by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
There are so many ways to play the puns here. Who Moved my Rain? Move before you get Rained Upon. It’s Rainin’ Moves. All pretty goofy.
In the interest of full disclosure, I’m biased but so is Greg Swann. Greg calls Active Rain stoopid technology, I call it useful, Again, my interest in Active Rain’s success is financial; I write to and market to the Realtor channel.
Move’s shuck and jive play for Active Rain is indefensible. If Move were a home buyer, they would be entitled to material information in the interest of full disclosure. Real estate agents call this the inspection or contingency period. In the corporate finance/M&A world, it is referred to as the due diligence period. Move had every right to reverse it’s offer to purchase Active Rain if it discovered something during the due diligence period.
Here’s where Move screwed up; they started a competing business while fleecing the boys of their member roster and competitive points system plan. That is referred to in the lawsuit as the “confidential information”. They placed contingencies upon the purchase: Active Rain was instructed to cease all merger and acquisition opportunities, revenue opportunities, and financing plans. Those very actions, combined with a simultaneous push to present a competing product, suggest that Move perceived Active Rain as a competitive threat. It used the carrot of its deep pockets as a tool to paralyze the industry leader while developing a competing product.
Are the boys at Active Rain insane to think that the platform is worth $33 million? I think so but I’m no investment banker (and I clearly have no experience in valuations of tech start-ups). The figure, however, was set by the perpetrator of this scheme. Move played the old Nigerian e-mail scam on Active Rain. Naivete doesn’t make the victim any less injured nor does it make the scam artist any less culpable. That means you can’t say “What are they stupid to think we’d pay them that much? ” as your defense.
A jury trial will be a nightmare for Move, especially if that jury is in California. Twelve reasonably hard-working men and women will listen to a complaint from three ambitious and bright young men. The defendants, clad in Bond Street suits, will scoff at the amount of the complaint and enjoy a cigar in the back room, chuckling over the fleecing. A jury of Californians will listen to a parade of Realtors and originators as witnesses, braving the falling market while embracing a new technology. Make no mistake about it, these Active Rain users are cultish in their loyalty to the Network. I know because I’m one of them.
…and Move will be seen as a red-handed thief. A red-handed thief who, when caught, tries to explain his innocence by claiming that the diamond he stole was really a piece of glass.
Active Rain gets $8 million. We’ll never know because the settlement will be sealed.
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Greg Swann says:
I do not believe that ActiveRain disclosed anything they had not agreed to disclose, nor do I believe that Move, Inc., had agreed to anything like a non-compete.
I do believe that ActiveRain was poorly advised, but the one thing I would bet Move, Inc., always gets right is strict contract compliance.
I will bet a large dollar that Move, Inc.’s attorneys wrote the purchase contract ActiveRain is bitching about.
The fact that Move, Inc., asked for a jury trial, rather than settling out of court, speaks volumes.
September 27, 2007 — 10:33 pm
Brian Brady says:
It’s just you and I speculating for now. My guess is that we’ll know who won the World Series before this plays out.
I think AR asked for the jury trial in its original complaint. Do you think Move’s request for jury trial was a pat response or calculated?
September 27, 2007 — 10:54 pm
Greg Swann says:
> Do you think Move’s request for jury trial was a pat response or calculated?
Three words: Bring it on.
Move, Inc., believes that the cost of prevailing before a jury will be cheaper than paying ActiveRain to get lost. The better the trial goes for Move, Inc., the lower the cost to settle, so they may still settle at some point. But it’s not because ActiveRain has a case. The suit ActiveRain might have won would have been for malpractice against whatever attorney advised them on M&A matters. My bet is that we’ll discover that Move, Inc., was completely contract-compliant straight down the line.
September 27, 2007 — 11:12 pm
andrew says:
AR was poorly advised and this would have not happened if they were venture backed. I do not think Move will loose this case. Any time a company opts for jury they know they will prevail beyond a reasonable doubt. Now, does AR have the money to go to court?
September 27, 2007 — 11:45 pm
Greg Swann says:
> Now, does AR have the money to go to court?
Touché.
September 27, 2007 — 11:51 pm
Maureen Francis says:
Really, as much as I feel bad for AR, what kind of confidential information could they possibly have handed over? Their membership list is largely members of NAR. A programmer probably could have scraped the user data in a few hours, without paying a red cent. The points system is smart, but is it patented? The blogging platform? Easily replicated. WordPress is open source.
Dustin was brought in to do something. I doubt it would be to manage AR.
September 28, 2007 — 6:51 am
Jeff Brown says:
Would someone please explain to me the big deal about AR?
They sport 50,000 members? About 500 post nearly daily?
This is like talking about the Kansas City Royals’ chances for a championship next year.
I appreciate all the intrigue – but frankly? Watching paint dry is more interesting.
September 28, 2007 — 8:36 am
Jonathan Dalton says:
What Move created isn’t a product in competition with AR, any more so than WordPress offering a blogging product is in competition. Internet Crusade’s the better parallel with its RealTown Communities – we give you the editing software, the server and the domain and you go to town.
Move isn’t trying to build a real estate community in any way, shape or form. It’a a series of independent blogs all hosted on the same server.
AR, by virtue of the point system and the desire to build an online community, is a different animal.
September 28, 2007 — 10:45 am
Ines says:
So some of us have a spot in our hearts for AR – until we hear that our articles may not be ours to begin with. We agree that $33 million may be a little steep….but take a look at Mark Cuban….he sold broadcast.com to Yahoo for how many billions?
As to the number of members that actually blog – I’d like to see where the 500 estimate came from.
Move, Inc. is a big dog and the little guys at AR were obviously not well represented….but I do feel like they have a case.
