|King Kong (CoStar) with Flat Stanley (LoopNet)|
Technology Improvement: LoopNet is more forward thinking when it comes to technology than CoStar. They invest twice as much of their revenues in technology and are trying to automate information gathering. They have also made some attempt at a Web 2.0 strategy with Facebook, LinkedIn, the iPad app, etc. This should hopefully result in a better user experience than CoStar users are accustomed to, and more efficient/lower cost research for the combined company.
Better Exposure to the General Public: CoStar has historically only been available to paying users. CoStar recently started CoStar Showcase to provide listings to the general public, but it doesn't have nearly the exposure that LoopNet has. LoopNet has much broader exposure to the general public and also has a stronghold on tertiary markets where CoStar is not as strong. A merger would likely make CoStar listings more visible to potential buyers/tenants directly and expand presence in tertiary markets. This would in-turn increase transparency in the market.
Monopoly Backlash/Pricing: LoopNet's subscription fees are relatively low, while CoStar's fees are high. If the combined company chooses to take on CoStar's fees, then entrepreneurs will be incentivized to build a lower cost competitor. If the combined company chooses to lower its fees (seems unlikely), that would be good for the industry, increase the user base and therefore increase transparency and help level the playing field between large real estate firms and small firms.
On a side note, if CoStar/LoopNet is smart, they will create several price points to (for all you economics majors) maximize revenue on the price elasticity curve. This would be good for both the company and users.
A Monopoly: It has yet to be seen whether the government deems this merger to cause antitrust issues, but there's good reason to think it would. CoStar and LoopNet are the two largest players in the commercial real estate information world. While most commercial real estate firms are dependent on CoStar subscriptions, LoopNet did provide some competition. Additionally, LoopNet's presence required CoStar to continue to innovate. The combined company will have a chokehold over commercial real estate firms, and will have little incentive to innovate. The barriers to entry in commercial real estate listings/information is rather high. CoStar has an incredible amount of research gathered over many years, and makes a point of suing any company that threatens it. While it's UI/UX may be mediocre at best, it will be very hard for upstart companies to compete with its wealth of research, existing relationships, and most notably, the status quo in an antiquated industry.
- Prohibits CoStar and LoopNet from restricting customers' ability to support Xceligent
- Requires CoStar and LoopNet to allow customers to terminate their existing contracts, without penalty, with one year's prior notice.
- Bars the merged CoStar and LoopNet from requiring customers to buy any of its products as a condition for receiving other products, and from requiring customers to subscribe to multiple geographic coverage areas to gain access to a single area in which they are interested.
- Requires CoStar and LoopNet to continue to offer their customers certain core products on a stand-alone basis for three years after the acquisition.