How to walk away from dragons and land a shark
Morgan Carey, founder and chief executive of Nanaimo, B.C.-based Real Estate Webmasters (REW) spoke this year at the T3 summit in Las Vegas, a think-tank for executives looking to innovate in the US$1-trillion real estate industry that earmarks about US$15 billion a year for marketing. At 35, Carey is just slightly older than the coveted target market he spoke about, but he’s built an impressive track record. He expects REW’s revenue to hit $20 million this year, up from about $10 million in 2014, from designing websites for realtors. Many Canadian startups prove their model on home turf before expanding into the U.S., but Carey did the opposite, even walking away from a deal on Dragons’ Den before joining forces with Barbara Corcoran, real estate maven and investor on NBC’s Shark Tank. Carey tells Financial Post contributor Mary Teresa Bitti how he landed a shark and why he built REW in the U.S.
Q You’ve been called the grandfather of SEO (search engine optimization). How did you earn that title?
A In the early 2000s, Google wasn’t really Google. There was AltaVista, Lycos, Excite. Nobody was doing much with search engines. I had a natural talent for sales. As a teenager, I sold long-distance telephone plans for MCI WorldCom and became the top salesperson for North America. In my first year of university, I was recruited by a marketing company to help them do search engine optimization. In 2001, I started SEOguy.com. I was the original SEO guy and helped Adobe, Digital River, online casinos, tool manufacturers, anyone who realized there is money to be made advertising on the Internet. I ranked No. 1 for SEO consultant.
Q Walk us through the evolution of REW’s business model.
A In 2003, we launched Realestate optimization. com. Real Estate Webmasters began as a discussion forum, because I needed to learn about the industry. We had savvy realtors and their graphic designers joining, and it quickly became a community of 60,000. We were getting more business from it because of the visibility I was gaining. It soon outgrew the real estate optimization name, because we were doing so much more. We created our own market, and in April 2004, renamed it Real Estate Webmasters. Because of our background in SEO, we took the top position for custom real estate web design. We were the biggest company nobody knew about for a long time.
We are still the only true custom house in the real estate space. We have multiple product levels ranging from US$2,000 to US$100,000 for big end-to-end enterprise solutions. We also have subscriptionbased software as a service product. We sell to franchises, brokerages, teams and agents. Our largest Canadian customer is Sutton.com. They have 9,800 agents, and we power their entire infrastructure. We just launched a new product with Bar- bara Corcoran that is a US$5,000 website called The Barbara.
Q Why did you target the U.S. market first?
A It’s far more technologically advanced in terms of Internet marketing adoption than Canada. I was an Internet celebrity as the SEO Guy, and U.S. customers were already finding me. There was more interest from the U.S. It’s 10 times the size, and the dollar disparity was huge. Taking U.S. clients made sense. We only started intentionally targeting Canada two years ago. Today, our client base is 85 to 90 per cent U.S; 10 to 15 per cent Canada.
Q What can clients expect in terms of return on investment?
A I work on a 10-times model. The typical conversion of a realtor using web leads is only about two per cent. So it takes 50 leads to generate one deal. We follow the math. If you need 50 leads to close one deal and your cost per lead is US$10, it will cost US$500 per transaction. Getting the cost below US$10 increases the ROI from there. If you spend US$100,000 with us and don’t make US$1 million in gross commission income, there’s a problem with your performance.
Q REW has a target of US$100 million in revenue in six years. How do you plan to get there?
A We’re growing 25 to 50 per cent year over year organically. I made my first acquisition this year, which added huge revenues to our bottom line. We’re ramping up advertising, opening our fourth office and adding revenue streams that don’t rely on the old model, such as an exclusive deal with Docusign whereby we are the only website vendor that can do an integration with the company’s new transaction management product. Those kinds of partnerships will get us into events we weren’t necessarily invited to in the past.
Q How did you land a partnership with Barbara Corcoran?
A I work with a team in the U.S. called the Radio & Television Experts. RATE had partnered with Barbara to do exclusive TV advertising in individual markets, where agents shoot commercials with Barbara. The realtors are my customers, too. I was invited to come to the shoot and looked at her website (before going).
I had my best designer work with me to mock up a new barbaracorcoran.com and showed her what I thought her site should look like. She became a customer. After several months of working with her — during which time I had walked away from the on-air deal I landed on Dragons’ Den with Mike Wekerle and Jim Treliving — I told her I’d like her to invest in my company. I wanted her for the same reason I had hoped I would benefit from the dragons: She is a titan in business and has a lot of experience I don’t have taking on investors, selling stocks, going public. From a credibility perspective, she’s a megastar.
Q How’s The Barbara doing?
A We sold on average 1.5 of The Barbara every business day last month. It is officially our best-selling product.