Web 3.0 and Real Estate: Overview

So, you thought realty was all about buying / renting a new house and moving in? Think again. It’s a $3 billion online industry and is said to give a whole new dimension to the property business. In this series, we will evaluate the online real estate category against the Web 3.0 framework.

Real estate sites furnish information on buying/selling of apartments, houses or commercial properties, mortgage rates, local contractors and movers, etc. and have moved a step ahead of newspapers or agents. According to Borrell Associates “the proliferation of free listings sites on the Internet portends a collapse in the $6 billion print classifieds business, especially with the vast majority of home seekers now using the Internet to find a home.”

Real estate ads are definitely moving to the Internet. The $11.6 billion real estate ad market is experiencing a shift from print to the Internet and newspapers are shifting their focus to the Internet to retain their classified ads. A study by the National Association of Realtors (NAR) shows that more than 70 percent of buyers begin their search for a house on the Internet on sites like Realtor, Rent.com, Yahoo! Real Estate, etc.

Ad spending on online realty sites rose from 11.3% in 2005 to 11.9% in 2006. Real estate sites are attracting significant Internet traffic and pulling advertising dollars from newspapers. New age sites like Trulia and Zillow are slowly but steadily pulling traffic from newspaper sites with their innovative offerings and value added services.

The yet untapped opportunity in online advertising lies in the fact that 61% of the real estate agents do not advertise on the Internet and 87% of the agents do not buy keywords on Yahoo or Google or MSN.

The New York Times Co. has launched two vertical content sites for the real estate market targeting luxury home listings and the mortgage process. Great Homes contains a searchable database of more than 30,000 along with lifestyle guide, videos, slide shows, etc. Home Finance Center focuses on mortgage process, containing tools like mortgage and home equity charts from Bankrate.com.

Realtor.com is the leading realty site with 8.78% market share. RealtyTrac with 3.73% market share holds the second place. Below is a list of the Top 20 sites in the Real Estate sector based on visits.

Real estate sites are making a gradual shift from mass to niche. There are sites, which cater to specialized needs of home buyers. Roomster, for example is fast growing as a niche for the college goers who would like to share apartments with like-minded roommates. Loopnet is an online marketplace for commercial properties for sale or lease. Loopnet doesn’t charge any commission on any sale that occurs through its site, only listing charges via a subscription fee.

Most real estate sites are rich in contextual content. Apart from usual buying, selling or renting databases, these contain information on mortgage rates and quotes from lenders, movers, home loans and insurance. ZipRealty has tools like Price your House that helps users set price for their houses. Again, sites like Zillow has a Home Q&A section, which allows home seekers to interact with land or apartment owners.

Real estate sites earn money mainly through advertisements and commission on property transaction services. According to Borrell Associates, online ad spending on realty sites is forecasted to reach 32.1% of overall Real Estate ads in 2010 from the current 17.7%. Real estate sites contribute to 13.1% of search advertisements through Google Base.

According to comScore, total Internet audience for real estate sites grew by 15% from 34.79 million unique visitors in January 2006 to 39.85 million unique visitors in January 2007.

Meanwhile, major new media companies like Google, Yahoo and MSN and old media companies including newspapers are likely to play a significant role in the online realty business. Yahoo! already has its own Real Estate site and the others may look at expanding their presence in this vertical by acquiring some of the smaller players. Also, large real estate companies like Coldwell Banker may choose to participate in some M&A in the segment.

This segment is a part in the series : Web 3.0 and Real Estate