On the Mortgage Lender Implosion and the Evaporation of Internet Ad Revenues

My fubby asked me why I am so concerned about the mortgage meltdown recently when I work in the tech industry which seemingly has nothing to do with mortgages.  It actually already affected me because most companies that sell ads on the internet are hurt by the fiasco in some way. Internet outfits like LowerMyBills and LendingTree that thrive on mortgage leads are also hit heavily by the implosion of so many mortgage companies this year.  A mortgage lead is basically a form that’s filled out by a consumer requesting a mortgage rate quote.  As recent as last year, some of these leads were selling for more than $100 per pop to companies like New Century Financial, which operates mostly under the name Home123 on the internet. The selling of leads is still a viable business, but less mortgage companies are alive to bid on the leads, and thus the prices are falling.

In addition to mortgage leads, there are mortgage ads.  “Mortgages” and similar terms were very expensive in the AdWords market place because of the flurry of mortgage lenders and lead generation companies that wanted to attract customers.  With the implosion, the mortgage ads revenue will definitely have to go down.  The July 2007 Nielsen rating of the top 5 internet advertisers based on estimated earnings are as follows:

1. Low Rate Source — One of the largest mortgage leads companies.
2.  NexTag, Inc — One of the largest shopping comparison engines which has a mortgage leads service
3. Experian Group Limited — One of the three credit rating bureaus that also happens to own LowerMyBills
4. Countrywide Financial Corporation — I think we all know this one as the largest mortgage lender in the country.
5.  InterActiveCorp — The owner of LendingTree and other internet properties.

You have to take Nielsen’s estimated ad spending with a grain of salt since they don’t know exactly what amount of money each of these companies spend on ads, but these five companies do serve up a lot of ad impressions and ALL of them have revenues either partially or totally from mortgage related businesses.  With the current market conditions, it would be prudent for them to cut down on mortgage related ads.  Companies such as Countrywide might even need the advertising dollars to survive, as it recently borrowed billions from other banks to fund its operations. Lower advertising spending by these companies would mean less revenues for all advertisers carrying mortgage related ads.

I am not sure what percentage of ad revenues internet giants like Google and Yahoo are losing due to this situation, but Yahoo did lower their revenue guidance for Q3. Could less ad revenues spell new rounds of layoffs for the Valley? Only time will tell.

Share This

Related Posts