NS: Most people know that Bankrate
TE: Sure, Bankrate not only provides rates for mortgages, but five-year, 10-year, 15-year, and 30-year mortgages, Jumbo mortgages, interest-only mortgages, and ARMs. Additionally, we provide rate information on CDs, money market accounts, checking accounts, credit cards, and passbook savings accounts. So it's a comprehensive list of products in, as you mentioned, over 400 local and regional markets.
NS: Logistically, how do you actually process and compile all that data, and how many people does it take?
TE: There are a couple of processes by which we compile the data from the financial institutions. Much of the data is inputted electronically by the financial institutions themselves and updated up to three times a day. We have a team of people that review the data for any unusual or "out-of-pattern" rates. And we then have a team of a dozen or so people in Quality Control who contact random banks and lenders on a "mystery shopping" call, posing as consumers to confirm that the rates posted are being honored by those institutions. It's a process that works pretty well for us.
NS: Bankrate is much more than just tables of raw data. Your flagship website, for instance, contains a wealth of practical tools and other content designed to help consumers make informed financial decisions (something we here at the Fool can certainly appreciate). How important is the educational component of your business?
TE: It's very important to our users. We have calculators and tools as well as a host of editorial packages on a variety of subjects that our users rely on to educate them. We want them to consider Bankrate that trusted friend that they can rely on to help them make smart, well-informed choices that affect their personal financial lives. Our editorial staff does a great job of providing our users with practical, helpful, and timely advice on a great number of financial subjects.
NS: With the Fed adopting a more restrictive monetary policy, many fear that Bankrate will be adversely affected by a slowdown in consumer loan activity. On the other hand, demand for money market accounts, certificates of deposit, and other short-term fixed-income instruments should be rising. Ultimately, what is the net impact on the company from a continued rising rate environment?
TE: Ultimately, what we benefit most from is a changing environment. Volatility and change is good for our business. When rates go up and the re-fi market slows, our deposit business, CDs, and money market traffic increases. So Bankrate can be successful in both a rising and falling interest rate environment.
NS: After pulling out of partnerships with MSN and AOL, Monster.com's CEO Andrew McKelvey recently challenged the assumption that site traffic is directly correlated to sales. With your own traffic down markedly from last year's peak, are you concerned by the downtrend, or do you share the "quality over quantity" belief?
TE: Yes and no. We had anticipated some decline as a result of the refinance market slowing. However, as I mentioned, we've seen an increase on the deposit side. The nature of what Bankrate has to offer gives us an edge in that we are used by people who are largely "in market." They are coming to Bankrate at a time when they are looking to make a financial decision. Our quality remains consistently high, so we like quantity as well. Interestingly, even in difficult economic times, there are still, for example, 6.5 million homes sold a year. There are 14 million cars and trucks sold a year and billions of dollars seeking an investment rate of return. The point is that even in what would be considered "bad economic times," there are still a lot of people looking for the best rates for their loans and deposits. That's good for Bankrate.
NS: During the second quarter, Bankrate picked up 72 new hyperlink advertising clients, four times the number of graphic advertising clients. Is this reflective of a concerted shift to target recurring hyperlink revenues over traffic-sensitive graphic ad revenues?
TE: No, actually the hyperlink advertiser is just an easier sell. Generally, graphic advertisers are making a larger dollar commitment, so the number of advertisers is going to be smaller, but the dollars larger. Our second quarter was a good one for graphic advertisers. We had more, new traditional brick-and-mortar institutions begin advertising on Bankrate than ever before, and it's a trend we hope will continue. Our hyperlink growth is again proof that the Internet is great medium for the financial institutions looking for customers, and we are told by those advertisers that no one provides those customers better than Bankrate.
NS: Bankrate Canada is now up and running. What is your outlook for this new venture?
TE: Bankrate Canada was just a great way for us to test the portability of our model into other markets. It's a relatively small venture, and we are pleased so far with its progress. We have some decent traffic to the site and some advertising support. So far, so good.
To lean more about Bankrate's outlook, read the entire interview:
Nathan Slaughter does not own shares in any of the companies mentioned in this article. The Motley Fool is Fools writing for Fools.