Some of you may have heard I’m working on a new project with Tree.com (parent company of LendingTree.com). More to follow on the project as it takes shape, but it’s already getting some buzz in the news…
Here’s the recent article in PDF form if you’d like to share with others.
Here’s the link on WSJ.com.
Prior to the recession, Tree.com Inc. the parent company of LendingTree, which matches mortgage shoppers with lenders, was growing at a fast pace, so much so that it sparked the interest of Barry Diller‘s InterActiveCorp. which bought the company in 2003. Valued at: $726 million
But once the recession took hold and the mortgage industry imploded, LendingTree’s business suffered as consumers largely stopped buying homes and banks cut down on lending. The company’s business declined, and IAC shed it in 2008.
“The feeling was that LendingTree with its mortgage challenges shouldn’t be a question mark on the new media IAC business,” says Doug Lebda, founder and CEO of LendingTree.
After the sale, Mr. Lebda faced a predicament: How to make the company profitable again without the financial backing from IAC.
With no end in sight for the mortgage sector’s plight, Lebda’s strategy was to diversify LendingTree into new territories outside of home loans.
“Essentially we had to reinvent what LendingTree was,” says Mr. Lebda. After years of hearing companies calling themselves “The LendingTrees” of lawyers, doctors and other professions, Mr. Lebda decided the company should actually become the LendingTree of other industries, replicating the companies initial mortgage model for vertical sites covering healthcare, autos, education, home equity loans and insurance. For example, LendingTree’s auto site gives users access to local dealers, car values and financing options. While the company restructured–it shed over 3,000 employees, bringing the total number of employees down to just 700–it branched out into these other industries.
Sticking to the diversification plan with a quarter of the workforce and pressured resources proved challenging. “IAC spun us out with $100 million in cash, we had to work through a lot of restructuring,” says Mr. Lebda. “And the mortgage industry wasn’t coming back quickly,” he adds. At the same time, he explains, shareholders and investors were saying the company should remain focused on mortgages instead of investing millions in other verticals.
Limited resources were a hurdle: After the layoffs, LendingTree had just 700 employees to handle the mortgage side of the business plus launch the five new verticals.
“To do marketing on a single product is hard, to do marketing on five different products is exponentially harder,” says Mr. Lebda.
Still, Mr. Lebda stuck with his strategy, and it seems to be paying off. Today, 47% of LendingTree’s customers are non-mortgage, and that’s with minimal marketing for the new sites, he says. Over the course of the next year, he plans on having up to 25 verticals. “The new businesses have the opportunity to dwarf the mortgage business,” he says. Had it not been for the recession and the mortgage industry’s demise, Mr. Lebda says he would have never ventured outside of mortgages.
“Given limited capital, resources and time, a lot of people thought it was too long of a putt,” he says. “The recession forced us to reacquaint ourselves with [the company’s] core mission and culture; to reinvent our product and to diversify into new businesses that we would have never explored.”
Tree.com’s profits have been steadily improving since launching the vertical sites. In the third quarter, Tree.com posted a $5.5 million profit, up from a $3.5 million loss a year earlier.
Write to Dana Mattioli at email@example.com