The commercial real estate industry encompasses real estate assets such as office, industrial, retail, multi-family, and land for development. According to Pramerica Real Estate Investors, the aggregate value of commercial real estate in the United States was approximately $5 trillion in 2003.

Much like the residential real estate industry, the commercial real estate industry relies primarily on brokers and agents who facilitate sales and leasing transactions for a commission. According to CB Richard Ellis, the commercial real estate services industry in the United States generated approximately $23 billion in services revenue in 2004. This brokerage system is highly fragmented and, according to CB Richard Ellis, the top five commercial real estate brokerage firms accounted for less than 15% of the revenue generated by the commercial real estate services industry in 2004. In most cases, commercial real estate agents associated with both small and large brokerage firms operate as independent contractors, make decisions for property marketing strategies, and seek cost-effective means to market their property listings. It is believed that the majority of transactions in the industry are small and are consummated by local independent brokers. According to the Association of Real Estate License Law Officials, there are over 2.6 million licensed real estate professionals in the United States, including commercial and residential real estate agents.

In addition to the brokerage community, industry participants include tenants, owners, property investors and business operators, all of which are actively involved in commercial real estate transactions. Commercial office, industrial, and retail properties are often occupied by operating businesses, which are generally either rent-paying tenants or owners of those properties. According to the Small Business Administration, in 2002 there were approximately 5.7 million operating businesses classified as “employers” and there were another 17.6 million operating businesses which were classified as “non-employers,” such as small family-owned and -operated businesses.

The Company offers two types of memberships on the marketplace. Basic membership is available free-of-charge to anyone who registers at the Company’s website Basic membership is available free-of-charge, and enables members to experience some of the benefits of the offering, with limited functionality. The premium membership is available for a monthly subscription fee and provides enhanced marketing exposure for property listings and full access to the property listings, as well as numerous other features.

LoopLink is an online real estate marketing and database services suite that enables commercial real estate firms to showcase their available properties both on the LoopNet marketplace and on the brokerage firm’s own website using the Company’s hosted search solution. Within LoopNet, each LoopLink listing is branded with the client’s logo and is hyperlinked to the client’s website.

RecentSales is a comprehensive database of recent commercial real estate transactions collected from sales initiated through the Company’s online marketplace and from third party information providers. The Company’s RecentSales service enables property searchers to review precedent sales data to inform commercial real estate valuation analysis based on asset type, asking and sale price, sale date, property address and size. RecentSales is currently available in a limited number of markets and is available for a monthly subscription or on a per-property-record basis.

BizBuySell is an online marketplace for operating businesses for sale. Business sellers pay a fee to list their operating businesses, and interested buyers can search the Company’s listings for free. Key features of the Company’s BizBuySell service include premium listing placement for an additional fee and paid access to pricing reports that provide a comparative analysis of recently sold businesses and businesses currently available for sale. BizBuySell also offers BrokerWorks, a membership service available to business brokers, enabling them to list an unlimited number of businesses for sale.

Cost of revenue was $3.8 million in the year ended December 2005 and $2.6 million in the year ended December 2004, an increase of $1.2 million, or 48.7%.

Sales & marketing expense was $6.1 million in the year ended December 2005 and $2.9 million in the year ended December 2004, an increase of $3.2 million, or 107.5%.

Technology & product development costs were $3.4 million in the year ended December 2005 and $2.5 million in the year ended December 2004, an increase of $0.9 million, or 38.6%.

Interest income increased by $389,000 to $487,000 in 2005, from $98,000 in 2004.