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Lending Tree vs Bankrate: What They Do

By Arvin Sahakian · Oct 7, 2015 · Mortgage

Lending Tree vs Bankrate: What They Do

Image courtesy of Google Images, Wikimedia

Lending Tree and Bankrate attract and refer website visitors to lenders, banks, and other credit providers for a fee. This article will review the history and describe how these companies make money through the services they provide.

Lending Tree and Bankrate have done a tremendous job in creating a name for themselves online over the years while attracting millions of visitors to their websites who they anticipate will turn into future clients of their lender and credit provider referral partners.

Both companies have gone through some important changes since they were founded and both are among some of the most visited websites with regards to banking and lending products and information.

In this article, we will review the company history of Lending Tree and Bankrate, discuss what products they offer to their visitors and how they make money.

Lending Tree is a Referral Business

LendingTree connects borrowers with lenders, banks, and other credit providers who compete for business. It does not make loans. Instead, it serves as a referral broker through its online exchange.

Lending Tree Company History

Doug Lebda founded Lending Tree in 1996 and launched it nationally in 1998. Doug was frustrated by the process of finding the perfect mortgage. He found that going bank-to-bank and negotiating each offer was time-consuming and complicated. This is when he decided to create a way for banks to compete for their customers' business instead of customers having to do all the work to find the best deals.

LendingTree.com launched its trademark campaign, "When Banks Compete, You Win!" in 1999. A year later, the company went public with a successful initial public offering (IPO).

Media mogul Barry Diller acquired Lending Tree, LLC through his company IAC/InterActiveCorp in May 2003. IAC spun off Lending Tree in 2008. It joined newly established Tree.com, Inc., a company that offered consumers various financial matchmaking services. The following year the company launched Lending Tree Education, Lending Tree Home Pros, and Lending Tree Autos as an extension of its services.

The company launched its all-new LendingTree.com website in 2012. In that same year, it reached the milestone of 30 million customers.

LendingTree added a small business loan marketplace to its site in 2014 and officially changed its name back to Lending Tree, Inc. in 2015.

Who Are Lending Tree's Customers and What Are They Offered?

Lending Tree's customers include consumers and small businesses who are in the market for:

  • Mortgages
  • Home equity loans and lines of credit
  • Auto loans
  • Personal loans
  • Business loans
  • Credit card
  • Student loans
  • Commercial lending products

Lending Tree's customers are looking for an easy way to find the best credit product. They must complete Lending Tree's online application. Lending Tree shares the information provided by these customers with up to five potential lenders who in turn make credit offers to them. Customers then pick the best deal.

In addition, customers are able to track their credit score through their My Lending Tree account. They receive monthly updates that provide insights into what might be negatively impacting their credit score. Lending Tree also offers them Real Estate Services, which provides access to a network of real estate professionals that assist a consumer when either buying or selling a home.

How Does Lending Tree Make Money?

Lending Tree receives referral fees for each loan after originating on LendingTree.com. According to a case study by Mequoda Group in late 2006, Lending Tree partners pay a lead-generation fee for each loan application generated on LendingTree.com that they receive. In addition, lender partners pay a one-time $10,000 set up fee along with a $5,000 security deposit.

Since Lending Tree launched in 1998, it has facilitated nearly $214 billion in closed loan transactions from over 30 million customer loan requests as of late 2014. According to the case study by Mequoda Group, LendingTree.com received over 70,000 completed applications per month. We suspect his figure may be well over 100,000 today. Lending Tree's Lender Network has over 300 members and includes some of the nation's largest lending institutions as well as regional and local lenders.

Lending Tree Revenue Chart

Currently, Lending Tree is a publicly traded company (NASDAQ:TREE) with a market cap of $1.04 billion as of the close of trading day September 30, 2015. Market cap or market capitalization is the total money market value of the shares outstanding of a publicly traded company; it is equal to the share price multiplied by the number of shares outstanding.

With that said, the chart below outlines the growth in revenue reported by Lending Tree for all of its income producing operations from the year ending 2011 to the year ending 2014.


Lending Tree Revenue From 2011-2014

At first glance this might seem impressive, and that's because it is. To grow the revenue of any company, let alone a publicly traded company, over $100 million in four years is no easy task. However, revenue is not where the accounting story ends because companies of this magnitude usually have tremendous expenses that go behind the creation of growth in revenues.

When we factor in the $168.32 million in total operating expenses of Lending Tree in the year 2014 we see that Lending Tree actually reported a negative operating income of -$970,000 in that same year. Although negative, this figure is actually far better than tax year 2011, when Lending Tree reported a negative operating income of -$61.11 million.

What is Bankrate?

Bankrate is the leading aggregator of financial rate information online. The company also publishes articles to help consumers make informed financial decisions. They sell advertising space on their site and refer customers to their lender partners in exchange for fees.

Bankrate Company History

Bankrate began in 1976 as "Bank Rate Monitor," a print publication for the banking industry. The original newsletter included the same rate research and information the company provides today. Bankrate launched its web site in 1996. Since then it has created an online network that not only includes Bankrate.com but also features CreditCards.com, InsuranceQuotes.com, NetQuote.com, and Mortgage-calc.com.

