Welcome to the new apartments.com As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Rich Simonelli. Please go ahead.
Thank you, operator, and welcome to our discussion of the relaunch of Apartments dotcom along with our 2015 guidance. Thanks for joining us today. And As you know, certain portions of this discussion contain forward looking statements, which involve many risks and uncertainties that can cause actual results to differ materially from such statements. Important factors that can cause actual results to differ include, but are not limited to, those stated in CoStar Group's February 17, 2015 press release and in CoStar Group's filings with the SEC including our most recent Annual Report on Form 10 ks and Quarterly Report on Form 10Q. All forward looking statements are based on information available to CoStar Group on the date of this call and we assume no obligation to update these statements whether as a result of new information, future events or otherwise.
As a reminder, today's conference call is also being broadcast live and in color over the Internet at www.coastargroup.com, where you can also find CoStar Group's Investor Relations page. An audio recording of the conference call will be available for approximately after an hour after the call is completed and will remain available for a period of following the call. To access the recorded conference call, please dial 800-four 70five-six thousand seven hundred and one from U. S. And Canada or 320-three 65-three thousand eight hundred and forty four from all other countries and use the access code 3,533, 862.
The webcast replay will also be available in our Investor Relations site for a period of time following the call. As a reminder, in order to give everyone a chance to ask a question, please limit yourself to one question, which we'll do at the end after both Andy and Brian's comments. You can rejoin the queue for additional questions and we'll take as many as time permits. I'll now turn the call over to Andy Florence.
Good morning and welcome and thank you for joining us this morning. I'm pleased to announce that over the holiday weekend, we relaunched Apartments.com with a completely new website that dramatically improves the online experience for the 100,000,000 Americans that rent their homes. Multifamily is a huge asset, classified at over $3,000,000,000,000 with approximately 30,000,000 renters moving annually. Renters pay in aggregate approximately $440,000,000,000 in rent each year or about a third of their income. Approximately 70% of all real estate moves are in the multifamily sector and the multifamily sector is expanding rapidly.
Over the last 5 years, the number of renting households grew 12.6% in the U. S. This year over a250,000 new rental units are expected to deliver in the United States. And we're forecasting about 2,900,000 rental households being formed over the next 5 years. So even at a250,000 new housing units that is barely keeping up with demand.
The echo boomers are now 25 years old and with their birth year of 1990, they're almost as large of a cohort as the Baby Boomers. They're load with student debt. They got early earning career incomes. And after the financial devastation they witnessed their parents enduring the housing crisis, they often do not view homeownership as a path to financial stability. Homeownership rates in this group have dropped dramatically 21% in the past 10 years from 44% to 36%.
Across the board, homeownership rates are dropping and rental activity is increasing. As a result, we believe the multifamily sector will continue to expand for the indefinite future. Unlike the residential resale market, where lead generation web sites sell ads to brokers who generate leads for house sales that may generate commissions, Apartments dotcom sells directly to the property owners who realize the majority of the value in the transaction. So comparing the 2, the average U. S.
House sells for $209,000 and the agent buying the ad typically keeps 1 quarter of 6% or 3,135. Our client who is often the apartment owner captures approximately 10 times that value from the transaction with 36 months of rent typically at 8.50 $1,600 A 2011 study estimated that apartment managers spend 2,800,000,000 annually marking their apartments. We believe that the majority of that will eventually be spent online and in fact we believe that the online spend already exceeds 1,000,000,000 dollars Today, CoStar and Apartments dotcom are generating revenue analytics and information needs. We believe that within the next 10 years, CoStar Group can achieve $550,000,000 in annual revenue and 250,000,000 dollars in annual adjusted EBITDA providing these services to the apartment industry. Our market research indicates that both renters and owners are dissatisfied and frustrated with the current first generation of apartment search websites.
Many of these websites are in the process migrated from providing those print apartment directories you see at the checkout account, the supermarket to online websites. These legacy websites generate 100 of 1,000,000 in revenues each year. We asked renters and focus groups from across the country to rate their experiences using legacy renter websites and they gave them an average grade of D minus. Today consumers are finding easy to use actionable and comprehensive information online when they search for anything from flights to dinner reservations. The current apartment search websites fall way short of consumers' modern online experiences.
