Partnering With For-Profits: Homestore.com

By Steven M. Worth, President at Plexus Consulting Group, LLC

To write a successful screenplay, you’ve got to pull all of the obvious elements together: plot, setting, characters. To add richness to the story, you’ve got to get inside the characters. To do that, you’ve got to know where they’re coming from… you need to know the backstory.
In today’s rapidly changing economic setting — where the boundaries between companies, associations, and foundations are ever more difficult to discern — it helps to know the backstory as well. A perfect example is the connection between Homestore.com, Inc. and its primary partner, the National Association of Realtors, and other strategic partners, including the National Association of Home Builders, the Manufactured Housing Institute, and the American Institute of Architects.

About Homestore.com
Homestore.com, Inc., a publicly traded company (NASDAQ: HOMS) is the leading network of sites on the Internet for home and real estate-related information, products, and services.

Homestore.com, Inc.’s family of Web sites includes:

• Realtor.com® where consumers can view more than 1.3 million new and existing homesfor sale and find broker and agent services.
• HomeBuilder.com™ where consumers searching for new homes can find more than130,000 models, new homes, and built to suit plans.

What makes these facts remarkable is that Realtor.com® is the official Internet site of the National Association of Realtors (NAR) and HomeBuilder.com™, is the official new homes site of the National Association of Home Builders (NAHB). What is even more remarkable is that in the first quarter of 2000 Homestore.com, Inc. also announced:

• An agreement with the Manufactured Housing Institute (MHI) to host and maintain a consumer Web site for the association.
• Its intention to help NAR build the REALTORS® Electronic Transaction Platform, an online system which will integrate the essential steps in the process of buying a home over the Internet.
• A strategic agreement with the American Institute of Architects (AIA) permitting visitors to www.homestore.com to find AIA member architects in their local area.
• A 20-year extension of its alliance with the NAHB.

This is clearly a company that’s going places… But, equally as interesting is where it came from.

So, here’s the backstory:

Homestore.com — Brainchild of the Realtors
Before the Internet was even a glimmer in a geek’s eye, real estate brokers across the country invested millions in the Multiple Listing Service (MLS) system. Participants in local MLS systems set the standards for an orderly residential real estate marketplace by placing listings on the service and limiting access to industry professionals only.

By 1994, the first real estate listings were becoming available on the Internet. Intuitively, the NAR leadership knew that the Internet would not replace the knowledge, efficiency, sophistication, expertise, and personal contacts that make a professional real estate agent so invaluable to his or her customers. What the association did fear, with a great deal of justification, is that real estate customers would lose access to the expertise of its members, placing consumers at the mercy of individuals and companies who build and promote Web sites, not serve real estate customers directly.

Clearly, making listings available around the World Wide Web was a frontal assault on the priceless data that the real estate industry had laboriously accumulated through the MLS systems. The NAR decided to meet this challenge head-on. In 1994, to keep its members at the center of the transaction, the NAR created a wholly owned subsidiary, the Realtor Information Network (RIN), which represented a pioneering attempt to create a single, electronic network linking MLS systems nationwide.

However, like many others, RIN did not anticipate the true potential of the Internet. It attempted to duplicate the MLS model on a proprietary system by limiting both input of listings and output to industry professionals. RIN’s competitors, on the other hand, made information available for homebuyers to peruse from their desktops. By the spring of 1996, it was clear that private sector competitors with deeper pockets, greater technical expertise, and a broader vision were overtaking RIN.

By June 1996, NAR had invested nearly $17 million in RIN. The association’s members said, "Enough is enough." The membership demanded that no more money be spent on what appeared to be a bottomless pit. At that point, the NAR leadership could have surrendered the playing field to for-profit companies with the deep pockets capable of sustaining losses as large or larger than RIN’s for years to come. However, to surrender would mean loss of control over the channels of information that had built the profession. Instead, NAR decided to close down RIN and find an entirely new way to tackle the problem.

