Three Lessons We've Learned About eReal Estate

What Have We Learned? ... With the NASDAQ down 54% from its March 2000 high and a tight venture capital market, real estate dot-com services face tough hurdles building sustainable business models. What lessons have we learned about the Internet and real estate over the last five years? (Netscape went public in August 1995.) Here are three thoughts, patterned after a recent article in Fortune ("What Have We Learned?" Oct 30, 2000).

Lesson #1: Net Not As Disruptive as Feared... Well, it turns out that the web doesn't really change everything. Connectivity certainly doesn't eliminate the need for real estate or most of the existing industry players. If anything, the complexity of transactions demands even more human involvement. I'll bet that last year saw record revenue for many bricks-and-mortar service providers.

Lesson #2: Revenue is Essential... Yep, you gotta make money. If the net doesn't fundamentally change the existing process, you've got to generate revenue from the existing players, e.g., owners, managers, brokers. And it turns out that these folks need to see real increases in productivity or deal flow to be willing to part with meaningful revenue.

Lesson #3: Time Favor Incumbents... Traditional business models (the "old economy") already generate gross revenue and cash flow. These firms do not need to raise venture funding to stay in business. They can take their time to perfect their e-commerce strategy. Eventually, owners, managers and service providers will standardize on a limited number of Internet-based listing services, procurement services and transaction platforms. But they will not feel the same sense of urgency that they may have felt a year or two ago.

What lessons do you think that we've learned? Send e-mail to me.

--Peter Pike