Interest grows as networking site receives $2.75 million for minority interest
By Beth McGuire
RISMEDIA, Jan. 24, 2008–Now that the phenomenon of online social networking that has emerged in many areas of business today is finally gaining popularity in real estate, it’s growth is taking off ‘faster than a speeding blog.’ This was evidenced this week by the big announcement that social networking site ActiveRain will receive $2.75 million in a minority investment from marketing and lead generation firm HouseValues, a publicly-traded, Washington-based firm.
News of the investment was buzzing on real estate blogs this week including a Q&A on ActiveRain with company execs Jonathan Washburn, CEO, and Matt Heaton, EVP, where they discussed some of the details of the agreement. RISMedia recently caught up with the powers that be on this power deal including the ActiveRain execs and Mike Nelson, HouseValues, Inc.’s VP of strategic development, who tells us why this investment was so important to his company.
We also wanted to hear more about the impact of social networking on the real estate industry from Saul Klein, president of InternetCrusade, which operates RealTown, a popular real estate social networking site on the Internet, and Errol Samuelson, president of Realtor.com, which now features some of the Web 2.0 phenoms like Wiki and social networking.
A Little Breathing Room: ActiveRain Will Focus Investment on Product Development
Since ActiveRain was founded four years ago, the company has moved away from its original focus of lead management to its social networking platform, launched in 2006.
Heaton, the company’s executive vice president, said that as recently as this past spring they were “still working out of their basement” and believed so fervently in the SN initiative that they had taken out home equity loans to get money to keep ActiveRain going.
The money from the HouseValues funding will mainly go into product development and be used for two big areas, which include launching their outside blogging platform and rebuilding Localism.com, a consumer portal that will highlight local agents’ knowledge of their neighborhood through content submissions, photos and other local data, also known as “hyperlocal data.”
ActiveRain currently offers free networking opportunities to real estate practitioners, who create their own blogs on ActiveRain.com and interact in groups and blog communities.
The outside blogging platform, currently in beta form, is expected to launch in early February, Heaton said, and will cost about $100 per year.
Citing potential member concerns, Heaton and Washburn, ActiveRain CEO, say the core blogging and social networking service at ActiveRain will remain free to users and that they “have no plans to get into the lead generation business.”
“ActiveRain and HouseValues are seperate companies,” said Washburn. “ActiveRain will continue to execute against the same business models we’ve planned on all along; for example selling services such as “Outside Blogs” and generating revenue from advertising. We have no plans to be a lead generation company.”
In addition, Washburn said on his company’s blog Tuesday that the deal did not give HouseValues access to member data or content, which remains the property of the individual member. The founders also still retain majority control of the company and have “never been more excited about ActiveRain, as this investment gives us the monetary resources we need to accomplish our goals.”
ActiveRain currently has approximately 66,000 members.
Why Did HouseValues Invest?
Clearly the popularity of social networking is growing, but this announcement begs the question, why would a lead generation company such as HouseValues want to invest essentially in an idea that for ActiveRain, has yet to produce revenue?
One of the reasons, says Mike Nelson, HouseValues vice president of strategic development, is that helping the cause will in return benefit HouseValues customers. “At HouseValues our mission is to help real estate professionals manage and grow their business. Everything we do is designed to help our more than 10,000 agent and broker customers achieve success on their own terms. All it takes is one look at the vibrant community on ActiveRain to see that they are using the power of social networking to help real estate professionals succeed and therefore finding ways we can help is a natural fit for us.”
He continues: “ActiveRain is already helping thousands of real estate professionals achieve success and grow their business. More than 65,000 professionals utilize ActiveRain to both share best practices and promote themselves to home buyers and sellers in their neighborhood. And we believe that this is just the beginning. ActiveRain has ambitious plans to expand its community and its offerings, and we see our investment as a way to help them achieve their goals and in the process assure they can continue to help many of our customers achieve theirs.
“And if we can learn a little from them along the way,” he added, “that will be a bonus. They really have a terrific, passionate team and we are eager to work more closely with them in the future.”
The funding from HouseValues is structured as a minority investment, which carries similar terms to venture capital funding (provided by outside firms to new-growth companies). With minority investments, shareholders own less than half the shares in a corporation.
The company considered many opportunities for funding over the last year, Heaton said, and were approached by and partnered with HouseValues because they felt the company best understood the importance of keeping ActiveRain’s core service free while also remaining hands-off from the core community.
“Around the beginning of the year we realized that this thing was exploding on us and it was taking all our efforts to keep it running,” Heaton said. “But we didn’t have the money to keep it running. We went through a lengthy process to find the best investors – angel investors, venture capitalists and other strategic partners – but HouseValues really understood our vision and were excited about what we’re doing.”
How Social Networking Can Really Help Realtors
So with all the recent interest in social networking, what are Realtors’ talking about in these communities and how does being a part of them really help their bottom line?
Heaton says they’re using it in both a B2B capacity for networking and generating referrals as well as communicating directly with Internet-savvy consumers, who are starting to discover and participate in online real estate communities.