In December 1996, the NAR entered into an agreement with two large East Coast venture capital firms and one of RIN’s former vendors to create a new company to serve as the operator of the NAR Web site, Realtor.com® and its then 500,000 listings. The new companies are known today as RealSelect and Homestore.com, Inc., its parent. Now in its fourth year, the revitalized Realtor.com® is the one-stop virtual shopping site for homebuyers and sellers. And, it is going gangbusters.

Realtor.com® is accessible to anyone with access to the Internet, but because NAR owns and controls Realtor.com®, the association retains control over the use and presentation of property ads. Property data or information derived from the site can’t be marketed to any other entities. Basic property ads, which include a photo, are free to REALTORS® for life. With NAR’s backing, Realtor.com® negotiated additional contracts with MLS boards, brokers, and agents to list their properties on the Realtor.com® site.

Others shared the NAR’s vision. They understood that this was nothing less than a race to build not only the primary real estate site, but also one that would continue to dominate when the inevitable shakeout occurs. From the RIN experience, NAR learned that e-commerce works like a poker game in which the players capable of raising the stakes high enough will never lose because competitors will simply have to fold.

Start-up funding for RealSelect came from the REALTORS®, with a small investment from Allen & Company and Whitney Equity Partners, venture capitalists. The total capitalization was $7 million, with 10 employees at the beginning of 1997. Since its formation, RealSelect has attracted such notable investors as John Doerr of Kleiner Perkins Caufield & Byers, General Electric Capital, the National Association of Home Builders, and Fannie Mae.

As NAR developed Realtor.com® further, they sought to do more than reach committed homebuyers and sellers. They wanted to create a site that would bring people into the home buying process. Thus, NAR worked with Homestore.com to develop additional sites for homebuilders, apartment owners, interior design firms, and home remodeling and repair operations. This was done through a number of acquisitions and strategic alliances.

In August 1999, when Homestore.com went public, the partnership brought NAR access to millions of dollars of capital that no nonprofit organization, no matter how large, has been able to match. As of April 5, 2000, Homestore’s market capitalization is about $3 billion and the
company has more than 1,000 employees. NAR’s 15 percent equity stake in Homestore is worth nearly $300 million, a handsome recovery from the $17 million investment in RIN.

In just three years, NAR has moved at "Internet speed" to assure that its members remain as the first point of contact for buyers and sellers. Today, Realtor.com® is by far the leading real estate site on the Internet. The site carries 1.3 million listings — 90 percent of the estimated number of homes for sale in the United States and twice as many as its closest competitor, Microsoft’s HomeAdvisor.

In terms of traffic, Realtor.com® delivers more traffic than the next five home listing sites combined, and research shows the gap is widening. The six million monthly visitors to the Realtor.com® site stay longer and learn more than at competitors’ sites. Exclusive distribution agreements with America Online, @Home, Excite, and Go Network/Infoseek drive traffic to the site.

Other Associations Follow the REALTORS® Lead
Nothing begets success like success. In 1997, Homestore.com and the National Association of Home Builders began discussions about creating a Web site for new home listings. A partnership agreement was signed in June 1998 and the new homes site, Homebuilder.com was officially launched in September of that year. More recently, the Manufactured Housing Institute and the American Institute of Architects have also come on board.

Jay Shackford of NAHB says, "We thought about our own consumer-focused Internet site. However, even an organization as strong as ours didn’t have the financial wherewithal, technical capabilities, organization, and staff to go it alone. We needed a strategic partner and we were delighted when the Homestore.com opportunity materialized."

Michael O’Brien of MHI echoes Shackford, describing his association’s decision: "Nonprofit associations simply don’t have the marketing muscle to access millions of consumers the way a for-profit company like Homestore.com can. The startup expenses and manpower costs are truly prohibitive." O’Brien went on to note that the strong ties between Homestore.com, NAR, and NAHB were factors in their partnering decision. "They had a well-established track record, and we saw this as a clear win-win situation for the MHI membership."

O’Brien sums up the situation succinctly: "Dot-coms cannot supplant the myriad services that trade associations offer their members. But, associations that don’t embrace emerging technologies could find themselves seriously undermined. The association that leads, rather than follows, is the one that best serves the interests of its membership."

