Real estate social networking site ActiveRain will receive $2.75 million in a Series A minority investment from HouseValues, a real estate marketing and lead-generation company based in Kirkland, Wash., ActiveRain executives announced today.

ActiveRain, based in nearby Seattle, has seen its membership skyrocket to 66,000 members since launching in mid-2006. The Web site offers free networking opportunities to real estate practitioners, who create their own blogs at ActiveRain and interact via groups and blog commenting.

Matt Heaton, the company’s executive vice president, said the new funding will go into product development, and that the company is moving forward with plans to launch an outside blogging platform, which will enable real estate agents to create and operate blogs for their individual brands that aren’t walled inside the ActiveRain social network.

The outside blogging platform, currently in beta form, is expected to launch in early February, Heaton said.

“We found we had a lot of agents who started blogging at ActiveRain, then would go get their own blogs because they wanted their own branding,” he said.

The outside blogs offered by ActiveRain will still be managed through the network so that agents can leverage the visibility from the community onto their outside, consumer-facing blogs.

The cost for an outside blog will be roughly $100 per year, according to CEO Jonathan Washburn.

Heaton and Washburn say the core blogging and social networking service at ActiveRain will remain free to users.

Also in conjunction with growth plans, the executives said they are rebuilding ActiveRain’s Localism hub that targets consumers. Localism currently serves as an aggregation site for all local blog posts at ActiveRain in which users have tagged to identify with specific locations, neighborhoods or local issues. will still aim to serve local information to consumers, but Heaton said ActiveRain plans to pull in more hyperlocal data to the site, such as market statistics and demographics.

Plenty of start-ups have gone after the hyperlocal information market in recent years with little success, Washburn said, but ActiveRain differentiates its approach by starting with an active community of real estate professionals that’s grounded in local information and happenings.

“Agents know more about the market than anybody and they have the motivation to write about it because they have the prospect of gaining business from it,” Washburn said.

The company plans to monetize Localism through advertising so that the service will remain free to consumers and agents.

In a blog post announcing the news to ActiveRain members, Washburn and Heaton addressed questions about what the funding from HouseValues means for the ActiveRain community. Heaton wrote that HouseValues will have no access to member data or content. “Member content remains and always will remain the property of the individual member,” he said.

Heaton also said ActiveRain has no plans to become a lead-generation company and that the current management team will retain full control over the company.

The funding from HouseValues is structured as a minority investment, Heaton said, which carries similar terms to a venture capital funding. The company considered many opportunities for funding over the last six to nine months, he said, and they decided on HouseValues because they felt the company understood the importance of keeping ActiveRain’s core service free while also remaining hands-off from the core community.

“We’ve gone for about a year and a half without significant funding, which has constrained what we can do,” Heaton said. The founders will be in full product development this year, he said.

ActiveRain previously was engaged in plans to be acquired by property-search giant Move Inc., but after the purchase didn’t go through the company filed a lawsuit in 2007 seeking $33 million in damages.

Move, which operates the popular listings portal, has opposed allegations that it broke the law when it backed out of the acquisition plan and launched its own blogging platform, and has asked for a jury trial.

The lawsuit, filed Aug. 2, 2007, in U.S. District Court for the Central District of California, alleges that Move approached ActiveRain in November 2006 “about a potential financing or purchase of ActiveRain by Move,” and also alleges that the company “assured ActiveRain that it wanted to acquire ActiveRain, and gave assurances in this regard in order to convince ActiveRain to disclose its confidential information to Move.”

ActiveRain alleges Move violated the California Trade Secrets Act, among other allegations, including breach of contract, unjust enrichment, promissory-equitable estoppel, unfair competition, violation of the Washington Unfair Business Practices Act, and fraud-deceit.

Washburn and Heaton both declined to comment on the status of the lawsuit Monday.


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