Most apartment websites or ILSs as they are known in the industry primarily supply only the listings that property owners pay to advertise. They often serve up results that don't even remotely match what the renter was looking for. These results generally do not even indicate if the rental is actually available or what the actual rents would be. This puts the burden on the renter to painstakingly contact each and every apartment to acquire about availability, rents and fees. In the process, renters do not get what they want and owners are flooded with bad leads.
Our research shows that despite paying 1,000,000,000 to generate leads, owners are only answering the phone in their communities 30% to 40% of the time when a renter calls. And that's because they're overwhelmed with bad leads. The ILS' goal appears to be generating a lead to the community even if today sometimes that gets in the way of the owner effectively signing a lease because of low quality leads. We designed the new apartment.com around the needs of the renter. The site uniquely gives renters comprehensive information with actual availability of rents and accurate search results.
We believe in doing so we have created a site that will generate the highest traffic and we expect consumers will overwhelmingly prefer the new site. We believe that owners will prefer to and renters in numerous focus groups and they gave Apartments dotcom an average grade of A-. We believe they gave us an A because with approximately 680,000 rental options across the U. S. On our site, we believe that Apartments.com has more apartments than any other website and uniquely presents information on actual availabilities and rents to save renters valuable time in their search.
The site also offers innovative search tools to help renters find the apartments that best meet their needs. The new website draws on CoStar's massive multifamily database, which contains detailed information on over 450,000 apartment properties and the largest research effort ever conducted to document the U. S. Apartment industry. Over 1,000 CoStar researchers have done a great job gathering information that we believe will provide renters with more apartment choices than any other listing site.
In addition to multifamily apartment buildings, similar to Craigslist, people with houses, condos or garage apartments can boast their rentals for free on Apartments.com. We have visited and photographed over 400,000 properties prior to relaunching Apartments.com. CoStar researchers and shoppers make over 1,000,000 calls per month to continually update rental units, rents, concessions and the other fees renters pay. CoStar has developed software that searches approximately 40,000 apartment websites each day for rents and rental availabilities. Apartments.com also integrates directly with many property management companies' back end systems to pull real time availability and rents for their properties.
In total, the new Apartments.com is powered by up to 90,000 rental updates each day. Apartments.com also offers in-depth information on neighborhoods including restaurants, nightlife, history, schools and other important facts. We believe we are the only company doing this type of large scale data collection for the multifamily industry. And quite frankly, we're probably the only company in the multifamily sector that can do this on this scale. In just 9 months since acquiring Apartments dotcom, our awesome technology team has created addition to web browser on responsive mobile iPad, iPhone and Android devices.
I encourage you to see for yourself and go check out wwapartments.com. Make sure you try out the Polygonal and Commute tools. Our team was the team that have initially invented the polygonal search tool on the map, oh gosh, probably 5, 7 years ago today, probably 10 years ago. I feel we have the best technology team in the broader but they appear to be equally interested in the CoStar multifamily information analytics tool we have previewed for many of them. A high volume of great leads can be combined with great competitive rent intelligence to optimize an apartment communities revenue.
Apartment owners need tactical information to effectively position their properties and analytics solutions to understand critical market dynamics such as supply, demand, vacancy, rental rates and sale prices. There is a significant cross sell opportunity to sell CoStar information services to apartment owners and managers who are already buying Apartments.com for lead generation. This is similar to the successful cross sell that occurred when we acquired LoopNet. Last week, we introduced these new products to our 500 sales professionals at our annual sales conference. They're very excited about the opportunity to sell both marketing and information solutions to the multifamily community of owners and of owners and property managers.
Our sales team has been given the tools to sell CoStar, LoopNet and Apartments dotcom solutions. They've been given quota to sell all three services and they've been given lucrative sales incentives in the near and medium term that we believe will positively drive sales aggressively throughout the year. There is no question in my mind that our sales team is highly motivated and ready to go out there and sell. This is an enormous opportunity that is right in front of us for the taking. So what do you do when you have the best site, a huge competitive advantage, powered by an unprecedented amount of proprietary data and a sales force that's chomping the bit and ready to go.
