Group # 1
Internet Business – MBA 659
March 24, 1999
Consumers can now save hundreds of dollars and speed up the mortgage process by comparison
shopping and applying for a loan on line. The Internet is changing the way mortgages are bought and sold,
and online mortgage lending is growing at a rate of 200% annually. According to a recent study
conducted by Forrester Research, online mortgage originations totaled about $265 million in 1997, and
are projected to reach $725 million in 1998. Forrester also predicts that by 2005, online mortgage
originations will constitute about 10 percent of the entire mortgage market.
According to a July 1998 report by Robertson Stephens, the Internet, combined with a fresh
technological approach to the transaction process, will allow for "an abnormally high mortgage
concentration" among fewer players in the future. To be one of those players will require broad
distribution, competitive product offerings, cost-effective and innovative technology, and superior
This paper analyzes three mortgage service providers: QuickenMortgage.com, HomeShark.com and E-
loan.com, which act as middlemen in the supply chain as shown in the diagram below. The comparison
table (see Appendix A) compares and contrast these three web sites.
Online Mortgage Service Providers Mortgage lenders Homebuyers real-time mortgage (Charter Lenders)
information provided by
QuickenMortgage Company Overview
QuickenMortgage is one of the trademarks of Intuit Inc., #1 in personal finance software, including
Quicken personal finance and TurboTax tax programs, QuickBooks small-business accounting software.
Intuit's strategy has shifted from PC (software) to the Internet as a potential pipeline for financial
transactions. Intuit's Internet offers financial news site Quicken.com, payroll processing services,
insurance marketing, and mortgage lending. Intuit is successfully transitioning its products and culture
toward the Web. Currently, Quicken.com enjoys more than 44 million page views per month. IDG's
WebMaster Magazine honored Quicken.com for business excellence on the Web.
The Money Making Machine
QuickenMortgage derives revenues from Advertising, Sponsorship, Transaction-based fees from
mortgage lenders. In 1998, the business closed $600 million in loans and had more than 800,000 visits to
the site in January 1999. While the Internet presents many opportunities for Intuit, the Internet
Commerce revenue was less than 10% of overall revenue in 1998.
Marketing and Brand Strategies
QuickenMortgage uses a co-branded strategy to market and distribute its products and services via many
other famous web sites such as Excite Business & Investing (http://quicken.excite.com), ImproveNet (a
Web site helping homeowners find reliable contractors, architects and designers), AOL.com, CNNfn
(www.cnnfn.com/quickenonfn), etc. This strategy will increase traffic coming to QuickenMortgage site
from its other related web sites, thus creating more chances of acquiring new customers. The company
also operates in an online profiling market, in which profiling technology is used to target messages and market to the Web surfers the company wants to reach. Moreover, QuickenMortgage’s strategy to
expand its international market presence, which includes the U.K. and Australia, is to partner with local mortgage lenders in those countries.
Strategic Alliances and Acquisitions
To fully take advantage of the Internet and increase traffic to its QuickenMortgage Web site, Intuit has formed many strategic alliances in the areas of mortgage lending. Some of the most important alliances and partnerships are listed below:
? Intuit and Excite created a new channel, called Excite Business & Investing by Quicken.com, which covers all the other major areas of their financial lives, including banking, mortgages, taxes, planning, insurance. Excite leverages the expertise Intuit has gained making Quicken (financial software) the
trusted choice of 10 million people to help them manage their personal finances and delivering it via the Excite Network (quicken.excite.com)
? QuickenMortgage teams with ImproveNet. QuickenMortgage users will have direct access to the extensive home improvement resources at ImproveNet and ImproveNet customers can also directly
access to co-branded elements of QuickenMortgage.
? Intuit announced a joint effort with TCI, Bank of America, and @Home to develop personal financial management tools for cable subscribers and expanded its professional tax business with the acquisition of Lacerte Software Corp., which produces software for professional tax preparers.
? Partnering with AOL, Excite, and CNNfn gives QuickenMortgage the potential to reach millions of consumers.
