For those of you not familiar with Website ActiveRain, it is a free online community for real estate professionals designed to help them promote and grow their business. Primarily, it is a blogging site that provides provides free blogging tools to the niche real estate market. Their main audience is Realtors, though they also have several blogs written by lenders, notaries, home inspectors, appraisers, and title companies. The site launched in June 2006 and has become immensely popular in the real estate community. Currently, the site lists nearly 51,000 members.

I have read some of the blogs on ActiveRain and have found them to be very good. You can tell just how popular some of the bloggers are by the number of comments their posts receive - in a matter of a couple of days, some have 40, 50, or more comments.

Recently, I became aware of a lawsuit filed by ActiveRain against Move, Inc. Move owns and operates Websites including Realtor.com, the official site of the National Association of Realtors, Move.com (formerly Homestore.com), HomeBuilder.com, and SeniorHouseingNet. The complaint is for violation of the California Trade Secrets Act, breach of contract, unjust enrichment, promissory/equitable estoppel, unfair competition, Washington Unfair Business Practices Act, and fraud/deceit.

Read ActiveRain's Complaint and Move's Answer.
 

The lawsuit seems to stem from the failure of an agreed buyout of ActiveRain by Move. ActiveRain alleges in its complaint that in November 2006 Move approached it about a potential purchase and assured ActiveRain that Move wanted to acquire the company. The companies signed a mutual Nondisclosure Agreement which, among other things, was supposed to assure ActiveRain that the confidential information it provided Move would be kept secure and used solely for purposes of conducting due diligence in connection with the acquisition.

In March 2007, Move allegedly provided ActiveRain with a Letter of Intent detailing the essential terms of the buyout, including a purchase price of $30,000,000 in cash and "earn-outs," and contemplating employment agreements with ActiveRain's owners and officers. Meanwhile, Move asked ActiveRain to forgo growth and other business opportunities. Move had ActiveRain sign a "no shop" agreement which prevented it from seeking or discussing any investment or purchase transactions with anyone other than Move. Move also asked ActiveRain to cease development of revenue generating models and strategic partnerships with other businesses, including competitors of Move.

According to the complaint, Move was to announce the purchase of ActiveRain at the annual National Association of Realtors meeting in May 2007. And, at the insistence of Move, ActiveRain provided their member roster and profile information in digital format. Then, within hours of receipt of the information Move told ActiveRain that it cancelled the deal. Days later, Move announced that it was "rolling out free blogs for Realtors" and announced it as its own "new" real estate professional blog network through its flagship Website, Realtor.com.

In its answer, Move denies these allegations and claims, among other things, that any losses suffered by ActiveRain were proximately caused by or contributed to by ActiveRain's own negligent, willful and/or other misconduct or fault.

This will be an interesting lawsuit to see develop further. My guess is that it will be settled before it actually goes to trial. I wish ActiveRain the best, and from the comments on ActiveRain, it seems that they have many loyal members who fully support them as well.

My initial reaction to the suit was "Holy Cow! $30 Million dollars!" After all, ActiveRain is a FREE blogging site and their only revenue model at this time seems to be advertising - charging a fee per 1,000 impressions of the displayed ads. I don't know what that equates in hard dollars, but the "agreed" figure for the buyout took me by surprise. And remember, that figure was arrived at when the company was less than one year old.

That made me wonder... What is Source of Title worth? Source of Title is a similar community building site of title professionals, rather than real estate generally, mainly Realtors. Instead of focusing on the blogging medium, we chose to focus on a directory and message forum approach. The purpose is similar - to help title professionals network and share their thoughts and concerns on their industry.

The price tag on ActiveRain seems to breakdown to about $588 per member using today's membership numbers. Source of Title has nearly 14,000 members. At the per member price of the ActiveRain deal, Source of Title would be worth about $8.2 Million! Seems a little high, even to me. Even if we base Source of Title's value on the number of companies listed in our directory, over 6,100, the figure would be over $3.5 Million. I would love to know how the folks at ActiveRain and Move arrived at their valuation.

So, is Source of Title for sale? Nah, I love what I do. But, it is fun to think about!

Robert A. Franco
Source of Title
rfranco@sourceoftitle.com