, 2007 at 11:41 AM PT

Thanks, Ernie. Helpful information.

Sramana

Sramana Mitra Friday, July 13, 2007 at 11:47 AM PT

A couple of additional thoughts —

I think that in evaluating Move’s future prospects one has to consider 1. private equity endorsement and 2. recent executive additions.

  1. After months of due diligence Elevation Partners invested $100M in Move about 18 months ago. Since they have $1.9B to invest and will only be making 8 investments, that’s a significant endorsement.

  2. Lorna Borenstein and Vaughan Smith have just joined the executive team. Both have played significant roles at other Internet companies such as Ebay and Yahoo. Eric Thorkelsen was instrumental in building the Martha Stewart and “This Old House” brands.

Eric Krupnik Saturday, July 14, 2007 at 3:40 PM PT

Yes, the Elevation investment is precisely the kind of endorsement that says that their thesis and mine are reasonably similar.

I will admit, that for some reason, I missed the Elevation investment news, and came to my conclusion independently. However, the investment convinces me further that they see the same thing that I see.

Sramana

Sramana Mitra Sunday, July 15, 2007 at 5:16 PM PT

[…] Will Move Move Up? […]

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