? Partnering with 17 mortgage lenders (i.e. Countrywide Home Loans, PNC Mortgage, Principal Residential Mortgage, etc.), and GHR Systems (the developer of the MARS mortgage software), to
provide real-time mortgage information, personalized mortgage rate quotations, and online mortgage
applications on Intuit's QuickenMortgage Web site. Through the combination of easy-to-use interactive
tools developed by Intuit and GHR, and real-time mortgage information provided by the lenders,
consumers are able to obtain mortgage advice and current rates, pre-qualify for loans, and apply for
mortgage loans on-line. These lenders offer a wide range of loans with fixed or adjustable rates, or
balloon payment loans, directly to customers visiting the QuickenMortgage site.
? Intuit strategically allies with Moore Corporation to link the two Web sites, QuickenMortgage and CyberHomes (a top on-line property listing service), to create a one-stop home shopping.
Use of the Internet
Intuit uses the Internet to create a new channel for mortgage lenders to communicate electronically with prospective mortgage applicants, and to acquire new customers at a lower cost. The Internet business
covers all the markets Intuit addresses and provides both an efficient distribution channel, as well as means to offer new products and services. QuickenMortgage.com, launched in November 1997, allows
consumers to search through thousands of loans, pre-qualify (to give an estimate of how much a
consumer is able to borrow and can actually afford) for a loan online at no cost, and submit an online
mortgage application for a specific loan via the QuickenMortgage web site. Users can make comparisons of loans, which can be selected based on their preferences. For loans offered by the participating lenders, users can drill down and get detailed information including an itemized list of closing costs. The online mortgage application shortens the loan process because QuickenMortgage applications are electronically transmitted to participating lenders at a consumer's request. Intuit uses the Internet to expand its existing markets, open new markets, manage information, and maintain cost-effective interactions. The Internet improves Intuit's ability to reach and help its customers and prospects. QuickenMortgage enables lenders to reach millions of consumers, who access QuickenMortgage from the Internet. Consumers can save time and shop for a mortgage conveniently from their homes by completing a simple form step-by-step online interview.
HomeShark allows consumers to shop online for a low-cost mortgage and a new home. HomeShark's core services are low-cost mortgages from national lenders and the HomeScout search engine that delivers a large selection of online home listings.
The Money Making Machine
As the HomeShark act as an intermediary for lenders and consumers on the net, their major source of revenue is from margin. HomeShark gets wholesale rates from lenders and offers a lower fee. While most brokers charge loan origination fees up to 2.5 points (2.5% of the loan amount), HomeShark charges only a 1/2 point. Plus, the company generates revenue from membership fees from the participating lenders.
From the HomeScout, although the company offers some information such as basic neighborhood information for free, they generally charged for more details and contact information. Marketing and Brand Strategy
HomeShark specializes in discount rates. Hence, the most obvious strategy we see here is "Pricing" statergy. And, since the company core business is online, we see that HomeShark promote much of their brand on the web. HomeShark site can be reach by major portals including Excite, NetCenter, Webcrawler, HotBot, Infoseek, InfoSpace, Snap, Lycos and Metacrawler and through company's advertising banners.
HomeShark partners with well-established local, regional and national lenders who are committed to customer service and provide the most competitive rates. Some of the participating lenders are Bank United, Chase Manhattan, Merrill Lynch, Countrywide, North American Mortgage, First Franklin, etc. Other Strategic partners includes portal sites such as snap.com to launch a new co-branded real-estate service on snap.com and homes.com to provide a friendly mortgage services that will benefit both buyers and sellers.
Use of the Internet
HomeShark integrated almost all advantages of the Internet into their web-site. The company allows customers to compare rates, fill out applications, and figure out how much home they can afford. Unfortunately, there some points that can not be completed by using the Internet, which are legally binding milestones such as getting approval letter. The Internet can still not replace a professional who helps clients with paper work and answers questions.
E-Loan brings together the best lenders and their products to provide the lowest rates for customer’s lending needs along with unbiased information on the best loan for their personal objectives. Chris Larsen and Janina Pawlowski founded E-Loan in Palo Alto in 1992. They focused their business and technical skills on the typically cumbersome loan transaction riddled with inefficiencies and "garbage fees." They envisioned a process that gave customers more choices among lenders, better service, and control over information so they could make the best decisions, while enjoying better rates than loan agents offered.
The Money Making Machine
E-loan generates revenue in a similar fashion as QuickenMortgage and HomeShark. It includes Transaction-based fee from lenders and ad banners.
