Multifamily Management
and Strategy

April 2005

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Why Rent.com Sold for $415 Million in Cash

eBay’s purchase of Rent.com for $415 million should trigger a moment of pause for all apartment professionals. The ability of CEO Scott Ingraham, President Allan Hunter and their whole team to build an online apartment marketing company and sell it in four years to the market leader is a tremendous coup, and we congratulate them.

But we also think the deal should cause apartment executives to consider why Rent.com is worth as much as a portfolio of 5,000 apartment units. The answer is simple: Rent.com does a better job tracking marketing results than most apartment firms. They exploit this weakness in apartment marketing and monetize it by taking the risk of closing the deal alongside their customers. If that is worth $415 million to eBay, multifamily CEOs should start asking how they can better track their marketing results, and how they can improve their marketing strategies to yield a greater NOI. To many, marketing seems unmanageable, but it doesn’t have to be. This issue of Multifamily Management and Strategy examines how firms can get more leads for less money and dramatically improve how they handle those leads.

Buying the Cheapest Prospect Leads First

When I was in college, I threw parties that required a lot of beer. To slake the thirsts of most party-goers, I bought in-expensive beer by the keg. If I wanted something special for my roommates, I bought a foreign beer in fancy bottles after the main buying was done. I didn’t buy a lot of expensive beer first and then fill in with cheap stuff. We were 19 and the point was to have a good time, not to provide for the expensive lifestyle of strangers.

While this seems an obvious strategy, most apartment companies fail to apply it to their marketing. Instead, they often buy the most expensive ads first and fill in with the cheap ones. That’s a costly mistake. If you know the number of units coming vacant in your portfolio this year as well as your lead conversion rate and your walk-in traffic, you can estimate how many leads you need to buy to fill those vacancies. Once you understand that you are buying leads in bulk (albeit market-by-market and property-by-property), it is easy to figure out how to buy them—buy all of the cheapest leads first, and if you need more than the cheap guys can provide, fill in with leads from other sources. According to Kevin Thompson, its Senior Director of Marketing, AvalonBay Communities is on track to reduce their marketing costs by at least 10% for the third year in a row using this strategy of buying the highest quality leads from lowest cost sources.






Every property has a certain amount of “organic” drive-by traffic. That’s the advertising that comes from having a building on a busy street. The rest is purchased. The data we have seen says that Internet leads from RentNet.com and Apartments.com are the lowest cost leads, or the lowest cost-per-lease, depending on how you want to count. Referrals from existing residents cost more, and leads from print sources still more than that. Locator services top the pyramid as the highest cost-per-lease, but presumably with the highest level of value too.

According to the National Association of Realtors, at least 70% of home searches start on the Internet. While compa-nies need to consider the relative performance of ad publishers in their markets, their basic plan should be: (1) count the leads you need; (2) buy all you can at the lowest price; and (3) and fill in with the more expensive leads as needed.

But that is not clear to most senior managers, which partially explains why Rent.com fetched so much money—they add a lot of value and certainty for companies that are not sure their advertising works. Rent.com does the tracking for their customers and takes the risk that their product works. Advertising doesn’t have to be just a creative enclave that’s not accountable for what it costs. Unfortunately, most firms do not begin their marketing strategy by determining how many leads they need, which causes them to overspend for advertising. If they did, they could make their advertising work as a cost efficient operation that consistently delivers sufficient renter traffic at the lowest possible cost.

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