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CoStar’s Strong Pimp Hand; Eagerly Awaiting Response

February 14, 2008

Looks like the latest CoStar blog post takes the rivalry between CoStar and Loopnet to a new level.  It’s exciting — almost as if we’re in a Presidential Election season.  Oh yeah…. 

Anyhow, CoStar basically pimpslapped Loopnet’s membership claims and alleges false advertising:

If the impressive-sounding number LoopNet claims as its “registered users” is really the cumulative number of times someone ever registered to use their web site over the past decade, why would LoopNet say that it can “immediately expose” listings to 2.5 million people?

We think the answer is clear: LoopNet doesn’t have extensive research facilities. It doesn’t spend millions of dollars on trained researchers to track down listings all over the country the way CoStar does. Which is why CoStar has a higher quality, more comprehensive database, with the information you can’t find anywhere else. 

Granted, the two of them have been going at it for some time now, including various lawsuits enriching various corporate litigators from coast to coast.  And I gather that they’re tussling with each other over who will be the National Commercial MLS when it’s all said and done, since the commercial real estate world doesn’t have domination-by-MLS that the residential side does.

I personally can’t wait to see the response by Loopnet.  It’s going to be an interesting time in the tiny, arcane world of online commercial real estate.

Here’s the thing, however, for those who don’t follow the Inside Baseball stuff about commercial real estate websites.

There is little doubt that CoStar is right.  Loopnet does make silly claims.  2.5 million registered users just doesn’t fly considering the size and scope of the entire commercial real estate market.  Not to mention aging of users, as CoStar brings up.  At the same time, CoStar shows its character with not only the blog post but the lawsuit that inspired it.

CoStar is extremely good at what they do.  Really, they are.  Their technology is very good, and their research capabilities (which CoStar has spent hundreds of millions of dollars developing and maintaining) are second to none.  CoStar singlehandedly changed the way that commercial real estate firms conduct business.  But they’re evil.  If you look into their business practices, you realize that you are seeing the wielding of monopoly power the likes of which you haven’t seen since the pre-Google Microsoft days.  That CoStar looks upon litigation as a good competitive weapon says much about how they compete: to win, and to win in Conan-like ways.  Crush your enemies, see them driven before you, and hear the lamentation of their women.  Not that there’s anything wrong with that, but that sort of competitiveness isn’t going to make you a lot of friends.

Loopnet may not be as evil as CoStar, but they’re incompetent.  This is not the place to go into the details of their incompetence, but suffice to say that they remain in business because (1) how much the industry despises CoStar, and (2) their competitors are even more incompetent than they are.  Going out with a 2.5 million registered users claim when even a cursory examination of the numbers based on public records (as CoStar did) shows that claim to be… how shall we put this… marketing fluff is not the height of competence, especially when you’re locked in a death match struggle with the Death Star CoStar.

Looking at this particular little fight, I feel like I did when (as a Jets fan) the 2007 Patriots played the Dolphins.  Do you root for the evil empire?  Or the utter incompetence of the Fish?  Eeek.

I will point out one thing, however.

CoStar says it plays straight with its subscriber numbers.  Curiously, I haven’t been able to find those numbers.  I’m sure they publish their subscriber numbers somewhere in their voluminous marketing materials, since that is the substance of their lawsuit against Loopnet: false advertising.  I just can’t find them.

But beyond that, the way that CoStar defines ‘subscriber’ isn’t necessarily what one might think when one thinks of the term “Subscriber”.  Subscriber typically implies some sort of voluntary act, coupled with payment, by an individual to a publication.  In CoStar’s case, that ain’t necessarily so.

CoStar agreements tend to be at the enterprise level, not at the individual level.  For example, Cushman & Wakefield has a single agreement with CoStar covering all of its agents (some part of the 11,000 employees it claims worldwide).  Let’s say for the sake of discussion that 5,000 of the 11,000 are actual commercial agents & brokers, with the remainder support staff.  That means that all 5,000 Cushman brokers are ‘subscribers’ to CoStar, under the enterprise agreement — even if they have never used CoStar, never will, and don’t even know how to use the Internet.  As long as you have a listing in your name, or an administrative assistant could conduct a property search in your name, you may be covered under the agreement as a ‘subscriber’.  In fact, word is that CoStar fairly insists on having some pretty stringent definitions to ensure that the maximum number of ‘subscribers’ are covered (since the fees a compay pays to CoStar is closely tied to the number of licenses, aka, subscribers).

Let me give one example I happen to have personal knowledge of.  A firm with 35 brokers wanted CoStar, but only for the 5 brokers who are full-time commercial agents.  The other 30 are what one might call “resumercial” agents who dabble in commercial now and again.  The firm was planning on having an admin conduct property searches for its agents, and putting listings up for agents — a common arrangement.  How many subscribers would you imagine were covered in the agreement between said firm and CoStar?  If you guessed 35, you get a gold star.

And technically, that’s true — because the firm was paying CoStar the fees for having 35 licenses, and each of the 35 agents had his/her individual login and password.  The admin would login under an agent’s login/password to do the work for that agent.  But 35 people in that firm were not looking at CoStar day in and day out.  One person was, with perhaps another five checking the site once in a while.

Nonetheless, one cannot deny that CoStar’s numbers are ‘more straight’ than Loopnet’s.  Which is why CoStar’s pimp hand is so strong.  I can’t wait to see Loopnet’s response, beyond the generic “Allegation is ridiculous” pooh-poohing that isn’t going to convince anyone.


2 Comments leave one →
  1. CoStar Info permalink
    May 16, 2008 11:41 am

    Also you need to figure that CBRE just signed a national contract with CoStar. While there CEO loves CoStar, most of their brokers hate CoStar and some will even slam the phone down when they call. However, all of them are counted as users.

  2. May 28, 2008 10:26 am

    Well, CBRE IS a brokerage and pays the freight for all of its agents. So if they want to pay CoStar, that is their business.

    But you’re correct in pointing out that “users” don’t necessarily mean users in either Loopnet or CoStar’s system.


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