Marketing and Brand Strategy
E-Loan is positioned as the leading online mortgage originator -- not merely a lead source for lenders -- as well as a mortgage banker, allowing the company to automate even more of the process flow in the loan transaction, pass savings to customers, and achieve maximum profitability. As a multi-lender and mortgage banker, E-Loan is unique among all online brokers. E-Loan's roots in the offline mortgage industry, along with its status as an Internet pioneer, loan originator, mortgage banker and customer-oriented innovator make it the clear leader in the online mortgage arena.
Strategic Alliances and Acquisitions
E-Loan has alliances with Yahoo! Finance. Customers can check their stock portfolio, follow all the latest financial news and shop for loan and insurance rates, all in one place. For their investing needs, Yahoo! Finance allows them to track stock performance, gain access to company and mutual fund profiles, and read news from Reuters, Standard and Poor’s, Zacks and many others.
Their alliances with E-Trade provides financial services and features that include the ability to invest online in stocks, options, and mutual funds; free real-time quotes, stock alerts, breaking news, charts, and analysis; free checking and daily interest; and high-powered research, portfolio management, and screening tools.
Its alliance with Telebank allows customers to use the phone and the Internet for all banking transactions, When you bank online with Telebank, you'll be able to perform transactions with your account from anywhere you have Internet. Customers can pay bills online, have more control over their finances, get more timely account information and automatically reconcile their accounts.
Use of the Internet
E-loan uses the Internet to reach customers, take applications and refer them to lenders. They slashes
transaction costs by replacing the commissioned loan agent with powerful, easy-to-use decision support
tools, and a combination of 24-hour online tracking and personal customer service. In addition, they
redesigned almost every element of data capture, transmission and customer service to provide a fully-
integrated, highly-efficient and cost-effective transaction that reduces customer costs up to 75% while
providing superior levels of service.
Each of the mortgage company operates in a similar environment and face similar Issues. Some of these
? Intense Competition
? Pricing Pressures. Due to the availability of online mortgages, consumers can now compare different
lenders’ rates and choose among the lowest available.
? The cost of implementing the company's Internet strategy.
? The uncertainty as to timing and amount of future Internet-related revenue and profits.
? Future growth of the online mortgage business.
? Risk associated with regulated mortgage lending.
? The timing and consumer acceptance of new products and services
? The success of the company's business relationships with portals in continuing to increase traffic
Recommendations for Mortgage Companies
Some of the common recommendations for Mortgage companies are listed below:
? Increase the number of participating lenders to provide more lender choices.
? Provide consistently low rates to compete and be the choice number one in this highly competitive
? Provide personalized customer services such as having their own loan consultants and the option of
viewing the account summary online, etc.
? Form more alliances with other famous web sites and portals to increase the amount of traffic coming
to their sites
? Increase brand recognition by placing ad banners on other famous sites and advertising their brand
names on other channels such as radio, magazine, newspaper and TV.
"Intuit Fincl Chief -2:CMGI's Engage Tech CEO Also Speaks", March 3, 1999, www.wsj.com
Computerworld, Online Mortgage, January 11, 1999
Newsweek, Dial Up a Mortgage, October 26, 1998
The New York Time, Web Mortgage Brokers Benefit From Low Rates, October 11, 1998
QuickenMortgage HomeShark E-Loan Mortgage Refinance Yes Yes Yes Center
Sources of Revenue Transaction-based fees, Transaction-based fees, Transaction-based,
Ads Ads Ad Banners Expert advice Yes Yes Yes with their own
loan consultants Detailed checklist of all Yes Yes Yes the documentation
needed to close a loan
Credit Center, helping Yes Yes Yes consumers find out how
their credit affects the
loan process, where to go
for help and providing
access to order credit
Yes Yes Yes Multi-lender web site (17 participating lenders) (21 participating lenders) (40+ participating
lenders) State Broker License to 50 States throughout the 50 States throughout the 42 states throughout offer loans in the U.S. U.S. U.S. US
Yes (the U.K. and No No International presence Australia)
High (part of that is High High Brand Recognition because Intuit has gained
reputation from its
Transformation of the From financial software to From Palo Alto business online financial service Funding Group to E-