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By Rosalind Resnick

When you're a hammer (or, in my case, a direct marketer), everything looks like a nail.

That's why, at the risk of oversimplifying a complex and much-debated topic, I think it's safe to sum up the Internet's underlying business model in two words: Lead Generation.

Whether it's Google selling clicks for 50 cents a pop or co-reg sites that peddle completed credit card apps for $50 per completed form, the name of the game on the Net is putting buyers and sellers together and making the spread between how much you pay to drive traffic to your site and how much your advertisers are willing to pay you for it. The closer you come to bringing your advertisers an actual sale the more money you stand to make –but the more risk you take that the users that you try to bring to your site will surf away without putting any advertising dollars in your pocket.

Recently, I attended an iBreakfast seminar in New York entitled The eReal Estate Boom. It was hosted by the technology impresario Alan Brody and featured a panel that included Amy Bohutinsky of Zillow.com, Dan Parisi of House.com, LaLa Wang of MLX.com and Jack Petrie of CRESA Partners. While the topic wasn't lead generation per se, the Q&A after the PowerPoint presentations turned into a lively debate on the respective merits of the business models that each of these real estate sites pursues.

While the ostensible mission of both Zillow and House is to provide free information to consumers looking for a home, the way the sites make money is to drive traffic to their sites and sell advertising against their user base. Zillow.com, launched in February by a co-founder of the Expedia online reservations service with $32 million in venture capital, has aggregated data on more than 60 million U.S. homes, providing Web surfers with free, instant "zestimates" of their homes' value.

According to Bohutinsky, the company's communications director, Zillow plans to sell ads, not leads, and has already signed up more than 50 advertisers, including such non-real estate companies as Monster.com, the popular jobs site. Because all real estate is essentially local, advertisers will be able to target their messages by neighborhood and zip code.

House.com, by contrast, is a pure lead generation site that makes its money driving consumers to its site to fill out information-request forms, then selling those leads to real estate agents for $50 a pop. According to Parisi, who's been doing this since 2004, buying leads as opposed to ads gives real estate agents "something to show at the end of the month." If an agent can close 1 in 15 of the leads that he buys from House.com, he should be able to more than cover his costs through the commissions that he earns, Parisi says. (That said, Parisi says he's also planning to launch a site similar to Zillow's and may start selling clicks in addition to leads.)

So, who's got the winning business model–Zillow or House? Advertising or lead generation?

Ironically, the answer could be neither. One seminar attendee shot up her hand and told both executives that she uses Craig's List, the free/low-cost online classifieds service that has now spread nationwide, to find homes that are not listed by a brokers so that she can negotiate a better deal directly with the owner. After the damage that Craig's List has done to the newspaper industry, is the real estate business the next to go? Given that most people like real estate brokers about as much as they like journalists, the 6 percent real estate commission seems headed for a fall. And what happens then to the value of an ad, click or lead to an agent who's struggling to survive at increasingly lower commission rates? Do the math.

Personally, I think that there's always going to be a need for real estate agents to help people buy and sell houses–especially now that the real estate market is beginning to cool. But, if home sales decline and buyers and sellers can post prices and strike deals on their own, sites like Zillow and House that sell to the real estate industry will have to work harder to create value for their advertisers–no matter how that advertising is sold.

Rosaline Resnick is the Founder and President of Axxess Business Centers.
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