To us, the obvious course of action is to maximize the opportunity before us and launch an aggressive marketing campaign that we expect will significantly shift industry market share to Apartments.com. Owners pay somewhere around $10 per lead for incoming inquiries. Typically, there'll be 10 leads per renter, 100 some dollars. They'll pay 100 and some dollars per tour and pay up to 1,000 of dollars per renter that an apartment broker brings to their community. So each renter that we can win the $1,000,000 over Apartment.com's 2014 annualized marketing spend since the close of the acquisition.
I believe this investment will generate massive brand awareness and site traffic for Apartments dotcom and quickly position Apartments dotcom as the number one destination for renters and advertisers alike. The advertising campaign is expected to reach 95% of all adults aged 18 to 49 via thousands of high profile TV spots running on primetime and late night network, television, local TV, radio advertising, sports, online digital advertising, social media and out of home ads. The multichannel media campaign is scheduled to kick off March 1st and run throughout the year. This media blitz is reinforced by what we believe is the largest search engine marketing program in the industry. Jeff Goldblum has been featured in so many great films such as Big Chill, Jurassic Park, Independence Day will star in the ad campaign conceived and executed by RPA, a prominent Santa Monica based ad agency.
The marketing strategy will also contain an aggressive B2B campaign that launches in the next week. In 2014, we looked at potential acquisitions in the multifamily real estate or ILS space in aggregate totaling approximately $2,500,000,000 And after careful consideration, we passed on each deal because we believed it would be dramatically more effective to spend less than 5% of all that potential $2,500,000 into this organic investment building, marketing, branding, the new Apartments dot com. We believe that organic investments in research, software, SEM, SEO, marketing and branding will enable us to capture us to capture a significant share of the revenue we would have otherwise acquired at a much higher cost through acquisition. We believe this organic investment in growing the Apartments dot com business faster is a prudent use of capital and an excellent investment with a good ROI. I believe that we're taking steps will continue to put us into a position to drive revenue growth rates in the mid teens with high margins for CoStar Group.
I remain very confident that we will reach our goal of $1,000,000,000 in revenue and 40% adjusted EBITDA margins in 2018. At this point, I'm going to turn the call over to Brian Financial Officer. Thank you, Andy. It's all yours. Thanks, Buddy.
Appreciate it. No problem. As Andy mentioned, we believe the new apartments.com website and the related investment in marketing branding will prove transformative for consumers searching for rental apartments, property managers and owners advertising availabilities and for CoStar Group as well. We expect this marketing will establish our brand with consumers driving significant traffic to the new apartments.com website, which we expect will result in more leads for our customers, higher renewal rates, accelerating sales growth and increased revenues for many years to come. Obviously, all this won't happen overnight, but we expect traffic and lease to begin significantly increasing in response to our marketing campaign and to position us to demonstrate extraordinary value to property managers and owners who pay to advertise on Apartments dotcom.
With the launch of the campaign on March 1st and the heaviest marketing in the following 6 months, we expect to see sales activity increase in the back half of 2015, translating to meaningful acceleration in Apartments.comrevenuegrowthtothe25% to 30% range in 2016 and beyond. Before I get into our 2015 outlook, I want to mention 2014 year end results. We still expect to announce financial results for the Q4 of 2014 following the market close on Wednesday, February 25 and hold our standard conference call to discuss the results at 11 a. M. On Thursday, February 26.
At this point, we've completed our work and are confident in our numbers. We expect that revenue and earnings will meet or exceed the top end of our previously communicated guidance range. Since the auditor's schedule was set for months ago, we'll let them finish their work as planned. And apart from what I've already said, we will not be discussing any further details today on the Q4 or full year 2015. We expect revenues of approximately $655,000,000 to $660,000,000 for the full year 2015 with approximately $157,000,000 to $159,000,000 for the Q1 of 2015.
We've incorporated our unaudited Q4 sales and revenue performance into this range, so I don't expect to update the numbers on our call on February 25 about a week plus from now. The revenue range also includes the decision to discontinue or deemphasize certain non core services we talked about quarter, totaling $14,000,000 to $20,000,000 in annual revenue. We're continuing to test multiple scenarios and therefore I think the range of impacts are still about the same as what we communicated last quarter, because we have control over how fast and when we make these transitions. For the full year 2015, we expect non GAAP net income per diluted share in the range of $1.95 to 2.05 dollars This outlook includes the impact of the increased marketing for apartments.com as well as the research investments we discussed previously for 2015. The 2015 impact on Apartments.com marketing and branding investment is expected to be an increase of approximately $75,000,000 in incremental spend or approximately 1.4 $5 in non GAAP net income per diluted share.
