LendingTree and Red Ventures are on a collision course

LendingTree and Red Ventures are on a collision course
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Two of the Charlotte area’s most successful companies are starting to look a whole lot like each other.

Just five miles apart, LendingTree and Red Ventures are in an arms race to become companies that drive sales across the internet. Both are buying up smaller comparison sites and online marketplaces to solidify their positions.

And as they grow, both are recruiting tech workers to new headquarters buildings. Red Ventures just expanded its Indian Land campus, and LendingTree is set to move to SouthPark later this year.

The converging paths of LendingTree and Red Ventures

LendingTree made a name for itself as an online tool letting future homebuyers easily shop different banks’ mortgage options. The company went public in the year 2000, and today has a market cap of nearly $4 billion.

Beyond home loans, LendingTree also lets site visitors compare credit cards, business loans, car loans and other financial products. They get paid by lenders who want access to the sales leads.

The company expects to bring in nearly $800 million in revenue this year.

From LendingTree’s home page.

From a LendingTree investor presentation.

Though born in the same era, Red Ventures has taken a different route.

They started as an Internet marketing and advertising firm, but pivoted to managing the online sales funnel for big companies like DirecTV, AT&T and Verizon. Red Ventures creates a website, boosts it with search engine optimization, and handles inbound calls in their call center.

Lately, though, they’ve been spending more resources building or buying their own platforms rather than working on a contract with clients.

In contrast to LendingTree, Red Ventures has remained a private company, with a valuation last year of $1 billion.

That figure came out days before Red Ventures acquired LendingTree’s biggest competitor — Bankrate — in a $1.25 billion deal that presumably doubled the company’s worth.

From Bankrate’s home page. It is strikingly similar to LendingTree.

Over the past year, both have been cutting checks like crazy.

In the past few years, LendingTree has purchased the following online lead-gen marketplaces:

  • SimpleTuition
  • CompareCards ($130 million)
  • DepositAccounts.com ($33 million)
  • MagnifyMoney (consumer finance comparison site, $39.5 million)
  • SnapCap (business loan comparison site, $21 million)

Red Ventures has consolidated the market as well. They’ve bought:

  • Allconnect (home services comparison site)
  • Soda.com (owns Reviews.com, Freshome, and The Simple Dollar)
  • ChooseEnergy
  • Imagitas (moving services)

The pièce de résistance on that buying binge: Bankrate.

Purchase prices are not available for most of the deals because Red Ventures is a private company. Bankrate does have a value listed because it was public before being acquired.

This convergence is perhaps more than just coincidence.

Before Red Ventures was a Charlotte-area unicorn, it was a small Internet marketing firm called Red F.

Struggling through the dot-com bust, current CEO Ric Elias and co-founder Dan Feldstein had burned nearly all the way through a $2 million initial investment, according to a report at the time from the Charlotte Business Journal.

The desperate company managed to land a small contract from a local company — you guessed it, LendingTree.

That business helped them get a little more runway to pivot from marketing to sales. A year later, they landed a deal to sell subscriptions for DirecTV — and the rest is history.

It’s unclear how the two companies feel about this. But they are definitely on each other’s radar.

Neither Red Ventures nor LendingTree made executives available to discuss the similarities.

But in July, LendingTree CEO Doug Lebda took a question from a Wall Street analyst on Red Ventures’ acquisition of Bankrate.

“Is that something you guys ever looked at, or any thoughts on what that new competitor might look like?” he asked, according to a transcript.

Lebda assured the analyst that they had taken a look at Bankrate, but didn’t find it a good fit at the price Red Ventures paid. Lebda also bragged that LendingTree was already “beating them in the marketplace.”

But then he gave a nod to his neighbor and former vendor down the road.

“I can tell you that Red Ventures is a really great company. It’s a run by fantastic leadership,” Lebda said. “They’ve got a great business model. They are in Charlotte, and it’s a natural extension for Red Ventures. And I think it couldn’t find a better home. And I think it’s pretty cool that two of the biggest fintech companies are right here in North Carolina.”

Lenny the LendingTree puppet, at the company’s HQ. Photo via Facebook.

Could LendingTree and Red Ventures merge?

Stockpickers speak of the two companies in the same breath in an industry ripe for more consolidation. That leads to the obvious question: Would they ever merge?

With a new $250 million line of credit, LendingTree has the cash for more acquisitions. While that obviously wouldn’t be enough to buy Red Ventures, could the company ultimately be a target? If you can’t beat them, join them.

Wall Street’s best guess is no.

“We expect TREE to remain disciplined and do not expect a large, transformative deal,” RBC Capital analyst Mark Mahaney wrote in a research note.

That means the competition between the two will only heat up.

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