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A CASE STUDY IN MARKETPLACE DISRUPTIONS & TRANSITIONS Daniel McCarthy Chairman & CEO Network Communications, Inc. www.nci.com www.viralhousingfix.com Twitter: danielrmccarthy Interactiv e Local Marketplac es Conference The Kelsey Group Los Angeles, CA March 16, 2009

Kelsey Presentation

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Presentation prepared for Kelsey's Interactive Local Markerplaces conference on March 16, 2009 in Los Angeles.

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Page 1: Kelsey Presentation

A CASE STUDY IN

MARKETPLACE DISRUPTIONS &

TRANSITIONSDaniel McCarthy

Chairman & CEO

Network Communications, Inc.

www.nci.comwww.viralhousingfix.comTwitter: danielrmccarthy

InteractiveLocalMarketplacesConference The Kelsey Group

Los Angeles, CA

March 16, 2009

Page 2: Kelsey Presentation

THE MODULARITY OF THE NEW LOCAL MARKETPLACE Growth of consumer expenditures and access to inexpensive

capital fueled local marketing budgets in key categories Auto Real estate Retail Home products

Growth fueled expansion and innovation in local market media Entrepreneurial growth Venture-backed growth

Within climate of media expansion, distribution of consumer attention has dispersed broadly

Current economic contraction severely reducing local marketing spend

Local media competing on price and results during period of deteriorating financial performance Social media expansion provides enticing low- to no-cost impact on lead

generation Current status: rapid re-engineering of business models and

market-facing tactics

Page 3: Kelsey Presentation

CASE STUDY – REAL ESTATE:BUBBLE-BURSTING ECONOMICS

Bubble economics created 3 – 5M additional transactions during boom. Average price has declined

25% from $229K to $170K. Total price decline likely to

level at 40%

Incomes dramatically eroded by rapid decline

in transactions and price.

Transaction Value Peak Today

Home sales 7.1 M 4.5M

Avg. Price $220K $175K

Total Transaction Value

1.56T $822.5B

Commission rate 5.75% 5.0%

Commission value

$89.5B $41.1B

Transacting agents

600,000

500,000

Avg./Agent $149.2K

$82.3K

Page 4: Kelsey Presentation

CONSUMERS HAVE UBIQUITOUS ACCESS TO INFORMATION

Any house online at any time.

Independents include Trulia, Zillow, Homegain, RealtTrac, Homes.com,

NCI Interactive

Approximately 3.6M homes for sale

All independent sites have millions of duplicated listings.

Brokers present broad view of market

MLS distribution expanding and becoming consumer facing.

(in 000)Unique Visitors

% of Total

Networks 12,408 32.0%

Move 7,425 19.2%

Top brokers 4,862 12.6%

Top 5 independents

12,108 31.3%

All others 1,915 4.9%

Total 38,718 100.0%

Page 5: Kelsey Presentation

INCOME DECLINE IS SHIFTING MARKETING PARADIGM

Average inventory: 9.6mos.

Intermediary bears no inventory risk in existing home sales

Reduced market activity diminished lead volume during leanest period

Top agents invest approximately 8.5% of commission revenue in marketing 60% of agents invest

less than $3000/yr in marketing

Peak Today$0$1$2$3$4$5$6$7$8$9

Marketing spend

Page 6: Kelsey Presentation

THE MEDIA VALUE MATRIX:REAL ESTATE

Hi Cost

Lo Cost

Traditional

Media

NewMedia

Specialtymagazines

Newspapers

Radio

Directmail

YardSigns

MLSInternetListing

Services

BrokerWeb Site

E-mailMarketing

Socialmedia

Blogs

Personal Income

Page 7: Kelsey Presentation

COMPARATIVE LEAD VALUECategory Activity

Avg. leads per listing 2 per month

# transactions to earn $100K

22

Average time on market 180 days

Total leads required 550

Annual marketing investment

$7,920

Marketing investment per lead

$15

Required monthly leads: 45

Free sources generate 20 – 25% of total activity

Paid sources deliver leads at approximately $20 per lead

Page 8: Kelsey Presentation

MEDIA CHOICES OF TOP REAL ESTATE AGENTS

Source: Real Estate Agent Study

Conducted by OSR Group for NCI

Spec.mags.; 24%

Internetmktng; 24%

Agent web site; 23%

Newspapers 16%

Other media; 13%

Spending dis-tribution

Media % Use

Yard signs 98%

E-mail 91%

Broker web site 88%

Personal web site 86%

Specialty mags. 84%

Internet listing service

77%

Direct mail 76%

Newspapers 66%

SEM 61%

Social media/blogs 25%

Cable TV 12%

Billboards 9%

Radio 7%

Page 9: Kelsey Presentation

SOCIAL MEDIA TURBO-CHARGES WORD OF MOUTH Agent

requirements:Content creationPersonalityAuthorityRelationship

Outcome: Massive personal networks

Platform

JanuaryUsers

# of Agents

Facebook 57.2M 156,000

MySpace 75.6M 80,360

LinkedIn 7.7M ???

Twitter 2.6M ???

Active Rain 930K 136,195

Page 10: Kelsey Presentation

THROUGH THE CLOUD Advertising spend will increasingly focus on

differentiation Customer contact management will become a

point of excellence Social media applications will increase word of

mouth leads by 10-15% Listings enhancement will be supplanted by

personal presence Increasing proliferation of content

generation/management tools Publish once to many Original quality

Professionalism will require greater commitment and expertise.

Page 11: Kelsey Presentation

ABOUT NCI Leading local media

provider serving the housing market Rental markets: 48% of

revenue Resale markets: 35% of

revenue Remodeling: 17% of

revenue Integrated media platform

Distribute 10M+ publications each month in 600 markets

2.1M unique users to multiple brand-specific web sites

NCI Real Estate Brands

The Real Estate Book

TheRealEstateBook.com

Unique Homes

New HomeFinder

Your Life By Design

Your Home By Design

iConnect