This increase is compared to the run rate marketing levels reported in the second and third quarter as well as the upcoming Q4 earnings. For the Q1 of 2015, we expect non GAAP net income per diluted share of approximately $0.18 to $0.22 In terms of timing, the marketing and branding is expected to be much heavier in the first half of twenty fifteen to coincide with the peak rental season and we currently expect the impact to non GAAP net income per diluted share of approximately $0.60 in each of the first and second quarters of 2015. In addition to this marketing investment, the investments in research that started to ramp up in the Q4 of 2014, we also expect typical seasonal Q1 2015 expenses of approximately 0 point dollars which is consistent with prior years. At this point, much of the incremental $75,000,000 of marketing and branding is committed in 2015, but this level of spending is discretionary in future years and can be adjusted based on the response we experienced with the new web site and the marketing campaign. Obviously, we're planning for success.
We believe these investments can accelerate revenue, drive traffic and grow dotcom into the leader for revenue among multifamily ILS providers, while positioning us to better cross sell CoStar Information Services into the multifamily, property management and owner customer verticals similar to the very successful LoopNet cross sell effort we've seen in the past few years. As Andy stated, we believe these investments better position us to meet or exceed our overall goal of $1,000,000,000 in revenue and 40% adjusted margins in 2018. As always, I look forward to sharing our progress towards these goals with you in the coming quarters. And now I'll open up the call for any questions.
And our first question comes from the line of Andre Benjamin from Goldman Sachs. Please go ahead.
Thank you. Good morning.
Good morning.
My first question is you've laid out an Apartments.comrevenuegoal of $550,000,000 I believe that's 10 years from now. And the 2018 target of $1,000,000,000 what level of Apartments.comrevenue should we be assuming in that? And if you're so much more confident that you're going to get that group of Apartments.com, why not take that number up?
Yes. Andrew, it's Brian. So I think we've obviously, we've got this year's guidance out there. We believe that apartments as the marketing gets out there in the rental season, our sales force will really be selling that in the second half of the year and it should translate to acceleration in 2016. I think you can plan to see that level of 25 plus percent revenue growth through 2018.
I don't think we're going to take the 2018 number up right now, but obviously it gives us a lot more confidence that we're going to get there. And I think as this rolls out over the next few 2, 3, 4 quarters, we'll continue to talk about that and we'll address that as we get up there. But clearly this we believe clearly this pushes us towards those numbers and puts us in a much better
position. Our next question comes from the line of Sterling Auty from JPMorgan. Please go ahead.
Yes. Thanks. Guys, I'd
be curious when the timing when did you decide to make this incremental $75,000,000 investment in apartments? And on the sales side, you talked about the quotas and the compensation. Can you remind us what portion of the sales force is being quoted to sell this? And how do you make sure that you keep the proper balance of focus across the entire sales force?
So the decision to increase the spend incrementally at this level has been evolving one that really finalized in the last week or so. So the focusing on the sales force, we just finished our annual sales conference and it was probably the last critical piece to Apartments.com launch was feeling confident that the sales force was ready and capable of carrying the product out there to take advantage of the incremental marketing spend. And they've been through intensive training over the last month or so on selling for the Apartments.com salespeople to sell CoStar information products to multifamily. And for the CoStar, the salespeople traditional CoStar people who have experience selling advertising solutions through LoopNet, train them to be able to sell Apartments.com. So we completed that and we pulled together what would be the largest sales force in the industry by a factor of 2, I believe.
And we pulled them together for a great conference, showed them the news products and services. They are very fired up. And I believe they're going to do a great job teaming together where appropriate or going at it alone with some smaller accounts and fully exploiting this opportunity in 2015. Now one of the great things about this is as we explore potential customer reaction to these new products and that is the Apartments dotcom site you see on the consumer side or the CoStar CMA solution that you see that you don't see it. So the professional information tools give you the rental rates to owners and the analytics, the forecast, the comparable sales all that kind of professional tools.
