Rising rates could prune LendingTree.

• Author: Breznick, Alan
• Position: Money Matters

Less than three years after going public, LendingTree Inc. has taken root in the minds of customers. It's even borne some fruit for investors--especially if they bought when the stock was below $5 a share late last year. The Charlotte-based company (Nasdaq: TREE), which operates a Web site where lenders bid for customers by pitching their rates and terms, doubled annual revenue to $64 million in 2001 while spending heavily to promote itself.

In 2000, it spent $56.6 million--most of it from its stock offering--on advertising and marketing. That was nearly double its sales and far more than its competitors spent. LendingTree's spending spree continued last year. An additional $39.9 million, 62% of sales, went into national television and radio ads.

So far, it's working. With its seemingly ubiquitous ads claiming that "when banks compete, you win," LendingTree has built a large customer base, processing 1.4 million loan requests and brokering $12.1 billion in loans last year. "If you ask 10 people where they would go online, six or seven would say LendingTree," says Christopher Penny, an analyst at Virginiabased Friedman, Billings, Ramsey & Co.

LendingTree collects a fee ranging from $1 to $9 from lenders for each loan application and a fee of $35 to $700 when loans close.

In the first quarter, the company handled fewer refinancing requests than before but processed more...