Spending on online real estate advertising will continue to grow during the housing downturn, surpassing spending on print ads by 2011, according to a forecast by Borrell Associates Inc.

The migration of real estate advertising dollars to the Internet won’t happen fast enough, however, to prevent the total real estate ad spend from declining from a peak of $11.8 billion in 2006 to a trough of $10.2 billion in 2009, Borrell predicts.

Although Borrell expects growth in total real estate advertising to resume in 2010, the $11.2 billion projected real estate ad spend in 2011 would still fall short of the record level of spending at the height of the boom. .

During the boom years from 2001 to 2005, spending on real estate advertising increased at about 9 percent a year, before peaking in 2006. Borrell now projects total real estate ad spending will shrink by 3.3 percent in 2007, to $11.46 billion.

“The real estate market went downhill in 2005, and the agents did what they always do at first — they started advertising more,” said Gordon Borrell, chief executive officer of the Williamsburg, Va.-based research and consulting firm, which tracks local advertising. “They ran out of money in about August or September of 2006, and the November to December timeframe is when we started to see significant changes in spending.”

While real estate print advertising in newspapers and local listings magazines is expected to decline by 6.8 percent this year from a record $5.2 billion in 2006, Borrell projects online real estate advertising will grow by 25.8 percent, to $2.6 billion.

Borrell forecasts that online advertising will grow at a more modest 12.4 percent next year, while the decline in spending on print ads will continue and then accelerate. Print advertising is expected to shrink by 16 percent in 2009 and 13 percent in 2010, with online real estate advertising surpassing print in 2011. In 2011, Borrell predicts online spending will hit $3.29 billion, compared to $3.19 billion for print.

By then, Borrell projects, Web sites will have cornered 37.5 percent of the market for real estate advertising, followed by newspapers (27.5 percent), direct mail (12.3 percent), other print (12.1 percent), broadcast TV (3.5 percent), directories (3.1 percent), out of home (2 percent), radio (1.2 percent) cable television (.9 percent) and telemarketing (0.3 percent).

While online advertising will make the largest gains, Borrell predicts cable television advertising and “out of home” spots such as billboards and move theater ads will see market share growth of a similar magnitude. 

“Before, cable and television, really had no relationship to speak of with real estate — there was very little video advertising done by agents and brokers,” Borrell said. Now that it’s easier and cheaper to distribute video on the Internet, real estate firms will start to look at television as another potential avenue to reach consumers.

“Have you ever seen an agent that didn’t have a color picture on their business card?” Borrell said. “These people love to promote themselves,” and will jump at the chance to produce videos not to promote listings, but their own services.

Borrell said that some of the money that once went into advertising now goes into agents and broker’s own Web sites. With the right content and search engine optimization, the sites can lure customers through channels like Google and Yahoo.

“It’s really a concern for the media companies because the deer have the guns now,” Borrell said of agents who are, through their own Web sites, in the content generation business. “All they have to do is go out and buy the keywords on Google and they have the traffic.”

For the moment, however, agents and brokers are spending less on their Web sites, having shelled out thousands of dollars in recent years to revamp them for IDX broker reciprocity.

“They have been accustomed to spending three, four or $5,000 a year to make themselves ready to get listings, and now they are done with that — that’s one reason they are spending more money online,” Borrell said.

So as online real estate advertising grows from a projected $2.6 billion in 2007 to a forecasted $4.3 billion in 2011, who will be the big winners?

The Borrell report says the outlook for newspapers is not entirely gloomy, since the industry captured 18.5 percent of online real estate advertising in 2006, or $380 million. If that trend continues in 2007, newspapers can count on nearly $100 million in additional online revenue to offset a $356 million decline in real estate print ads.

In fact, Borrell projects that the biggest development of 2008 in online advertising could be a “converging triumvirate” of Yahoo, Zillow and a consortium of newspapers that are feeding the sites classified ads.

Zillow this month announced a partnership with 11 newspaper chains that will allow it to take classified listings from 282 newspapers beginning next year (see Inman News story).

Some of those chains were already part of a consortium that allows them to share online text ads and content with Yahoo!

Borrell said Homes.com could be another site to watch in 2008. Dominion Enterprises this month announced the merger of Homes.com and Harmon Homes into a single real estate marketing company to give its property listings wider exposure.

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