A single event can spark an insight into where we have been or where we are going. The news that Prudential is purchasing eRealty did that for us.

For one, a traditional off-line franchise acquiring a pure Internet-inspired company shows convincingly that the marriage of bricks and clicks is real, necessary and inevitable. Prudential acquires the innovation, technology and risk-taking of an online company, and eRealty gets the depth, judgment and experience of a traditional real estate company.

Of course, this deal may just be a case of one real estate company buying another–an example of consolidation, albeit on a small scale, in the industry: HomeServices buys this, Cendant buys that, Diller grabs LendingTree, Tree nabs Realestate.com and Domania tags along.

The acquisition instead is the first shoe to drop in the trend towards major real estate franchises finally investing in the Web lead business, using the expertise and technology of firms like eRealty to prospect leads on the Web, distribute, convert and close them. Could Cendant and RE/MAX be far behind? New Jersey’s Weichert has already invested heavily in its own proprietary lead-acquisition strategy.

“Stop whining and start Googling” could be the motto of brokers and franchises that want to remain vibrant in the Internet age. Many are finding that the current in-vogue strategy of big capture rates on affiliated business may sound attractive at conferences, but is harder work back home. Leads, agents and home sales cut closer to the bone of what brokers have been about for 75 years. With work and capital, the Internet becomes an opportunity, not a threat.

This deal is also another example of un-met expectations with the burgeoning online real estate industry. Questions linger about how well eRealty was doing: Why else was the company determined over the last year to be acquired? Moreover, eRealty’s inability to go it alone exposes the dirty little secret of online real estate: There is no successful business model for a solo Internet real estate company. Unlike travel, dating and news, how to make buckets of money in online real estate is still a mystery. Like a treasure trove deep under the sea, everyone knows there is a big booty down there, but no one has figured out the right sonar, a steady navigation plan and the exact recovery scheme for getting their hands on it.

Untold millions have been spent on exploration, but so far no prize.

Homestore was a flash with its instant $200 million annual Web business, but it has been grappling ever since for a sustainable growth model. Lead companies like HouseValues, ServiceMagic and HomeGain have figured out how to sell leads to agents and brokers, and Barry Diller’s billions promise a magic bullet. But fundamental change in the industry has been expensive and allusive. Nothing is popping like it has in the travel industry where travel agents have been chased to far corners of the earth, or online dating, which has put an end to the bar scene as we knew it.

The eRealty end game is discouraging beyond the missed technology promise. With much bluster, the Texas company pledged to revolutionize real estate, changing the very structure of the industry by emphasizing a customer-service broker model that offered employees instead of commissioned contractors. Slowly but surely, it looked more and more like a traditional broker.

But E’s fate as a technology arm of a traditional brokerage in no way diminishes the promise of online real estate. Businesses may have failed to figure out the exact right model online, but consumers experience it differently. They are flocking to the Web to ease the pain of their transaction.


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