Storms Ahead for Real Estate Sites
by Simon T
Tech pundit Om Malik writes that the slowdown in the housing sector, and the greater uncertainty in the U.S. economy as a whole, is likely going to have an impact on advertising spending. I’ve been saying the same thing for a while (see What the Subprime Mess Means for Real Estate 2.0) now.
Om quotes a recent report by TNS Media Intelligence that says:
Total advertising expenditures in the first half of 2007 slipped by 0.3 percent to $72.59 billion versus the same period in 2006…
Strangely, August’s Neilsen Netratings report (PDF) of the top 10 Web advertisers also came out this week and it actually shows that three of the four mortgage/financial advertisers on the list (including Countrywide Financial) have increased their spending over last month (PDF).
But does this mean the gloomy prognostications are off base? I don’t think so.
Rather, I suspect that online ad spends in real estate are reaching the top of the curve, with perhaps just a minor boost in spending to counter the bad news last month. According to Internet Outsider, the month-to-month growth in spending by Countrywide, for example, is slowing; from $30 million in June to $35 million in July to $35.4 million in August.
It’s really too early to tell how this trend will play out - but if there is to be any large scale slowdown in spending I’m guessing we’re only at the beginning.
There’s one more factor to consider in all of this.
Malik goes even further in his post to suggest that this impact will be felt most severely at the large portal destinations, whose margins may be being squeezed by growing inventory levels at other destinations.
Social networks and social media sites are creating inventory at a rapid clip, and are one of the main reasons why the CPMs (cost per 1000 impressions) have stalled.
Hypertargeted advertising is the holy grail of online advertising; and social networks and social media can deliver that more accurately than a portal or destination site. Social networks like Facebook deliver authentic consumers, rather than faceless “uniques” and can do so in specific niches. Likewise, blogs can deliver passionated readers rather than random “surfers” - just look at the passionate communities Blown Mortgage, SocketSite and Curbed have built. The final link in this chain are the vertical ad networks like Blogads or Federated Media that are making it easier for big brand advertisers to reach out to these readers.
Finally, as advertisers start to shop around, a glut of inventory means only one thing - lower prices and less profit. Sound familiar? This hardly news to anyone trying to sell a home right now.
So, in a way, the prospects of the big ad-driven Real Estate 2.0 plays (Zillow, Trulia, et al.) could very well mirror what’s happening in the housing market. Money’s coming off the table (buyers are holding back) and profits are getting pushed down (too much inventory on the market). Bad news all around.
I could be wrong in this assessment. Part of me hopes I am.
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13 Comment(s)
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Andrew | Sep 13, 2007 | Reply
If anyone is going to suffer it will be Realtor.com. Showcased listings subscriptions are down this year compared to last year. The trulias and zillows should be fine since they serve ads and have plenty of inventory to serve. If they can continue to create page views they will be fine.
Brian | Sep 13, 2007 | Reply
Andrew, I agree about Realtor.com not making the big bucks anymore on such products as showcased listings, but any site that allows really targeted advertising as stated in the post will be in a better position than others. I have actually started advertising with HouseFront.com (kinda like trulia and zillow) and it allows me to pick anything from a specific address all the way up to national campaigns (super targeted). The shotgun affect for advertising; throw up a bunch of ads and see whats sticks is on the way out.
David G from Zillow.com | Sep 13, 2007 | Reply
Hi Joel,
When Rich responded to your earlier post he predicted that a reduction in advertising budgets and increased focus on advertising’s ROI would accelerate online advertising. This data seems to validate his theory. Additionally, many of Zillow’s ad clients aren’t in the real estate game. Our site’s audience is growing and with it are ad revenues and CPM’s.
David
Incredible Agent | Sep 13, 2007 | Reply
I agree with David G. to some extent. More attention will be payed to ROI and the bottom line. However, I have to say the pinch is definitely on. Fewer people shopping for Real Estate right now means a decrease in traffic as a whole in our space. Real buyers are getting harder and harder to come by everyday and fewer are willing to engage a Realtor online. Traffic isn’t everything. Just because your website is getting visitors doesn’t mean they eventually convert to a lead or a sale. If you aren’t getting results for your advertisers, then you’ll have fewer advertisers. It’s just that simple.
Mark Pilatowski | Sep 14, 2007 | Reply
IncredibleAgent, while you are correct that there are fewer buyers and this will hurt traditional real estate sites I believe David G makes a point that Zillow is not relying on home sales for revenue. Their model relies on advertisers and as he mentioned many of the Zillow advertisers are not realtors. They have many advertisers outside (or at least on the periphery) of the RE industry. As their visitors increase so do their ad views and CPM rates. Their may be fewer realtors spending money there but in their place will be financial services and other semi related industry advertisements.
