HouseValues.com parent company Market Leader Inc. says it’s pinned its hopes for the future on a new platform that helps agents generate and manage their own leads.

Market Leader reported a $13.1 million net loss for 2008 Thursday, despite cost-cutting measures that helped the company maintain positive cash flow from operations in the face of a nearly 36 percent decline in revenue.

HouseValues.com parent company Market Leader Inc. says it’s pinned its hopes for the future on a new platform that helps agents generate and manage their own leads.

Market Leader reported a $13.1 million net loss for 2008 Thursday, despite cost-cutting measures that helped the company maintain positive cash flow from operations in the face of a nearly 36 percent decline in revenue.

Company executives said much of the loss for the year stemmed from noncash write-downs that reflect a revised assessment of the value of the company’s intangible "goodwill" assets — the value of its brand name and technology, for example — versus its book value.

Most of Market Leader’s $8.8 million in fourth-quarter losses consisted of $6.2 million in noncash charges, including a $4.9 million goodwill write-down. The company also wrote down the value of its $2.75 million investment in real estate social networking site and blogging platform ActiveRain by $1.3 million.

Formerly known as HouseValues Inc. before rebranding in November, Market Leader purchased a one-third stake in ActiveRain in November 2007 after rival Move Inc. backed out of a planned acquisition. Market Leader has options to purchase the rest of the company’s outstanding stock for $25 million if it acts during the first half of 2009.

But Market Leader allowed an option to acquire the rest of ActiveRain for $17.5 million expire in December, and company officials who briefed investors Thursday said they are looking to conserve the $58.6 million cash position they ended 2008 with. The company saw erosion of its customer base and revenue per customer accelerate during the fourth quarter, a trend that it expects to persist into at least the first quarter of 2009.

Chief Executive Officer Ian Morris said while it’s been difficult to attract new customers during the current economic downturn, Market Leader is well positioned for growth when a recovery begins. He said the company expects new products designed to help agents generate their own leads will generate higher customer retention and value than the HouseValues products that currently generate most of the company’s revenue.

Cost-cutting measures allowed the company generate $1.6 million in positive cash flow in operations during 2008, even as revenue slipped from $59.8 million in 2007 to $38.4 million.

The company kicked off 2008 with a 20 percent staff reduction, laying off about 45 employees. That move followed the July 2007 closure of a satellite sales and service center in Yakima, Wash., in which 100 workers lost their jobs.

Market Leader continues to shed jobs, although at a slower pace. The current headcount of 152 employees is down from 160 at the end of the year and 167 employees at the end of September.

Morris said one bright spot for the company at the tail end of 2008 has been the warm reception by customers to a new platform that allows agents to generate and manage their own leads using custom Web sites that Market Leader builds and then drives traffic to.

The Vision contact management platform is built on a system originally designed for real estate brokers, RealtyGenerator, which Market Leader purchased in November 2007 for $10.2 million.

Market Leader spent much of 2008 updating RealtyGenerator and retooling it for agents, Morris said, launching the applications Growth Leader for individual agents and Team Leader for agent teams during the fourth quarter.

Morris did not have hard numbers, but said agents are reporting success with Growth Leader.

"We’re really bullish about what we’re seeing," he said. "I’ve been very happy, and I have to say so far the customer success we’re seeing exceeds anything we’ve seen with past products at this company, and exceeds our bullish expectations going in."

The bulk of Market Leader’s revenue still comes from agents who subscribe to the company’s HouseValues and JustListed products, which rely on leads generated by Market Leader’s stable of Web sites.

But Morris said products based on the Vision contact management platform, including Growth Leader and Team Leader, are expected to supplant those products as the company’s biggest revenue generators. For now, he said, one limitation is that the company can offer Growth Leader only in markets where it has relationships with multiple listing services (MLSs).

While Growth Leader is available in most major markets, the company is "adding new MLSs every day," Morris said. "It is safe to say that … throughout 2009 you will see the focus of our teams — sales, technology and elsewhere — be on those Vision-based products."

But Market Leader will continue to sell and support its HouseValues and JustListed products. About 40 percent of HouseValues customers have been subscribers for two years or more, Morris said, "and we will support those customers and add new ones wherever it makes sense for the customer and is profitable for us to do so."

Morris said Market Leader was able to reduce customer "churn" by 21 percent in 2008 compared to 2007 –a testament to the important role the company’s services perform for clients.

The 92.2 percent monthly customer retention rate during the fourth quarter was the worst seen in 2008, said Chief Financial Officer Jacqueline Davidson. But it still represented an improvement over all four quarters of 2007, when the company began the year with a 90.3 percent monthly customer retention rate.

Although Market Leader has improved its ability to keep existing customers, it’s had a harder time signing new ones up.

The company reported more than 15,000 real estate professionals as subscribers in the first quarter of 2007 — a number that’s declined every quarter since. During the fourth quarter, Market Leader signed on just 683 customers, while 1,819 cancelled, leaving the company with 7,245 subscribers at the end of the year, Davidson said.

Revenue per customer has also been in steady decline, from $389 a month in the first quarter of 2007 to $330 per client during the fourth quarter.

Davidson said one reason for the decline is that Market Leader has been willing to swing deals with existing clients who must cut costs.

"We continue to focus on finding solutions for customers who want to keep their Market Leader services, but may need to temporarily reduce their marketing expenses due to financial pressures," Davidson said. "We believe this customer retention focus may continue to place some downward pressure on average revenue per customer in the near term."

***

What’s your opinion? Leave your comments below or send a letter to the editor.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Success!
Thank you for subscribing to Morning Headlines.
Back to top