Homestore Discusses Whether Falling House Prices Threaten the Online Real Estate Advertising Market (HOMS 3Q05 Conf Call Quotes)

Homestore (ticker: HOMS) CEO Mike Long made the case that a slowing housing market wouldn't shrink the online advertising market. Extracts from his November 8th Q3 earnings call:

…We are frequently asked if a drop in home prices or transaction levels would cause real estate professionals to advertise less and thus adversely impact our business? In fact, we think just the opposite may be true… there are at least three reasons we are confident in our prospects.

First, historical data suggest that is real estate classified advertising is not very volatile. That spending has only decreased three times in the last 29 years, despite numerous economic fluctuations in local real estate markets.

Second, even modest changes in allocation between offline and online advertising spend creates the potential for significant revenue growth. For example, the advertising spend of real estate professionals is over $9 billion, so each 1% reallocation to online advertising represents nearly $100 million in additional revenue opportunities. We continue to believe that a slowing of the real estate market presents a catalyst for real estate professionals to more efficiently allocate their advertising budgets by shifting dollars to the more cost-effective and productive online venue.

And third, much of our revenue comes from top producing agents who… recognize that effective internet marketing will further differentiate successful agents and inevitably become the essential component of any marketing program…

(Quotes are from the CCBN StreetEvents transcript.)

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