Jonathan Bednarsh, OnBoard LLC | Sep 14, 2007 | Reply
Clearly the super-high growth rates experienced by many sites (many companies) in the boom is and will continue to slow down. However there will still be nearly 7 million homes sold this year. Those transactions still represent huge numbers of buyers and sellers who will go online throughout the buy/sell/research process, and a terrific opportunity for websites that cater to that mass of consumers. All is not lost….
Russ from BidSelect.com | Sep 14, 2007 | Reply
Some pertinent quoted stats
- Buyers have changed, 80% of today’s buyer’s start thier search online, yet only 13% of a Real estate agents advertising dollars are spent for online marketing. (Nar Profile of Home Buyers and Sellers)
- Most home buyers use the 1st agent they interview, why? Because its proven most buyers have searched on the internet for 2 full weeks before contacting an agent- they know exactly who they want to use by whom they see as most successful on the internet.
- Homebuyers, who found an agent online, were more staisfied with thier agents than traditional buyers in all aspects of the home-buying process (CAR Internet Versus TRaditional Buyers Study)
So internet advertising should be the last place to cut advertising dollars. In fact, they should increase thier advertising on the internet and get rid of all the rest.
Mark Eibner | Sep 14, 2007 | Reply
Rich, David and the gang from Zillow are right on…rev is up at Zillow and it will be UP with all the majority of web 2.0-community-transparent enterprises. Traditional static forms of media will be on the loosing end of the stick. More and more humans are spending more time in the 2.0 world. They are leaving the expensive and poor ROI medians behind. Advertisers, whether they be brokers, industry specific or outsiders are all realizing web-based marketing is the silver bullet we have always wanted, REGARDLESS OF THE MARKET CONDITIONS. We are just beginning to see the tip of the iceberg on cool web 2.0 solutions. (www.terabitz) Thank you Jonathan for reminding all of us that 7 million sales is a far cry from running back to our caves! The Real estate industry, including web sites, has been due a spanking for a long time. Cleansing and cleaning is a good thing!
Tom at The Real Estate Bloggers | Sep 15, 2007 | Reply
Russ
That is the trend that I am seeing also. Realtors are taking money from other marketing media during the slowdown and putting it into online advertising.
The real losers may not be the web plays but the newspapers and older media when it comes to the real estate slowdown.
When it comes to mortgage advertising, there I can see a slowdown with online revenue as they were pioneers in online marketing and the industry spend will decline as players drop out and the industry consolidates.
Confidential | Sep 15, 2007 | Reply
If you are “already in the process” of getting ready to launch a real estate listing site using video, contact me at away75904@mypacks.net
Hawaii Life | Sep 15, 2007 | Reply
I own an advertising agency as well, and the thing we always tell our client’s is to increase ad spending during down times. But not everybody follows this advice!
Carson Coots | Oct 10, 2007 | Reply
The supposedly cheap advertising presented by social networking isn’t really cheap at all. It involves finding a “voice” for your company (much like you are Joel) a “social media manager” which is a blend of PR and active networking. I have seen some SEO companies starting to re-package their service with this focus. But it almost requires more work than traditional ads, since you can just throw money at it… or outsource it to any old agency. You have to have a consistent, useful message, edit it, track it, respond to comments, etc. Larger companies look at everything under a microscope too… “can we say that?… but what if this happens” You have to basically become a paranoid publisher. At least that is what my experience is trying to sell the idea in a corporate environment.
retrove.com | Oct 15, 2007 | Reply
Personally, I think the RE companies and agents that make it past the slump are those who already embrace online advertising. The “traditional” agent who previously “played (driving up CPC)” with online advertising will be squeezed out financially of the market, leaving bigger market share for the good early-adopter agents / companies who understand / measure online media and advertising. This will lower the cost of advertising but more advertising dollars will go directly online instead therefore increasing dollar spend overall.
As noted above, the reports are already telling everyone where the remaining consumers are, so business will follow. The ability to measure the CPCS “cost per closed sale” is valuable and is getting alot easier for agents / customers to measure with free tools G analytics. They will seek out more places to advertise their listings “directly” to the actively looking consumers… i.e. T & Z.
Another way to know that the market is bright for advertising is to simply think of the other advertising options for generating business? Will agents go back to bus benches? Direct mail at .50 a piece? Magazines? I don’t think so.