E Loan's snail worked, but it was too slow

The Warehouse has taken over running mortgage comparison website E-Loan because the business was not sufficiently profitable.

Under the deal, which was announced just before Christmas, E-Loan has been split into two units. One, the B2C side of the business, is now jointly owned by The Warehouse and listed company eVentures. The business has been relocated to the Warehouse's head office on the North Shore and the Big Red shed has taken over management responsibility.

EVentures, which set up E-Loan in New Zealand, will concentrate on selling the comparative software tool which is the core component of E-Loan in the Asia Pacific region.

E-Loan chief executive Bruce Gordon says the changes have been made because the B2C e-commerce model many businesses were using wasn't working.

That model relied on stand alone e commerce businesses building brand profile, and hoping the large number of site visitors would turn into profitable customers in the future.

"It's fair to say that the entire world has changed its point of view on what is a sustainable model for marketing a B2C business.

"Investors have cooled to that model," he says.

Gordon says the high profile branding campaign was successful: "The snail worked for us."

On the financial side E-Loan's supply of cash had dried up, the cost of customer acquisition was too high, and the business wasn't profitable quick enough.

Originally E-Loan Inc in the US was to provide 50% of the cash for the business. However, that source dried up after the tech sector fell out of favour with investors last year.

Neither, Mitchener, Gordon, nor Warehouse chief operating officer Greg Muir will say what the Warehouse paid for E-Loan, or if it parted with any cash.

E Ventures chief executive Cindy Mitchener says part of the problem with the B2C set up is that "the cost of customer acquisition was too high", so it became necessary to explore other options.

E Ventures went to the Warehouse (which had a minority stake in the listed company) because E-Loan "was not sufficiently profitable quick enough as a stand-alone business."

Gordon and Mitchener say that although the model wasn't working, E-Loan, on a relative basis globally, was successful.

Neither will say how many loan deals were closed. However, the number appears to be small.

Mitchener says the application to closure rate was 22%, compared to 18% in the US.

Gordon says E-Loan has processed about 200 credit card applications since the service was launched in November.

What happens in the future is still unknown. Muir says the company will unveil its financial service plans in about two month's time.