The person buying these leads and the information are the same person. So it's not that our sales force is going out just to sell advertising on Apartments.com. They're going out to sell CoStar information solutions in the same meeting as they're selling CoStar Apartments.com advertising solution. So that's a really nice sale for us. And the bigger ones, they'll be teamed with a traditional apartments person doing it with a CoStar person and the smaller ones they'll do it one off.
So either one of those takes and I think they'll both take either one of those takes you've got a big success. Now at the same time in order for our salespeople to hit their highest commission rates they have to be selling into all three buckets. So the SIT plan is set up such that they're once they hit a target in the LoopNet sales, they move to a commission level. Once they hit target in the CoStar sales, they move up commission level. And once they hit a target in the apartments area, they'll move up a level.
So I feel pretty darn good about it. And I got to say as I looked across that room day after day and I saw 550 people in that room are charged up and ready to go take this product out there. I felt really good about our ability to not only have the best website in the industry, but also capture competitive market share.
Our next question comes from the line of Brandon Duvel from William Blair. Please go ahead.
Thanks. Good morning, guys. Andy, maybe you could address your comment in there about some of these dollars going towards the B2B side. I'm assuming that's just around selling more of the database products, but maybe you can kind of break out how the spending works on that, let's call it consumer facing and B2B facing and what you hope to gain from the B2B spend?
Right. I would say that it's probably roughly 10% going to the B2B side, 90% going to the B2C side. The nice thing here is that it's if I take the primary prospects on the B2B side, it's the top prospect is roughly 30 companies per salesperson. So it's really B2B to support the salespeople, build messaging around the salespeople as they go in to have face to face meetings with these prospects. Communicate the transition of the website from sort of old world model to a much more consumer centric, renter centric model.
What we're doing with that, want to communicate the advantages our information tools offer over anything else that they can get out there. And then we want to be ready to highlight our advantage in traffic and our advantage in cost of running our ad on a site on our site versus how much traffic we have. So it's mostly going to be to see again it's basically $1 per renter that we're spending to create awareness with the website. I believe the website is the best website out there for finding an apartment online, the most comprehensive. And that if renters do consider it and respond to this media campaign, we will get return traffic and sustainable traffic Did I answer your question at all?
The next question comes from the line of Sarah Gubbins from Bank of America Merrill Lynch. Please go ahead. Sure. This is David Ridley Lane for Sarah. Do you expect to continue the trends and TV advertising in 2016?
And have you already switched over the pricing grid that you had talked about? Or is that planned for a later date? And any early results about owners' willingness to upgrade their level of spend in apartments? Thanks.
Thank you. So the initial priority is to create brand awareness. This is a space where when you pull runners renters into a focus group and ask them what they use, they name just about nothing. And when you give renters in a focus group the names of the top six sites and ask for reactions, there's real brand confusion. It's amazing for an industry this big, nobody has ever done any kind of even remotely meaningful BDC brand building.
So when you're doing initial brand building, you have to spend more than you would to to brand and then you move into more of a maintenance mode. So we do not anticipate having to spend at the same levels over time. We think that the spends will come down pretty dramatically. Now remember unlike other industries or related industries, we're building proprietary content here. We don't have 10 competitors with the same content we do.
So we should have a pretty defensible position once we create the brand and the ability to create a moat to protect that brand new pricing in, oh gosh, 16 minutes ago. And most of the United States has socked in with snow. So we have absolutely zero information about reaction to the new pricing. But I think we'll have literally 1,000 meetings this week with our sales force and we'll know shortly. I can say that we did show the product in-depth in oh gosh, controlled environment focus groups in 4, 5 cities with 50, 60 big players in the multifamily space and they gave the new website on average an A and they gave the new information tools on average an A and said particularly we asked them to rate the probability that they would want or the desirability of being able to purchase bundled packages of information and marketing in 1 buy.
And on a scale of 1 to 5, they gave that a 5. So they're very responsive to what we've proposed here and they like the idea of getting information and lead generation from one place. So the buy makes sense for these folks because first you have to bring the leads in the door which is what Apartments dotcom does and then you have to get the highest possible rent, which is what CoStar Information Services help you to understand what the market will bear. So they like the person who's responsible for managing revenue in the site is the person with the biggest need for both leads and marketing. So we think we're feeling pretty good about the pricing plans and we'll obviously adjust as we need to as we go out and get reaction.
