Homestore CEO Mike Long has a short-term nasty job with a long-term bright outlook. Sort of like inheriting a money pit of a house, Long was overwhelmed by the mess left behind by former management, but he also has the vision to see what a gem of a company he can build with his remodeling skills.

In this exclusive two-part Realty Times interview with editor Blanche Evans, Long talks about his challenges taking over a company near ruin, past management decisions, restructuring a more realistic business plan, and what the new Homestore will be like going forward - especially with regard to its Realtor customers.

B.E.: Let's start with the cleanup of Homestore. Did you have any idea that taking over Homestore was going to be so challenging and from so many directions?

M.L.: Yes and no. I got a call from the board before Thanksgiving, and they invited me to come out and offer views and opinions. They were aware there were going to be major changes, and I saw it as offering consulting advice, so I had a chance to visit several times before Christmas. I had a chance to understand some of the issues - Homestore was overdiversified; it had lost focus and bleeding money; there needed to be restructuring and a reduction of expenses which means a reduction in personnel; and investors were upset.

But, what you can't judge is customer attitudes. From reading research about the company I knew there was unrest among customers, which is not surprising because of the company's loss of focus - that's when the casualty is customer service. So the bad news we have upset customers, and the good news is they will give us a chance to make the corrections we need to make.

B.E.: Many people - from Homestore customers to strategic partners - hated your predecessor Stuart Wolff. How much more difficult has that made your job?

M.L.: I really don't know Stuart. He left when I arrived. I had met him a few times, and I didn't know the other executives that left the company.

I had attempted not to focus on personal aspects - there are some strong feelings out there, and I have tried to understand why those feelings are there. As we made new decisions we didn't want to discount previous decisions, I have tried to divert conversations away from that.

B.E.: You've been all over the country talking to partners and customers. Don't most meetings start with them "dumping on you?"

M.L.: (Laughs.) I wanted to engage with customers on a personal level - all business is personal at the end of the day. There was a disconnect between our major partners and customers. I've spent 70 percent of my time on the road, two to three cities a day, three or four days a week. It's necessary. They are helping me and willing to meet with me and share their views on the real estate industry. I'm getting a compressed education. Third, I want feedback on what we've done well and not done well to make our services more valuable to our customers. Part of that is venting concerns about previous behavior and practices. We need to listen, as there is good information that we can use.

B.E.: What is the most surprising problem you have faced as the new CEO?

M.L.: Customers. The only successful business models I've been part of or studied have all been built around the customer, trusting the customer and being in tune with them, involving them in research and development, and then delivering what they want.

The big surprise is that the opportunity was there to do that and the company had not taken advantage of that. It was too insular and potentially believing in its own ability to determine what a customer needs. That's very dangerous in a service business. Strategy, pricing, product development, support products, training, the degree of customer involvement was less than I could understand.

B.E.: In hindsight, do you think it was a mistake for previous management to brand Homestore instead of the individual portals Springstreet, Homebuilder.com and Realtor.com?

M.L.: In some respects this is a defense of previous management, but they had the "$10 Billion Syndrome." Homestore at its peak was valued at $10 billion, and you start believing that is a real number and you have to defend it and grow it because Wall Street is telling you to. That led to the branding issue. It wasn't a $10 billion company. To be successful, that led management to diversify the company to justify this unrealistic high valuation. The company planned to go into other vertical markets, so the heavy investments made were at the expense of the real estate brands. .

B.E.: That policy alienated strategic partners. At one time, former NAR president Richard Mendenhall publicly distanced the NAR from Homestore, and many homebuilders started their own portal. How are you wooing these two groups and their leaders back?

M.L.: We are emphasizing those brands and spending our branding dollars on them. We have terminated the strategy to build another Yahoo!, so we are no longer in competition with our brands.

This dispute about brand competition is just symptomatic of deeper concerns that Homestore was going to compete with its customers, and we are modifying our business model to make sure that isn't the case. There was that perception that Homestore was positioning to compete with real estate professionals. It doesn't have those aspirations today.

B.E.: Does that mean you are reanalyzing the whole home portal strategy?

M.L.: There is a premium placed on traffic. It is immediately translated into buying customers for professionals. As far as Homestore.com goes, it is an aggregating site, so traffic will be directed into one of our customer sites, existing homes, new homes or apartments, so clearly homestore.com will be maintained as an aggregating site but not with the aspirations to build it into a Yahoo!.

B.E.: You renegotiated royalties to the NAR, but there is an even bigger payout to worry about - AOL. There's $90 million tied up in much-needed reserves. Are you renegotiating that reserve?

M.L.: We are in negotiations with AOL. There is also an arbitration proceeding between us, and it is unfortunate because they are an important business partner. We would like to work out an accommodation so our partnership reflects current market realities, and right now I'm optimistic that AOL wants the same objective.

B.E.: How close to an agreement are you, and will you reach an agreement before the arbitration?

M.L.: It's a complex agreement - a large strategic agreement for both companies and restructuring it is equally complex. The formal proceeding occurs this summer.

B.E.: The home channel is the number three destination for AOL users, we're told. How much leverage does that give you in your negotiations?

M.L.: We've done a good job helping them build the houses and home channel, and that should and does create some motivation to work out a restructured agreement that makes sense for both companies.

B.E.: Do you feel it is mission-critical to your traffic volume to work out a deal with AOL? In other words, could Homestore survive without AOL traffic?

M.L.: The vast majority of our traffic is organic as opposed to coming from other portals. AOL is 15 percent or less of our traffic, so yes, we can survive and prosper without it, but our obligation to our business partners and customers is to drive as much traffic as possible to generate leads for them, so we want to maintain the relationship.

The First 100 Days - Part II, Click Here

Published: April 29, 2002

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.