Tuesday, June 06, 2006

MOVE: Renovating Itself For Success.

Move (MOVE-$5.50), the world's largest moving community, provides home buyers and renters with the real estate content, decision support tools and professional connections they need before, during and after a move.

REALTOR.com, the Company’s flagship site and the official site of the National Association of REALTORS, is the No. 1 consumer destination for real estate related information with more than 6.5 million monthly unique users.

Welcome Wagon has been introducing homeowners to their new communities for more than 78 years. The home visits stopped in 1998 as an increase in two-income families meant fewer people were home to accept visits. Welcome Wagon began greeting new homebuyers through the mail with a gift of an attractive, customized gift book, and is now beta-testing a website. The welcome gift book contains a customized neighborhood address book with exclusive merchant advertiser listings as well as coupons and special offers from local advertisers.

Move is also a leading supplier of media and technology solutions for real estate professionals, local and national advertisers, and providers of home and real estate-related products and services. TOP PRODUCER’s flagship 7i product is the No. 1 contact management software for real estate agents, and The Enterprise offers brokerages custom Web and video production services as well as interactive voice response systems.

Corporate is working to brand “Move” as an essential consumer resource and the premier venue for property owners and brokers to advertise. In our opinion, through infrastructure initiatives, the Company is tracking well and is on its way to enhance shareholder value.

Corporate initiatives fall into three closely related categories:

1. Consumer content enhancements.
2. New, easily scalable business models
3. Integrated brand marketing to extend traffic advantage

Falling into the first category is Move.com, a comprehensive (vertical) real estate search engine that enables consumers to view more than 3 million property listings (with exclusive access) available to REALTOR.com.

Launched last month, Move.com, according to management, also offers a dramatically expanded listings experience for new homes and apartments with over 850,000 new home and rental listings; five times the number of listings previously available on the erstwhile proprietary RENTNET and HomeBuilder.com sites.

On the Company’s 1Q:06 conference call, corporate said: “Our previous sites for newly built homes and apartments, HomeBuilder.com and RENTNET, use the content strategy we refer to as paid inclusion. The listings database was composed entirely of listings that homebuilders or apartment managers paid to advertise. In contrast, the Move.com strategy aggregates as much free content as possible from all over the Internet to provide consumers with the most listings possible in one place. Furthermore, many of these listings are now at the unit level, meaning consumers can see individual home plans and apartments, not just subdivisions and apartment complexes.”

Rather than simply indexing properties, the Company will continue to roll out new content-rich functionality over the next couple of months, including personalization features and self-service postings. For example, Move will be introducing a featured CMA, or Comparative Market Analysis, which enables realtors to provide consumers with home valuation and other important advice. This solution will enable the Company to fully leverage its Realtor.com traffic in answering the consumer question, “What’s my home worth?”

The second group of initiatives, which focuses on scalability, is designed to offer customers opportunities for more targeted and flexible marketing. To enable different marketing solutions for different market conditions, Move will offer its customers both subscription-based and performance-based marketing solutions including cost-per-click, cost-per-lead and CPM-based opportunities. Incorporating performance-based business models into the revenue mix also provides the ability to scale revenue with traffic levels, so that the Company can better monetize increases in site traffic.

The company is also developing a real-time auction-based bidding system, (similar to those found on Yahoo!) where the featured listings will be ranked by relevance and bid price. Additionally, the Move.com engine will carry third-party sponsored links in the right rail alongside the slotted results.

The final group of initiatives relates to introducing Move as an integral resource for connecting consumers with the solutions they need before, during and after a move—ideally, however, at the earliest stages of property searches. The first step in this process involves expanding consumer awareness of the Company’s offerings. Move has already integrated Move.com with its existing traffic partners including AOL, MSN and Yahoo!.

Next, corporate is planning to target new traffic sources for integration of the Company’s listings experience (by introducing its new scalable revenue models).

According to the recently filed 10Q for the 1Q:06, seventy percent of revenue was generated by real-estate services, consisting of a variety of advertising and software services.

Barriers to entry are low, and Move competes with a variety of online companies and web sites providing real estate content that sell classified advertising opportunities to real estate professionals; and companies that also sell display advertising opportunities to other advertisers, including real estate professionals, seeking to reach consumers interested in products and services related to the home and real estate.

We believe, however, that the Company’s nationally recognized brands, such as Realtor.com and The Welcome Wagon, help to differentiate its online content from the competition (specifically online real-estate search engines), like Zillow.com, RealEstate.com, ForSaleByOwner.com, and Trulia.com.

A softening real-estate market does not equate to a moribund one. In the US each year 100 million consumers go online to look at real estate—more than 1 in 3 Americans. Move is renovating itself to be a dominant player in this market.

As in most companies we follow, the 10Q Detective did unearth some insider avarice: Chief Executive Officer W. Michael Long’s employment agreement calls for the Company to provide residential accommodations to Mr. Long with a budget of $5,000 per month. Additionally, Move reimburses Mr. Long the fixed operating costs and ‘reasonable’ business related variable operating costs of an airplane indirectly owned by him; Mr. Long was reimbursed approximately $1.68 million for the use of this airplane in 2005.

Coming to his defense [a rarity for the 10Q Detective], when the stock was selling for pennies, Mr. Long did lead the Company out from under an accounting scandal that threatened to bury the Company.

Smart money has invested in this stock: Fidelity Management beneficially owns 22.2 million shares, or 14.7%; technology guru (and Board member), Roger B. McNamee and his venture capital firm, Elevation Partners, own a (combined) stake of 48.5 million shares, or 27.8%; legendary Internet VC, L. John Doerr, owns a 2.9% stake (and sits on the Board of Directors); and the National Association of REALTORS owns a 2.6% share.

Think about following the smart money crowd in on this stock.


Wcw said...

I dunno. I can think of three reasons not to play follow-the-leader here. One, housing is easing. Two, housing is easing. And three, housing is easing.

Real-estate services are 70+% of MOVE's business. If the hot-hot-hot market that generates the bulk of their revenues continues to ease, then no matter how well they execute they're swimming upstream.

Here is the smart money I would follow (if I could; I don't have an $.39-strike calls).

FD: no position in MOVE. I am short a couple of homebuilders.

David J. Phillips said...


The slowdown in the housing market is already reflected in the current prices of publicly traded houding / construction firms -- I applaud you if you made money in these industry companies.

I believe a contrary bullish argument can be made for MOVE in a soft retail housing market--REALTORS TEND TO INCREASE ADV>NOT DECREASE to compete for potential customers.

Thank you for the feedback.

Wcw said...

No dispute with your logic. I put MOVE on my screens to follow during the ongoing shakeout, since like you I think they have a good business plan. I just can't see going long just now. What can I say -- I know better, but I time anyway.

And thanks; the homebuilder shorts have been very good to me. I believe those were 90% luck and at most 10% insight, but you don't look a gift horse in the mouth.