Richard Boyle is on a quest to draw more brokers, investors and tenants into the bustling online real estate marketplace known as LoopNet (NASDAQ: LOOP). His 10-year-old company, which raised $72 million in its June IPO, now boasts one of the largest online listing databases for commercial real estate. Shares hit the market at $12 per unit and hit nearly $20 in early July. But during early morning trading today, LOOP shares were hovering around $10.70 (below their offering price).
With $335 billion in commercial real estate listings, LoopNet’s total number of registered members reached 1.4 million at midyear in a 57% increase over the midyear 2005 level. LoopNet president and CEO Boyle recently spoke with NREI technology editor Parke Chapman on how LoopNet is leveraging its IPO to fund new technologies and lure more real estate players into the digital fold.
NREI: LoopNet has spent the past 10 years as a private firm. What drove the decision to go public?
Boyle: We felt like being a public company would help us establish our next wave of growth, plus allow us to build the overall listings service. The IPO will also help us invest in ways to integrate many new services into our technology platform. The company was already growing before we went public, of course, but this will speed the process up.
NREI: Tell us what new technologies you are developing and how they will help your clients use LoopNet.
Boyle: Our new map search tools are really cool. Most of this stuff is still in Beta, but we believe this is state of the art. What we’ve done is similar to Google Earth, which provides detailed map images of the entire planet, and we’ve integrated it into our listings service. The idea is that you can call up a map and overlay listings on the map to see the properties in an aerial fashion. We think this is light years ahead of what’s being done in the commercial real estate space now. We expect to release this technology later this year.
We’re also very proud of our RecentSales service, which we launched in March. This service allows our clients to get the most-up-to-date information on more than 425,000 properties that have been bought or sold recently. We’re growing that number, too. Our clients were asking us for this comps service, so we’re happy to offer it. With RecentSales, too, we can get key transaction data onto the site as soon as 15 days after the deal has closed.
NREI: You've called LoopNet a "search engine for commercial real estate." Can you elaborate on that?
Boyle: We now have the tools to index and aggregate data on so many different properties that all a user needs to do is punch in a name. Let's say they are looking to buy a Rite-Aid [drug store]. They will see thousands of Rite-Aids for sale across the country if they just punch in those search terms.
NREI: Many in the industry view LoopNet and CoStar Group as competitors. Do you agree? And if so, how do you compete against such a giant firm?
Boyle: First, we believe that the IPO puts us in a good position to raise our profile and fuel our growth. That said, we have a very different model than CoStar. It’s more of a marketplace model. We're providing a forum for buyers and sellers of commercial real estate. We are not a research and analytics company at the end of the day. [CoStar] describes itself as similar to a Bloomberg terminal but we are more of a marketplace company. We view our primary competition as people who are still operating in the offline world and marketing properties there.
NREI: To that end, how many commercial real estate folks are still offline, as you say?
Boyle: A lot. I saw a study by media research firm Borrell Associates recently that found that more than 60% of residential real estate agents do not yet market their properties on line. And the residential brokers are far more aggressive at adopting technology than the commercial guys. So you have to figure that plenty of commercial real estate agents and investors aren’t using the Internet to market or search for properties. We believe that when these transaction participants discover each other, they will have to go deep and get more information in the offline world and visit the building personally
NREI: Are you incorporating advertising into your revenue model?
Boyle: We are experimenting with some new advertising services similar to the Google model. Depending on what people are searching for, we can change the ads to become targeted advertising spots. But 80% of our revenues are derived from premium membership [the monthly fee paid by an individual agency or professional]. Advertising is very small part of the revenues now but we’ve had great demand by advertisers asking us to do more.
NREI: With the volume of commercial real estate transactions still brisk, are you concerned that the inevitable slowdown will sap demand for LoopNet’s services?
Boyle: I don’t think a slowdown will fundamentally affect our business model. We saw a slowdown after the dot-com bust. Even in a down market, businesses are advertising properties that are available for sale and lease.
NREI: Are Google and Microsoft breathing down your neck? There are rumors that both companies are eying the real estate listings side of the business.
Boyle: It’s true that some of the big players [like Google and Microsoft] have announced plans to develop broad, generic classified services. But they haven’t gotten any traction on the real estate side. It’s a lack of focus on their part. But, if Google made an announcement that they wanted to get into this business, they would be a formidable competitor. We do have resources to turn to, but a company of that magnitude has a lot of resources.