Bankrate was traded on the NASDAQ for 10 years and then it was acquired by Apax Partners in 2009 for a transaction valued at $571 million. Bankrate raised $300 million in gross proceeds with its 2011 IPO on the New York Stock Exchange.

Who Are Bankrate's Customers and What Are They Offered?

Through its website, Bankrate.com, it offers free rate information from over 4,800 institutions on more than 300 financial products including:

  • Mortgages
  • Credit cards
  • Auto loans
  • Money market accounts
  • CDs
  • Checking and ATM fees
  • Home equity loans
  • Online banking fees

Bankrate covers about 600 local markets in all 50 states. It generates more than 172,000 rate tables that capture a daily average of over 3 million pieces of information.

Bankrate also publishes original personal finance stories to help consumers make informed financial decisions. Its reporters and editors provide expert advice on major financial decisions facing its readers, such as: buying their first home, choosing a new car, and saving for retirement.

How Does Bankrate Make Money?

Bankrate makes money through referrals, advertising, and content licensing. It receives referral fees from the institutions to which it refers customers.

The company develops and provides service to over 75 co-branded sites with its online partners. Those personal finance sites are some of the most trusted and visited on the web and include Yahoo!, AOL, CNBC and Bloomberg.

Bankrate also licenses its story and editorial content to over 100 daily newspapers, including "The Wall Street Journal," "USA Today," "The New York Times," " The Los Angeles Times," and "The Boston Globe."

Bankrate Revenue Chart

Currently, Bankrate is a publicly traded company (NYSE:RATE) with a market cap of $1.06 billion as of the close of trading day September 30, 2015. Market cap or market capitalization is the total money market value of the shares outstanding of a publicly traded company; it is equal to the share price multiplied by the number of shares outstanding.

With that said, the chart below outlines the growth in revenue reported by Bankrate for all of its income producing operations from the year ending 2011 to the year ending 2014.


Bankrate Revenue From 2011-2014

Bankrate managed to grow the revenue of its company just over $120 million over the course of four years totaling $544.94 million in 2014. However, revenue is not where the accounting story ends, this is where we see that Bankrate actually faired quite well when compared to Lending Tree.

When we factor in the $510.38 million in total operating expenses of Bankrate in the year 2014 we see that Bankrate actually reported a positive operating income of $34.56 million in that same year. This figure is a modest improvement from tax year 2011, when Bankrate reported a positive operating income of $23.95 million.

During this four year span, the point at which Bankrate earned the highest reported operating income was in the year 2012 when they reported a $58.54 million in operating income.

What Are the Similarities Between Lending Tree and Bankrate?

Lending Tree and Bankrate have many similarities including the following:

Free to Consumers

Both Lending Tree and Bankrate offer their services to consumers for free. They focus on providing consumers with financial advice and data to help them make the best personal finance decision possible in hopes that this will eventually result in a customer for their lending and referral partners.

Referrals

Both companies primarily generate their revenue from referrals to lending institutions.

Leaders on the Web

LendingTree.com and Bankrate.com are among the top 10,000 most visited websites in the world. Both websites are among the leaders in the services they offer to consumers.

Flagships

LendingTree.com and Bankrate.com are the flagship sites for their companies which offer several other related or similar sites under their umbrella.

What Are the Differences Between Lending Tree and Bankrate?

Although Lending Tree and Bankrate are competitors, they also have several differences:

Lender Relationships

Bankrate simply refers customers to its lending partners for a referral fee. However, Lending Tree gathers and sells customer information to their lending partners instead. Lending Tree receives permission to do this as part of the online application customers must complete in order to receive competing deals.

Consumer Draws

Bankrate focuses on rate information and expert financial advice to draw in users and readers. On the other hand, Lending Tree appeals to consumers looking for the best deal on a financial credit products.

Evolution

Bankrate started life as a print publication in the 1970s that evolved into having a large online presence. Lending Tree began as part of the dot-com boom in the late 1990's and has not expanded outside the online space.

Building Digital Empires

As we delve deeper into the future, where computers get smaller, internet access gets faster and businesses build digital empires on the back of the internet, we're continuously seeing an upward trend when viewing long term historical charts dealing with the real estate and mortgage industry doing business online.

The brick and mortar behemoths like Wells Fargo, Bank of America and Chase are among the largest mortgage originators in the U.S. and have continued to dominate in spite of tech companies emerging with billion dollar valuations offering the same services. But let's not take anything away from these emerging tech companies like Lending Tree and Bankrate and the story their trends are telling us.

The lives of working Americans are busy, chaotic and unpredictable at times, which is why services that Bankrate, Lending Tree and others offer are becoming more popular and accepted. Although companies like Lending Tree are a good beginning for the transition into opening and closing a mortgage entirely online, the public needs more than simply a referral generating business. As new generations of home owners replace the old, they are much more comfortable going online to find the services they need. In fact, many will say they prefer it over traditional methods. Quite simply, it is far more efficient in cost and time to serve the needs of mortgage borrowers online in a fast, easy and transparent way. This is where BeSmartee comes into the picture. Stay tuned.


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