Our next question comes from the line of Bill Warmington at Wells Fargo. Please go ahead.
Good morning, everyone. Good
morning, Bill.
So a question for you on how much incremental revenue we could expect to get from the analytics products? And I'm assuming we're using that against 18 should I think about that as against 18,000 customers? And then a housekeeping question. The 450,000 buildings that was a number I was familiar with. The rentals option number of 680,000 just wasn't familiar with that number.
Thanks.
Sure. Okay. So on the 450,000 dollars I think the actual number is inside of CoStar property, the information service we're tracking 459,000 apartment buildings in the United States of America. Is the number of rental units available at Apartments dotcom right now. So that would include condos, townhouses, homes, individual rental units within apartment buildings.
So one is physical buildings. The other is things that a renter can go online and sign a lease on in the next 60 days basically. So that the $680,000 is the stuff the renters care about and the $450,000 is what a bank doing underwriting cares about. So the incremental revenue, we obviously believe it's very sensitive. When we look at the very small players that are out there currently trying to service that market, they're probably running in the $50,000,000 $70,000,000 of existing revenue, right now providing solutions that we feel are pretty weak and I think the owners feel are kind of inadequate.
So we're confident the size of the market is in the 100 of 1,000,000 of dollars for information to multifamily players. Initially, what we're doing though is the huge budgets. There's very roughly, I look at our prime prospects in 2015 for these solutions we're launching. 2015 for 2015 for competing products to what we're offering. Most of that money that's in the budget for 2015 is on the advertising online advertising side of the ledger.
So what we're trying to do is put proposals in front of people that allow them to capture or take advantage of our information products at discounted levels when they're allocating larger components of their marketing budget to Apartments dotcom. So there'll be a little bit of an artificial allocation going on as to what's information and what's marketing. We don't care. We just want to have a big piece of their budget. So it will be a little murky as to what goes into what bucket and that's where we're going.
We're excited about the fact that you got that big a target to attack here.
Is that $600,000,000 incremental to the 2 $800,000,000 level of spend you quoted or would that
be part of that?
The $2,800,000,000 in spend is an estimate of a third party the overall size of the market and that's probably about $1,000,000,000 online right now. And then of the $600,000,000 $700,000,000 I'm talking about that we're looking at in 2015 being in apartment owners budgets to spend with competing sites that we feel are inferior that is part of that bigger number that $1,000,000,000 online.
Our next question comes from the line of Brett Huff from Stephens Inc. Please go ahead.
Good morning, Andy, Brian and Rich.
Good morning, Brett. Hey, Brett.
Question on Brian, you had mentioned just trends that you guys saw in the core business that you were happy about just stepping away from the Apartments.com thing for just a minute. Can you give us any sense of what you're talking about? I think you said that the 4Q would come at the high end of guidance. You didn't want to talk any more about the 4Q numbers specifically I don't think. But can you give us some color on those trends and why you feel they're strong, the core info business, core LoopNet business that kind of thing?
Yes. I mean, I'll do it anecdotally because as I mentioned in the prepared remarks, we want the auditors to sort of finish their prescheduled audit. We'll be talking a lot more detail about it next week. But obviously, we already have the numbers. I mean, I already have the numbers in front of me right now, but we're sort of respecting their process.
So we feel pretty confident the numbers came in great. We'll be at the high end or above the end of the top end of the range, as I said in the prepared remarks and in the press release. So I think overall, all facets of the business were running well. And we'll get into all the details next week on that. But the business continues to run well.
Renewal rates are running well. Sales are running well. So, obviously, we feel pretty good about where that is and I've rolled that into the guidance numbers. I'm not going to update it a week later. So these are sort of the numbers we'll move forward with 2015.
But right now things seem to all be moving well in all directions.
Our next question comes from the line of Phil Stiller from Citi. Go ahead.
Hi, thanks. So I guess I just wanted to ask, I mean, is this something you guys thought about when you made the acquisition initially that you might have to do or want to do? And then as we think about the forward spending into 2016 and beyond, I guess how much of this 75,000,000 dollars would you guys consider to be kind of launch cost versus kind of run rate of the business? Thanks. So I think I would say that a significant part of that $75,000,000 is launch cost of incremental $75,000,000 is launch cost, a significant piece of it.