September 28, 2007 — 11:00 am
Russell Shaw says:
I do not and have never hated Active Rain. I have had many unpleasant feelings towards Homestore (now Move). I noticed that one of the letters of condolence for Bob Bruss (RIP, Bob!) on Inman was from Steve Cook, from MOVE. I believe this is the same Steve Cook who previously handled PR for NAR.
The prices that MOVE charges Realtors are WAY too high. Those prices are “approved” by NAR. How objective can NAR be if the two sides are switching players from time to time?
I don’t have a hard time believing that MOVE executives betrayed and took advantage of the owners of Active Rain. They take advantage of Realtors on a wholesale basis all the time.
But I also believe I would have been a little less than thrilled if I discovered Greg Swann had been secretly working to SELL my content and what I contribute to BHB. Will the Realtor.com “blogging platform” wind up a giant pile of useless crap ignored by the public and most Realtors? Of course it will. But the owners of Active Rain were secretly trying to “sell the group” to MOVE. It is hard to imagine what “secret information” they disclosed. This is sort of like some buyer (if there were one large enough) looking at buying Walmart and “discovering” Walmart had their own efficient distribution system. Deciding they would not buy Walmart and then setting up their own truck lines and warehouses. They took the secret! Add in the thieves now use retired people as greeters and “look what they did to us”.
Prior to reading about this the idea that a small group of computer types OWNED Active Rain had never occurred to me. That they tried to sell it (for more than that buyer would really pay may or may not mean something in court. It doesn’t mean too much to me.
September 28, 2007 — 11:18 am
Brian Brady says:
I started this article off by saying that I’m biased; I am. I want AR to succeed for purely selfish motives.
Move.com isn’t going to let me write to Realtors. I won’t be able to play the “Trojan Horse”. (see the first Russell Shaw vidcast for a definition of of “Trojan Horse”)
I’ve never hidden my motives on AR. I had the same motives by creating a community of Realtors on MySpace. It has always been about establishing relationships with Realtors. What I didn’t expect was the quality of the relationships I’ve made. The Realtors on AR are good, honest, ethical people. Most have a thirst for knowledge that I’ve never seen in my years of working with Realtors.
So, although my motives are marketing oriented, I’ve grown to be a raving fan of the COMMUNITY. I DO understand the distaste the Realtors feel that they almost got sold out to the bad guys.
Can we create an open source, multi-user platform that will accommodate the multiple users who still want to blog? I think a vendor could knock the ball out of the park if he/she did just that.
September 28, 2007 — 1:18 pm
cindy@staged4more says:
I am a blogger on AR and I am a stager. I think the move’s platform won’t work for me as well as AR since Move’s more geared toward the realtors. I have not only establish relationships with realtors on AR, more importantly I find stagers whom I otherwise would’ve not have ever met in my own little ASP (a stager group) network, and network with other professionals. I am frankly a little bit annoyed to see AR is being sold secretly (almost) since like someone else had commented, we the members drove the content and the seo and the membership. While I understand that the founders need to be paid for their idea, hardwork and time to maintain and upkeep, moderate the content, they can’t blame the members being angry about the platform & forum selling out without them knowing.
The founders had said over and over again that AR is founded basing on trust and transparency to its members, yet all of us finding out AR is almost sold for a butt load of money via Inman blog?
While I love what I have achieved on AR, the great people I have met and knowledge I have gathered, I can’t help but feel a little bit betrayed…..
Just my 2 cents,
Cindy
September 28, 2007 — 2:37 pm
Bob in San Diego says:
“Move’s shuck and jive play for Active Rain is indefensible.”
“Here’s where Move screwed up; they started a competing business while fleecing the boys of their member roster and competitive points system plan.”
OR you could allege that AR’s attempt to fleece MOVE was thwarted once someone with a brain did some basic math, or the person who brought the coffee into the conference room echoed jeff’s sentiment, “the big deal about AR?”
NAR plays with the big boys (the DOJ). A couple of ill-advised computer types don’t stand a chance, nor should they.
September 29, 2007 — 4:54 pm
Brian Brady says:
That doesn’t make what Move.com did right, Bob
September 29, 2007 — 6:05 pm
Bob in San Diego says:
That assumes that it was MOVE that did something wrong, Brian. I am aware of another version of the story.
September 29, 2007 — 8:59 pm
Agent Scoreboard says:
Wow this chatter about AR is almost comical, what’s even more amusing is that all of the AR posters think it was about “their” content. Move didn’t care about the content, it’s mostly crap, a handful of good posts, no real consumer traffic, just a bunch of realtors talking to each other. They wanted to sell stuff to realtors, put up retarded banner ads and basically make AR, realtor.com but with less of a point.
I’m really disappointed in the AR guys… they should have asked for some help with that $30M offer. Limit the due diligence to 7-14 days and get a definitive agreement inked before handing over anything. It probably wouldn’t have mattered, but it they would have gotten the NO from Move a lot sooner.
My Pick: Move settles for $1M max.
September 29, 2007 — 10:40 pm
Life in La Jolla says:
I heard a different side from the one here. Is it really true what MOVE did?
November 21, 2007 — 3:36 pm
Andy Mooers says:
Enjoyed reading, learning, reflecting by pulling back away from the ActiveRain campfire. Great perspective, speculation, background info here. But can anyone explain how hosting a private domain blog outside AR would be beneficial in the long run or other dynamics to consider? The cost of litigation in the MOVE case, and being made to turn inward to buy back a position among and on top of the images, blogs, set up of communities I’ve already created from scratch in Maine has me checking on the location of my horse and wondering about a box canyon scenario a little further up the trail.
February 12, 2009 — 3:34 pm