LoopNet Lures a Crowd

But, listing by listing, LoopNet has been changing that. At the end of the third quarter, the company had 475,000 active listings in 27 states and 1.6 million registered members. LoopNet estimates that there are 20 million potential members -- agents, brokers, investors and business owners -- leaving plenty of room for growth.

But 76,000 of those registered members were paying $49.95 a month for a premium account. Anyone can list a property for free, but only those with premium accounts can see all the listings. Buyers with basic accounts can see only listings made by sellers with premium accounts. Premium memberships make up 80% of LoopNet's revenue, and the company is using marketing to lure more members to paid accounts.

And so far, LoopNet has managed its growth admirably. The company has beaten the Street's estimates for both of its quarters as a public company. Its sales grew 58% in the first nine months of 2006 to $34.6 million and its gross profit margin rose a percentage point to 88.4%, while operating profit rose to 43.8% from 36.4% without a decline in marketing spending as a percent of sales.

Much of LoopNet's lead has to do with the openness of residential real estate information vs. the closed, opaque market for commercial buildings. Information about home sales -- prices, square footage -- are public knowledge. Residential agents have for years shared sales data over the Multiple Listings Service, a privately run database on which member agents post listings of homes for sale.