Online lead generator HouseValues has been under fire lately. New layoffs, disgruntled customers and employees, and the exit of its COO and mortgage lead business.

In case you missed what's going on here are a couple of links:

1. Shake up at HouseValues by Joel at Future of Real Estate Marketing
2. Layoffs at HouseValues by John Cook at SeattlePI.com (interesting comments left by ex-employees)
3. Interview with Ian Morris, the CEO of HouseValues

So what is the problem with HouseValues? Let's leave management, support and client relations aside and just look at their business model. It has two main problems:

1. No quality incentive

The more leads you generate and sell the more you make.

Other companies that work on a referral fee based on closed listings have a built-in incentive to generate quality leads. HouseValues does not as long as they can replenish their pipeline with new real estate agents.

2. Completely wrong value proposition to approach the end real estate customer

The source of HouseValues leads are primarily from home searchers and home valuation requests. This is the biggest pool of real estate traffic out there. But selling these fairly unqualified inquiries as leads are really stretching it.

People are not filling out a form to be connected to a real estate agent. If they did you would see a whole different type of quality.

You will convert some of these into "ready-willing-able" type of inquiries but not if you don't have a good follow-up system with good frequency, copy and encouraging engagement by the prospect.

One speculation that came out of the Ian Morris interview was that HouseValues would focus on their CRM / follow-up system and become more of a service company. It's an interesting idea.

They're facing a big problem though with a potential CRM strategy. Here is why:

Technology and CRM Systems does not have the same cachet and desirability as leads. The real estate industry is a sales industry. And in sales everybody want leads. Sure. CRM is important. But the average agent does not have or want to spend any large dollar amounts on technology or CRM systems. So when it comes to technology and services HouseValues would have to dramatically increase its client base.

And is their follow-up system good? I can't speak for the technology itself but their frequency and copy is pretty average. And average does not cut it if you want to be in the marketing services business.

HouseValues has about 78 million in the bank and could afford to change direction. Their cash is their
biggest asset at the moment.

But is it enough to turn the company around? It all depends on one thing only. If they take customer
satisfaction and client retention seriously.

We'll see.

All the best.

-Ola