What’s a Small-Volume Builder to do?

The headline resonated across the nation: "Five U.S. Homebuilders to Start Web Firm". The list read like a Who’s Who of home building: Centex, D.R. Horton, Lennar, Kaufman & Broad, and Pulte. Five builders quickly turned into ten, and ten into fifteen. Not just fifteen builders, but the largest fifteen builders. But my non-giant builder friends, the end of the world is not yet upon you.

This partnership, which is creating the company/ web site Builder Homesite, Inc., should do wonders for those involved. Yet, I don’t think that it will cripple their online competition, NewHomeNetwork.com, and HomeBuilder.com. In fact, it might help them out, as well as the builders who depend on them.

True, over 200,000 new homes annually will be posted on Builder Homesite. And yes, this will alter the business strategies of NewHomeNetwork and HomeBuilder, but if you look at what lies behind each of these three companies, you’ll see that each has its own niche, and consequently the small-volume builder should not be greatly affected by the emergence of Builder Homesite. Over time, this merger should help ensure that there will always be resources available for companies who can’t afford to invest millions into their web campaigns.

Builder Homesite, Inc.’s strength lies in its sheer capacity. The founding companies, as reported in the Professional Builder 2000 Giant 400 list, are for the most part breaking their own revenue records and this new site will aid in boosting other income generating business sectors. These business sectors include mortgage lending, lawn service, home security, and down the line, I believe remodelers will jump on board as well, creating a network of home services that will help redefine the entire industry.

NewHomeNetwork’s strength lies in its parent company, Classified Ventures. Classified Ventures is proprietor of, amongst other major metropolitan newspapers, The New York Times, Chicago Tribune, Los Angeles Times, Miami Herald, and the Washington Post. These newspapers have long been the staple of new home advertising, and will no doubt continue to play a major role in their respective markets. Having that secure and wide geographical range should ensure them enough space to compete if not thrive over Builder Homesite and Homebuilder.

Homebuilder.com, the home and builder locator of the Homestore.com family, is a for-profit division of the National Association of Home Builders. That means they are a government-based business whose business plan is not restricted by the concept of earning profit vs. merely providing a service. They are without a doubt the most publicly visible of the three companies at the moment. They have a national television advertising campaign and the comfort of being, for all intensive purposes, the sponsor of the NAHB Builder Show. At the same time, they are still affected by the NAHB, and the percentage of actual professional builders in the country that are members has been decreasing steadily over the past few years. If the Giants pull their homes and money out of Homebuilder, and NAHB doesn’t retain at least a good grasp of builder membership, Homebuilder.com may be the most vulnerable of the three companies.

What Builder Homesite is doing directly relates to what I’ve been talking about the last several weeks. They have created a hub that all new homebuyers must go through to get access to their homes and general services. Not only do these builders regain control of their electronic presence, but due to their conglomeration, each company’s marketing campaign’s will benefit the others, which will reduce costs all around. These costs can actually then be used to cover the capitol expenses of the site’s development.

Another big bonus for the companies involved is that by developing a major electronic company, they can begin to be evaluated on the same level as other public electronic companies. Although they have not yet stated an interest here in going public, these builders have been watching their stocks plummet while other electronic companies that show no profit, nor generate anywhere near the revenue that they do, have stock that in some cases is worth quadruple. The hope is to level the playing field.

Small Builders Take the Field
So where do the small-volume builders fit into this new playing field? They don’t, and never really have. I spoke to two small-volume custom home builders at the recent KBIS in Chicago, and one didn’t even know about the merger, and the other didn’t care. Their concerns, their businesses, and the Internet’s role in their lives differed dramatically from a builder who builds several thousand homes a year.

In fact, one of the builders purchases the services of homebuilder.com to help with his web site. The other created his web site with Microsoft FrontPage after attending the Custom Builder Symposium. Both builders claimed that they had more business than they knew what to do with, and had no desire to expand. What they wanted to do with their web sites was create a more personal experience for their customers in comparison to creating a revenue-generating hub. Their businesses are based more on referrals than large scaled marketing campaigns.

But that does not mean that they can’t expand on the core of their businesses. Even though the recent merger might not directly affect them, small-volume builders still need a web presence if they want to avoid the hazardous cyclical nature of our industry. Take note of what companies like Centex are doing with Builder Homesite. Using the web to generate revenues beyond the point of sale does not have to cost two and a half million dollars. Most sites, whether through service providers like NewHomeNetwork.com and Homebuilder.com, or done solo, can be built for a few thousand. Remember, these sites are mediums for more business to be generated, not the actual businesses.

Small- and large-volume builders are not at war. This isn’t David vs. Goliath, but rather much more like a big fish swimming with little fish as both go about their business. The fact is that the residential construction industry is large enough to house the Giants and the little guys. Those 200,000 houses that will reside inside of Builder Homesite represent only about 10% of an industry that builds nearly 1.3 million new homes a year. The other 90% is still there for the taking.

Todd Shraiberg is the Project & Development Manager for HousingZone.com. Please email him with any comments or questions regarding his column.