We will know more about that next year obviously. But again, it's much more expensive to launch a brand that really doesn't exist in the consumer mind than it is to build and develop a a brand. And obviously, the purpose.com brand exists, but it doesn't have the super strong positive characteristics that you'd want to put available into people's minds through an aggressive branding campaign. So most of the spend a lot of the spend is going to be launch. To be honest with you, we did not go into the acquisition of Apartments.com thinking that we'd be making this aggressive a commitment to the space at this point.
Our priority was to rebuild the site and to build much stronger content offering and present a new business model that is more appropriate for the opportunity. So we've done that. And when we look at the site when we look at our competitive positioning also after having considered acquisition of a number of other players, we felt that we had a very strong competitive hand that we are a generation ahead of the competing sites in this space. And we didn't want to waste that opportunity. So we became we took a more aggressive stance as we successfully built the new site out and the new content.
So it's something that really evolved as we felt like we were in a stronger position.
Our next question comes from the line of Peter Lowry from JMP Securities. Please go ahead.
Yeah. Hi, guys. Can you talk about how your $75,000,000 investment may impact other investments you were thinking of making and in particular if it has any impact on your acquisition profile? A good question. Certainly at this point, we have a lot on our hands and we're lucky.
We've got a lot of really good organic initiatives out there. We still have a lot of revenue upside with LoopNet, some exciting new price coming out there. CoStar, we're just launching the new lease comps module this month. Continued growth opportunity there. We've integrated portfolio strategies the rural real estate space.
So we've got a lot going on. And whatever comes down the road, we've got a lot going on. And whatever comes down the road, we've got a lot going on. And we've got a lot going on. And space.
So we've got a lot going on. And whatever comes down the road in terms of acquisitions has got to have a very attractive valuation on it in to step off of these other great opportunities we've got and focus on something else. I think that consolidate continued consolidation in the apartment industry online will likely happen over the next 2 years, but we'd like it to be based on valuations after we take greater share. So I think that answers that. Yes.
I mean, so Peter just to add to that. So I mean, I think clearly we've done 20 plus deals in the last 20 years. Apartments was about 9 months ago. So this is a pretty big release for us. It was a carve out.
So there was a lot of back end work that our dev teams had to do a lot more than I think more than any other acquisition we've had. It's safe to say Andy. Stunning. Stunning amount of work. And it's amazing that we rebuilt everything about this website in 9 months.
Yes. So I think that we are obviously all that's out the door now and a big piece of this is the marketing selling and marketing campaigns and getting that rolled out. So we definitely are excited. I think we've got the balance sheet for it. If you know any good deals at a good valuation, let us know.
We're still active in the marketplace. And I think clearly over the next few years, CoStar will continue to be as it has been in the past an acquisitive company for the right deals that will integrate well into the platform. So what you're saying is, if you've got a special line into some with a defensible position, growth industry, great margins and they're selling for 3rd the appropriate valuation cost? Yes. Yes, absolutely.
Thanks, Peter.
Our next question comes from the line of Oscar Turner from SunTrust. Please go ahead.
Good morning.
Thanks for
taking my questions. Good morning, Oscar.
You mentioned that futureapartments.com marketing spend will depend on the return that this incremental 2015 investment generates. We're just wondering how are you guys going to assess the ROI for this incremental marketing investment?
Well, we know that the ROI the potential ROI on this investment outside of the incremental marketing spend is obviously very significant. We've said that we believe that we can generate $250,000,000 of EBITDA out of the space over the next 10 years and make significant progress towards that goal within 5 years. So the ROI is very high. One of the things this spend does is it reduce the risk involved in getting to that goal, because obviously in the context of that goal this investment makes is obvious, right? So it's risk reduction.
It is competitive position consolidation. So in year 1, it's just it's in year 1 as you establish the brand, especially when you've got such a dramatic change in the product from the old version to the new version and you have such a dramatic contrast to some of the other platforms out there is in a launch cost. In the future, I think this is much more ROI evaluation where you look at the cost of acquiring each renter and then the revenue you enjoy for bringing that rent to the site and the lead generation fees pull from owners. So I think in later years, you're doing much more traditional customer acquisition ROI analysis.
Our next question comes from the line of Michael Hung from Needham and Company. Please go ahead. Thanks. Good morning, guys. Hi, Michael.