Money

By Steven M. Worth, President at Plexus Consulting Group, LLC

Vital Statistics
The desire to focus on “doing good” is a motivating factor that draws many people into association work—and that is clearly a strength; but association executives would do well also to realize that there is nothing crass in using money as a way to measure effectiveness— namely:

• Know that flat or declining revenues may be a sign that something is fundamentally wrong with your program, product or service. This is a warning bell--an indication that a thorough audit is needed of your marketplace, including: a customer satisfaction survey; benchmarking against the competition (if you do not know who your competition is, then that is another problem!); and a trend analysis of the needs of your target market(s).

• Understand that profitability is a measure of efficacy. If your revenues are rising but so are your losses, then either your programs are being mismanaged or your pricing is wrong. In such a situation market success in the form of increased sales can actually destroy your organization if it is not efficiently structured. 

• Know that customers expect to get what they pay for. People the world over are prepared to pay for quality and inherently question the value of anything they are offered for free or at low cost. This is particularly true the more things are critical to us. What person needing heart surgery will feel entirely comfortable going into an operating room knowing their surgeon was the least expensive that could be found? Focus on quality and price your product or service accordingly—this is what your customers expect. 

An association’s role may not be “just to make money,” but money does serve as a good tool by which to measure quality, effectiveness and efficacy. Such thinking has always been part of for-profit management; and if nonprofits are to hold their own in this increasingly competitive environment they will do well to adopt it! Do you agree?

Business and Professional Women’s Foundation

By Steven M. Worth, President at Plexus Consulting Group, LLC

Vital Statistics
The Business and Professional Women’s (BPW) Foundation, which was founded in the 1960’s as a sister organization to BPW/USA, aims to create successful workplaces by focusing on issues that impact women, families, and employers. From advocating for various legislations to aiding job seekers in finding their ideal careers, BPWF is a leader in the advancement of female participation in the workforce. Successful Workplaces are those that embrace and practice diversity, equity and work-life balance. BPWF aspires to form arenas that recognize the diverse needs of working women, communities, and businesses. Through its groundbreaking research and unique role as a neutral convener of employers and employees, BPW Foundation strives to redefine today’s workplace. Aside from their Successful Workplaces, BPWF also hosts a number of other initiatives.

Their Young Careerist research product, which targets those between the ages of 21-35, provides information on the challenges and unique opportunities that Generation X and Millennial members of the workforce face. Through their research, they support workplace policy and workforce development programs that bridge the generations for young careerists and their colleagues. Further, by encouraging women to work in Green jobs through their Green/Sustainability commitment, BPWF also promotes environmentally friendly positions. As women are underrepresented in green sector jobs, BPWF’s efforts are meant to train, recruit, and retain women for the sustainable jobs of the future.

Finally, in their Women Joining Forces initiative, BPWF provides research and resources to help women transition from a military background into civilian lives and careers. BPW Foundation's Women Veterans in Transition research project educates veterans and employers on the support necessary for a successful re-entry into the workforce, discussing issues topics such as pay equity, paid sick leave, health care, and continuing education.

The Challenge
Despite BPW/USA’s inspiring vision, they faced problems such as declining membership—10% over the last 20 years. Hit by the economic downturn, the sustainability of programming was threatened, and contributions and other giving-related revenue also decreased.

Through our efforts, Plexus Consulting Group aimed to find a revenue-generating solution that would allow BPW Foundation to continue its programming in the areas of transitioning women in the military into the workforce, creating successful workplaces, developing a green jobs initiative, and working with Generation X and Millennial members of the workforce. Plexus’ goal was to find alternative sources of funding to support programming through grants and corporate sponsorship; thereby providing more diversified sources of revenue for BPW Foundation.

In order to achieve this, Plexus Consulting Group’s Senior Advisors developed relationships with government and corporate sponsorship and grant opportunities—including BRAC (Base Reduction and Closure -- referring to military bases). Further, the BPW Foundation Board Chair also used connections to open the door for discussions with Walmart Foundation. After applications and a full proposal were submitted and all subjects were interviewed, the Plexus plan was implemented meticulously and generated remarkable results.

