Tree.com Inc., the parent of LendingTree LLC, plans to rev up its marketing efforts this year, in part to maintain volume as the mortgage market contracts.
The Charlotte mortgage lead generator and lender will be "stepping on the advertising gas again," said its chief executive, Doug Lebda, in a conference call Friday with analysts and investors. "That's how you stay essentially flat in a down market."
Tree.com incurred $16.8 million of selling and marketing expenses in the fourth quarter, marginally higher than a year earlier. For all of 2009, however, marketing expenses fell by more than a third, to $62 million.
Spun off from IAC/InterActiveCorp. in August 2008 at the height of the housing-market crisis, Tree.com was forced to overhaul its business and pare back its ad spending to weather the downturn.
"This year [2009] was a year of significant cost restructuring, as was last year" Lebda said. "We're a much leaner company … and the thing is just humming."
Observers said the decision to increase ad spending could also be in response to increasing competition.
"It's difficult to know what their motivation is, but I would think part of it is opportunistic," said Bruce Backer, the president of LoanSifter, an Appleton, Wis., provider of pricing data for online and retail lenders. "There is a lot of volume in the market. It also could be in response to these other sites becoming more prevalent."
Google Inc.'s recent entry into the lead-generation business, for example, has been seen as a potential threat to Tree.com.
"The focus on marketing probably says more about the battle for growth in a constrained marketplace than anything else," wrote Terry Moore, managing director of Accenture's banking practice in North America, in an e-mail. "It's too soon to read increased advertising as a sign of a turnaround" for the mortgage industry.
"There is a very limited market of qualified customers available, so we're going to see some institutions moving very aggressively to defend and pick off market share," he said. Lebda said Google's entry into his market has made him "paranoid," but so far it's not had an impact on the business. "I don't see that it's caused a reduction in our volume," he said.
Tree.com's net loss widened in the fourth quarter to $21 million, or $1.92 per share, from $7 million, or 75 cents per share, a year earlier.
Adjusted earnings before interest, taxes, depreciation and amortization were $400,000, down 64% from the fourth quarter of 2008, but better than the $3.5 million loss in the third quarter.
Revenue dipped 1% from the fourth quarter of 2008, to $47.8 million, in part because the company settled loan-loss disputes with two buyers of its mortgages. But those settlements should reduce losses in future periods, Tree.com said.