Just a quick question for you. Can you remind us again and I apologize if I missed this, how many of the 450,000 buildings that are in your database now, like how many are being advertised against? And what's the target penetration opportunity realistically both with respect to marketing and information kind of across these buildings? Sure.
18,500 are currently advertised of the 450,000 we've got in the system, we would like to see 50% advertised. And we can identify at least 35,000 communities that are not advertising with us that have very significant marketing spends on websites that we believe have dramatically less traffic and lower lead quality lead generation than we've got. So we're particularly focused on the, oh gosh, dollars 500,000,000 being spent on other websites that's not being spent being spent on communities that's not being spent with us currently. And we feel that we have a very compelling story to tell those folks. So we'll be very aggressive in the ROI we show the owner.
But we think we have a very compelling story that we're a better marketing solution than other alternatives right now. And just to add to that. So I don't want half, I want all of it Andy. I know I'm a little greedy. But obviously when you look at 18,000 versus 450,000 this is a massive market opportunity.
And we're going to go after a lot of the competing revenue that's out there directly. But clearly over the long term, we are putting together packages that can actually sell up and down that whole spectrum, which doesn't exist in the industry right now. And I think this is one reason why I think that for us the size of the TAM can be much larger than what's out there today. And I think that will become evident over the next couple of years as we roll this out and sell this. So we're obviously very excited
about this. And we have a follow-up question from Andre Benjamin from Goldman Sachs. Please go ahead.
Thank you. Good morning. So my follow-up question was, I think some investors are a little concerned about the potential competitive response and how you would think about the marketing spend and that reaction. So if I was trying to get some context around how much you think you'd be willing to spend longer term and whether you'd be willing to maintain the $75,000,000 spend or something higher if a formidable competitor were to decide that they were willing to also spend big to get awareness and share?
Well, it's important that good question, very good question. And it's important that if you spend a lot of money on marketing to drive people to your website, it's important that you've got a website worth going to once they arrive or else you're spending a lot of money telling the world that they should find a different website. So right now, there is and to best of our knowledge, there is no other website that provides a solid experience overall in the United States and driven largely by the quality of proprietary content we've built here. So this is nothing like the residential resale market for homes where the competitors are all using roughly the same content that's derived from MLS systems and that they're just differentiating on the quality of their UI experience and the scale of their brand. This is something where the content is we're collecting by making 1,000,000 phone calls a month by building lots of different methods and methodologies.
And there's also content that we've built over 30 some years. So it's taken thousands of people working to build the content. We believe the content is by and large defensible. So we don't think that someone could just go you can't go to ListHub and spend $5,000 a month and then spend money on marketing and whip up a website. So you have to actually have something to market to.
And I don't think that I think that there are folks there with okay websites. But specifically when you look at the players in the residential home resale market, 90 percent plus of their revenue right now is coming from residential resale. So and they it would be difficult for them to I think put the overwhelming majority of their marketing spend in the area where they don't have revenue, especially given the fact that the residential resale market is still contested and people are competing in that space. And the models I think are still evolving. So what the big residential brokerage firms are doing to take care of themselves, what NAR is doing to take care of themselves, what Move is doing, what Zillow is doing, I think it would be tough for them step out of where all their revenue is and market to a place where their revenue is not.
Then when you look at the traditional players in this space and those are really the folks who have the $500,000,000 of revenue that we're looking at more closely. In our opinion these are not firms in our opinion that have strong balance sheets. They often have a lot of debt with a lot of covenants. And doing aggressive marketing spends at this scale are simply not an option and would not make sense because their website experience is rated D by renters. And so you don't want to drive people to a website that renters rate as a D.
So I'm trying to keep an open mind to it. But at this point, I have not figured out who would be spending I'm not sure who is confident enough and focused enough on this space to be matching dollar for dollar. In the case of many competitors, if they did that would be a mistake.
Thank you. I'd like to turn it back to Rich Simonelli at this time.
Well, thank you all for your questions. And we look forward to talking to you again soon. And we'll get some back to you next week on the conference call for our Q4 year end earnings. Thanks a lot.
Thank you. That does conclude our conference for today. Thank you for your participation and using AT and T Executive Teleconference Service. You may now disconnect.