LendingTree.com boasts a website
attracting almost two million unique visitors each month. In a
little over 10 years, the US online lending exchange has
facilitated more than 23 million loan requests and $185 billion in
closed loan transactions. Turning a profit remains the big
challenge, however, reports Douglas Blakey.

Few financial services start-ups of the internet age have
developed such a strong brand awareness as US online lending
exchange LendingTree.com: 84 percent across the US, according to
the firm, thanks to a heavyweight advertising campaign promoting
the firm’s catchy ‘When Banks Compete, You Win!’ tagline.

While the firm has a number of revenue sources – such as
advertising revenue on its sites; lead generation; fees received
for every lead that matches lenders criteria; and closing fees when
loans are agreed – turning a profit remains LendingTree’s biggest
challenge.

For 2008, Tree.com – the holding site covering
LendingTree.com and a raft of new sites – reported a net loss of
$202.3 million, compared with a net loss of $550.4 million in 2007.
Revenue also declined, down by 34 percent to $228.6 million from
$346.4 million in 2007.

For the foreseeable future, despite ambitious
expansion plans, the prospects of the firm becoming profitable will
depend on the troubled US mortgage market. Unique visitors to the
LendingTree.com website, although down from a high of 2.8 million
in the first quarter last year, averaged around 1.8 million per
month in 2008.

Founded by Doug Lebda in 1996 and operating
nationwide by 1998, LendingTree was designed to offer a home loans
marketplace to connect consumers with multiple lenders that compete
for their business via a so-called reverse auction (see also
MoneyAisle.com, RBI 606
).

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

Typically, visitors to the site applying for a
loan complete a set of around 60 to 80 questions and receive five
loan offers within a few minutes. On the supply side, over 200
lending partners and banks have joined the exchange, many of whom
have built their origination business around LendingTree.

“The vision was to empower consumers to make
the smartest decisions at the most critical times in their lives,”
Lebda, currently CEO and chairman, told RBI.

By 2003, LendingTree had been snapped up by
InterActiveCorp (IAC), joining a stable of well known online brands
such as Ask.com, Ticketmaster and Expedia. Despite the ongoing
economic downturn in the US, Lebda has ambitious plans to expand
further, following IAC’s spin-off of LendingTree and its associated
sites into Tree.com in August last year.

“When IAC purchased LendingTree in 2003, it
was a great time to scour the marketplace and begin acquiring
companies that made sense for the business. With IAC’s help, we
purchased GetSmart, iNest, Domania and HomeLoanCenter all in short
order. Each of these brands remains intact today and serves a
different set of consumers with different product offerings in the
financial services and real estate industries. Without IAC’s
backing, we would not have been able to grow the company at a
critical time,” added Lebda.

The acquisition strategy was consistent with
Lebda’s vision to create a full spectrum of financial services on a
cluster of websites that consumers will use frequently, not just
when they are shopping for a mortgage. InsuranceTree.com was
launched in January, for instance, a convenient, single-stop-shop
for insurance policies and carriers. In the same month, LendingTree
also launched a reverse mortgage service for senior homeowners
considering freeing up equity in their home.

And, even with the annual loss, Lebda says he
hasn’t ruled out strategic acquisitions: “We are always looking at
opportunities that may grow the company in the strategic direction
we are heading. We just acquired New Homes Realty in December
adding six new markets nationally to our RealEstate.com footprint.
Also, in January, we acquired the assets of JustThrive.com, a free
and easy-to-use website designed to help consumers monitor, manage
and improve their financial health.”

But, stressed Lebda, home loan products will
continue to be the company’s main source of consumer interest,
especially as interest rates remain at historic lows.

The low level of rates has, however, resulted
in one major benefit for a firm which has regularly spent over $100
million a year in marketing: spending less on marketing in 2009.
Lebda is at pains to stress the need to reduce the firm’s
dependence on paid marketing, naming it as the first of four
strategic goals for 2009.

In support of this, the company has developed
efficient tools on its website, such as its My Account offering,
launched in the fourth quarter of last year, a personalised service
designed to simplify the loan selection process as well as giving
customers the ability to monitor and manage personal credit
reports.

Other priorities for the year include:

• Introducing an enhanced suite of online
tools (the Loan Coach service will look to help consumers via a
rate tracker, and a home buying coach);

• Leveraging the LendingTree brand and growing
into new business sectors; and

• Increasing the efficiency of the core
lending exchange.

According to Lebda, capacity on its site has
been an issue, which it will counter with IT enhancements over the
course of the year.

Performance

Tree.com – fundamentals,
2008

 

2008

% change y-o-y

Origination and sale of loans ($m)

88.9

-32

Other lending ($m)

103.7

-37.0

Real estate ($m)(1)

35.9

-31

Total revenue ($m)

228.6

-34

Total operating expenses ($m)

379.2

-54

Net profit/loss ($m)

-202.3

 

(1) commission income from real estate
developers from leads supplied by RealEstate.com Source:
Tree.com