SAN FRANCISCO–A young Barry Diller had his first taste of real estate from the seat of a bulldozer, knocking down homes and buildings situated on the Southern California land his family bought and developed in the 1940s.
Diller’s business entrance into the real estate industry last year with the purchase of LendingTree was almost as loud, but not nearly as destructive. The entertainment veteran who recently graced the cover of Fortune magazine and who casually talks about his good friend Jack Nicholson, spoke to a packed audience today during Inman News’ Real Estate Connect 2004.
For Diller, this was a return to the city where he was born. But the faces in real estate are still somewhat unfamiliar to him. Diller’s company InterActiveCorp is known for its operating brands Ticketmaster, Expedia, Hotwire, CitySearch, Hotels.com and Match.com, to name a few. In addition to LendingTree, some of the company’s real estate brands include RealEstate.com and ServiceMagic.
When Diller put his hands into real estate last year, half the industry was excited by the prospects of what could happen when his Internet expertise meshed with a traditional, fragmented business. The other half was scared stiff.
“I don’t get it,” Diller said.
The fears that real estate brokers and agents have about his company somehow dislodging them from the business are puzzling to Diller. He said his corporation is in the business of attracting consumers to those very agents. Consumers want information and Internet companies aggregate that information and distribute it in an efficient way.
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That distribution is no different than movie production crews and film distribution companies who get the actor from the set onto the screen in people’s local movie theaters or homes. Taking that away is like asking Jack Nicholson to sit in people’s living rooms and act out a film, according to Diller.
Traditional industry players have stirred controversy around Diller, saying his well-capitalized corporation wants nothing more than to come in and take a piece of the billions of dollars of annual real estate commissions.
To that, Diller said, “If you’re talking about revenue, the answer is yes,” the company is definitely after profits. “But for people to say we’re going to disintermediate the real estate agent, no…without them, we don’t make money.”
LendingTree founder and CEO Doug Lebda defended the company’s referral-fee business model, saying that model puts risk on the company, not the agents. Lebda joined Diller and Inman News Publisher Bradley Inman in a question-and-answer segment during the conference.
“It’s interesting to hear people attack that business model because we take all the risk,” he said. LendingTree delivers consumers to agents, but only gets paid when the transaction closes. Sometimes, the consumer takes up to nine months to close a deal.
Diller said earlier in the discussion that he only goes after what strikes curiosity in him or what interests him. One audience member asked Diller what his fascination was with real estate since he’s obviously been engaging his corporation in the business more deeply.
Diller said his company’s main interest lies in business channels online. He said real estate also is interesting to him because it’s such a huge industry, and nearly all people are engaged in home buying at some point in their lives. And real estate is a somewhat late-developing industry.
“There are lots of services we can provide in real estate,” Diller said.
With InterActiveCorp’s purchase of ServiceMagic, Diller talked a little about integrating the local home services segment of the business into the company’s CitySearch site, which currently provides mainly restaurant and entertainment information about cities nationwide. He said in some instances, such as this one, cross-pollinating brands or Web sites works. But he’s not interested in forcing that relationship with all of his companies.
One audience member equated what Diller’s online companies are doing now for the real estate industry to what the franchises previously had done.
Another audience member, a broker from Bellevue, Wash., stood up and said LendingTree is the slingshot he needs to compete against the regional brand giants that are in his backyard.
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