Measurement & Results
As a result of the work of the Plexus team, the programming and work in workforce development strengthened the name of BPW Foundation and branded the organization as a leader in creating equity and work-life balance for all women. Financially, the initiative successfully achieved the first grant of $400,000 from Walmart Foundation to support the furthered success of BPW/USA. Grant funding initiatives continue for BPW Foundation as Plexus focuses on other avenues of opportunity and also supporting BPW Foundation through the implementation of programming resulting from the Walmart Foundation grant.

Accreditation—is it really necessary?

By Steven M. Worth, President at Plexus Consulting Group, LLC

Credentialing programs can provide a foundation through which an association can brand itself in an industry—among members and non-members as well as companies that operate in related industries. Recently, Plexus Consulting Group sat down with one of its senior advisors and resident experts on developing accreditation programs, Dr. Sharon Goldsmith, to learn about the benefits of providing an accreditation program. Dr. Goldsmith gave us her first-hand experience on how credentialing programs can be beneficial to an organization.

“Accreditation always improves the quality of what an organization does.” She told us that at the conclusion of her engagements developing credentialing programs with organizations, organizations always indicate these programs help them as a marketing tool, but in the end it really has made them a better organization.

“The main thing is that credentialing programs can be the biggest source of revenue for the organization,” according to Dr. Goldsmith. She defines credentialing as “…a way to run a particular facility. It helps raise the level of quality in an industry by defining the competence of the company.” With credentialing, a company can provide high quality services to its customers without reservation. “It has a public good aspect in that it help individuals and organizations improve themselves.” Through accreditation programs, organizations and individuals can gain the necessary skills they need to become an industry expert. Having an industry-related accreditation “…helps the public make informed decisions on the legitimacy of the professionals.” Dr. Goldsmith points out that even in daily life consumers want to know they are being helped by experts they can trust. “For example, when trying to pick the best physician to go to, which plumber to hire, or other service choices, consumers want to know they can rely on the professional they choose.”

The programs that organizations have implemented take hard work and dedication to become successful. What steps are necessary in order to build a successful credentialing program? “The first thing they have to do is determine if their stakeholders want this what will make it a more valuable program, what will make it a less valuable program?” Dr. Goldsmith enforced that marketing research was the key aspect of creating a successful program. “Marketing, marketing, marketing! With a detailed feasibility study the organization can establish whether or not this is what people want.” Dr. Goldsmith told us that many organizations tend to make the mistake of initiating a program and working out all the details, only later to discover there is a lack of interest. Marketing the idea and conducting surveys to see if a program will be advantageous to an organization can avoid an inefficient use of company resources.

Individuals, as much as organizations, can gain much by obtaining an industry certification. It works as a resume builder, “serving as third party recognition.” Currently, many companies require certification for employees they hire or promote. Dr. Goldsmith says that “certification can help an individual getting a job or trying to advance in their career.” To determine which certifications are the most beneficial to career advancement, one should begin by speaking to potential employers in one’s chosen field and understanding what criteria an employer looks for in a successful candidate. This will eliminate the accreditation programs that are not a match to an employer’s needs and will narrow the job seeker’s search for accreditation programs.

With recent growth in the “green” industry, Dr. Goldsmith indicated there were new certifications and accreditations related to the environment and creation of new jobs and a green workforce. “There are hundreds of them, literally hundreds, that are being created for organizations- from people that are manufacturing materials, homes (construction), trade and green buildings.” Most programs are related to carbon emission. The “green” industry is a rapidly growing sector in the workforce, and Dr. Goldsmith points out that being a new field, these accreditations need to go through lengthy research to verify their legitimacy. “In the end, because of the new industry many artificial credentials are popping up,” says Dr. Goldsmith.

Credentialing is increasingly becoming a necessity in today’s workforce in order to differentiate oneself from the rest of the market. Dr. Goldsmith gave first-hand knowledge of how to create a program for your organization or determining which accreditation programs are the right ones for individual professional development. “It demonstrates that this person has the specific skills to do a job.”