LoopNet IPO: Strong Out of the Gate (LOOP)

Jun. 9.06 | About: LoopNet, Inc. (LOOP)

I’m just starting to track LoopNet (NASDAQ:LOOP), which had a very successful IPO that began trading Wednesday. The company is the leading online real estate site for commercial buildings. In Q1 of 2006, the company earned $10.2 million of revenue and dropped a very impressive $3 million to the bottom line.

What I especially like about this company is that it has taken a partnering strategy with real estate organizations. LoopNet’s market-leading LoopLink product powers the web sites of more than 1,000 commercial real estate organizations and seamlessly integrates their web sites with LoopNet’s listing service. This gets their product into the hands of a broad audience of people and drives faster growth.

My biggest concern is how defensible this company’s business is. It feels to me that other players could come in and build a very similar product, slash prices, and get some decent traction. There’s nothing especially difficult about building a buyer/seller network listing portal for real estate organizations. I’ll be looking for sticky points in the service as I track this company’s progress. If anyone has thoughts about this, I’d love to hear them!

It’s good to see a strong technology IPO. We haven’t had one in awhile. I don’t own shares yet, but I intend to track this company’s progress over time.

LoopNet was launched in 1997. The company now has 1.3 million basic members–who pay no fee for limited access and functionality–and 65,000 premium members who pay $49.95 per month for enhanced listings and more advanced search capabilities. The company generates 80% of its revenue from those premium members. The other 20% of its revenue is generated by advertising and by licensing its technology to third party commercial real estate sites.