“Our agent members connect with other agents out of state and later help each other when their clients need a Realtor in that state,” he says. “And it’s not just Realtors. Loan officers, title professionals, appraisers, are all talking with one another. The other area is business to consumer. There is a surprising amount of direct consumer traffic coming into our site.”
Saul Klein, president of InternetCrusade, which owns social networking site RealTown, a joint venture with RISMedia, says real estate blogging on their site has also grown to include communities within communities of a wide range of real estate professionals including members and executives of MLS associations, vendors, and many more who form their own sub-communities to discuss matters important to their area of the business.
RealTown boasts 78,000 members and has been in the online networking business for over 12 years. Klein, who also is a financial planner and a broker along with his business partners Mike Barnett and John Reilly, a well-respected real estate attorney and author, says social networking on RealTown is also invaluable for real estate professionals because of the expertise and insight they can only gain from the high-level industry experts who are members of their community.
“RealTown has a mature audience of people who has been writing for years, and their social skills are highly developed,” Klein says. “RealTown is a true blogging platform with the best-developed tools and features.”
He adds that having access to the founders’ expertise is also invaluable because not only are they experts in social networking, but can deliver advice and insights from the Realtor’s perspective, using their combined 100 years of brokerage experience.
“We are the ‘oldest social networkers’ in the industry; if not chronologically (laughs) then definitely in experience,” Klein says. “We’ve been doing this for 12 years. As a financial advisor, I also share my advice with our community and John (Reilly) is one of the most well known real estate attorneys in the country and author of the book, ‘The Language of Real Estate.’ We all speak as peers to our members and offer valuable insight.”
Klein is excited about the news of ActiveRain’s investment and says it stands as a testament to the growing popularity of social networking being used as a professional business tool. It’s finally being taken seriously, he said.
“If more people are pushing in the same direction to accelerate growth, it’s good for everyone,” he said. “But the popularity of social networking has not seen rapid growth. We’ve been offering social networking and the ability for people to be in a community together online and network since 1995. It’s really the speed at which growth has accelerated recently that has changed. From our perspective we are saying, ‘It’s about time!’ People are finally starting to recognize the power of community. We’re excited about it.”
Where Is Realtor.com in the Web 2.0 Mix?
Realtor.com, the real estate home and information site owned by Move, Inc. has also made some big strides in Internet wave of social networking.
Errol Samuelson, president of Realtor.com, says the company has incorporated features like “Wikihood,” where, using this feature, consumers can outline the boundary of a “custom” neighborhood on a map, give the neighborhood a name, and share this neighborhood and “their” definition with their friends or all users on Realtor.com.
In November 2006, Realtor.com also launched the beta version of its new blogging platform for Realtors, Featured Blog. Here, agents can sign up for their own free blog.
“Each day, we take the very best blog posts from thousands of agents around the country, and highlight their posts on http://talk.Realtor.com,” says Samuelson. “This section on Realtor.com provides free links back to the agent’s blog post/personal website, providing tremendous exposure and traffic for the creative bloggers using our system. Thus far, we’re seeing tremendous creativity and a wide variety of topics being discussed by our Featured Blog users.”
Samuelson says Realtor.com does not publish their membership numbers at this time, but notes they are pleased with the feedback they have received from Realtors around the country.
Where Will Social Networking Go from Here?
All our experts here agree that social networking is barely in its infancy stage and that we will be seeing more growth and uses of this platform in real estate as it grows in popularity and sophistication.
Says Samuelson: “Moving forward, we expect to see many more real estate applications [that will] take on more of social network ‘flavor.’ Over time as the concept of agents and brokers, buyers and sellers, and others interacting online increases, we expect social networking will become more commonplace and essential to the industry. Remember, there was a time when people focused on individual features like ‘Internet maps’ and other technologies we now take for granted as part of our every day experience. The same will happen with social-networking features.”
RealTown’s Klein sees the evolution of social networking taking on a more protective nature.
“Right now people are displaying a lot of information about themselves, but an identity thief can’t steal your ID from just your pet’s name or your mother’s maiden name or other information you use to protect yourself online, but when you have all your information out there in different places and that is collected, then it can be,” Klein says. “I see people starting to retrench their information and not give out as much. I think we will have greater layers of security within social networking, where you’ll be giving people layers of permission as to what information about you they will be allowed access to. You don’t need to know someone’s name and where they live to communicate ideas in an online community. You just need to have similar interests.”
Nelson sees HouseValues’ investment in ActiveRain as an investment in the future of real estate marketing.
“Web-based social networking is an important extension of the offline networking and marketing efforts that are already a part of what agents need to do to be successful. As such, we believe that Active Rain’s services will become important tools that real estate professionals rely upon to build their personal brand, generate customer referrals, and share best practices with their colleagues,” he says.
As for Heaton, he and fellow ActiveRain founders knew that giving up an established, profitable lead management business for an idea that still has yet to fully materialize, was definitely worth the risk.
“The real estate industry may be slower to adopt new changes, but they are the ones who can benefit most from social networking because the business is so relationship-based,” he says. “We can barely contain our excitement over the promise that this year offers.”