Some Numbers That Make Me Go Hmmm…

(Management suggests you click play while you read this post.)

So while just browsing around looking for info (because I wanted to respond to something Alan Bernier of Rofo.com posted), I found something rather interesting:

We believe we are the leading online marketplace for commercial real estate in the United States, based on the number of monthly unique visitors to our marketplace, which averaged approximately 500,000 unique users per month during 2005, approximately 800,000 during 2006 and approximately 900,000 during 2007, as reported by comScore Media Metrix.

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As of December 31, 2007, the LoopNet online marketplace contained approximately 560,000 listings.

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As of December 31, 2007, we had more than 2.5 million registered members and more than 88,000 premium members.

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For the year ended December 31, 2007, our registered members viewed property profiles on our website approximately 150 million times.

That is from Loopnet’s (NASDAQ: LOOP) 2007 10-K. Interesting data all around.

For one thing, 88,000 premium members is enormously interesting to me. Because Loopnet is the largest online market for commercial real estate, and really the only game in town, you have to imagine that any “real” commercial real estate broker (as opposed to someone who just dabbles in it from time to time) has to be a premium member. (Doesn’t s/he?)

As there is no real study of the size of the commercial real estate industry, I have to wonder if 88,000 is about the size of the full-time professional CRE brokers in the United States. Who knows, I guess, but it is an interesting number.

The thing I can’t quite understand is lining up the following:

• 900,000 unique visitors in 2007
• 2.5 million registered members
• 88,000 premium members
• 560,000 listings
• 150 million listing views

The first piece of information I would want, were I an investor in Loopnet, is how many of the 2.5 million registered users had visited Loopnet at least once in the past 12 months for more than let’s say… 2 minutes (clear out all the folks who clicked on the wrong bookmark or something). Is it 100% of the 2.5 million? 75%? 50%? It would be great to know what the actual “active membership” is versus the “everyone who has ever registered, including those who have become Chicago voters by reason of death”.

The next piece of information I would want is the average number of views per listing. In connection to this, please note this interesting tidbit:

Enhanced Listing Exposure. Property listings submitted by basic members can only be viewed by premium members. Property listings submitted by premium members are available for viewing by all registered members and have premium placement on search results.

So even if some large number of the 2.5 million “basic members” still hung around, their listings are viewable only by the 88,000 premium members. Now, remember this:

For the year ended December 31, 2007, our registered members viewed property profiles on our website approximately 150 million times.

That’s 267 views per listing. But, to be fair, presumably there was some turnover in the listings stock at Loopnet through the year. So how many total listings went through Loopnet during 2007?

Now, I can’t find any data based on 15 minutes of Google searching (and I’m not really willing to invest more time than that) on statistics of the average time on market for a commercial property in the United States. But I did find this Investment Property Forum study (PDF) back in 2004 for liquidity in the UK commercial market. According to that study, the “average time from formal marketing to completion” was 10 months. But the authors noted that this figure was skewed, and thought the median time to sale, at 190 days, is more representative figure. Just getting from initiation of marketing to “heads of terms” took 88 days on average.

So… let’s assume for the moment that from the moment a listing is posted on Loopnet to the moment it’s taken down because it’s far enough along that the listing broker feels he can take it down is 90 days. And let’s also assume that every listing on Loopnet found a buyer in 90 days. That would give us 560,000 x 4, or roughly 2.25 million listings. That gives us 67 views per listing.

When you think about how search works, where people don’t go past the first couple of pages of results, that’s an astonishing number. In residential real estate, we know there are listings that get ZERO views simply because it doesn’t appear high enough on the search results page. Maybe Loopnet has a different, advanced search system that ensures 67 views for every one of its 2.25 million listings? Every MLS in the country should immediately license that technology.

Furthermore, the basic members can’t view listings by other basic members. Only premium members can view those. Add in the fact that in all likelihood, Loopnet’s 2.5 million registered member number does not mean 2.5 million active members. Taken together, these facts strongly suggest that the 150 million listing views is not spread out among 2.5 million, but some much smaller number of users… like maybe 900,00 unique visitors in 2007?

We’re talking about a rather lot of views then.  That’s 166 listing views per unique visitor.  Yeah, it could happen absolutely.  That’s only about 40-some views per quarter for someone in the commercial real estate business.  I just… well… it makes me go hmmm….

I don’t believe Loopnet is lying about these numbers (not in the age of Sarbanes-Oxley, not in a SEC filing).  I just wonder if they’re counting things correctly, or perhaps there’s something iffy in their traffic analytics package.

Or… maybe… could Loopnet be counting the traffic from its LoopLink product?  Seeing as how a large number of commercial brokerages (including the world’s largest, CBRE) use LoopLink to power their own websites (without membership limitations for visitors to their own websites) via a frame, that could explain a lot of the uniques and listing views numbers.

So the final number I would want to see, were I a Loopnet investor, is the traffic, unique visitors, and so on broken down by source: Loopnet.com, BizBuySell.com, CityFeet.com, and LoopLink.  That would give me a much better sense of where the growth is, where the traffic is coming from, and let me evaluate whether the company was deploying its resources properly.  It is absolutely relevant whether 100 million of the 150 million listing views or 10 million of the 150 million listing views are coming from LoopLink versus the main website.

But then… what do I know?  I’m just a blogger who uses Arsenio Hall pictures….

-rsh