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by CareyBot

Companies that rely on online realty advertising as part of their revenue model may find both new opportunities and threats in today’s housing markets. Conventional wisdom argues that brokers and agents spend more money on advertising in buyer’s markets, yet skeptics say those same brokers and agents hold on more tightly to their smaller wallets in such times.

The argument in favor of higher ad spending may be supported by the reality that homes can be more difficult to sell in weak markets, and that may necessitate higher advertising expenditures to attract well-qualified buyers.

That’s already happening with respect to advertising for-sale home listings, according to Frank Breithaupt, vice president and general manager of Homescape.com in Chicago. Brokers and agents “know they need to have listings on Web sites to get exposure in a relevant way,” Breithaupt said at the National Association of Realtors convention in Las Vegas this month.

Moreover, he added, brokers and agents also need to spend more to make sure that their listings are displayed prominently and that they themselves are viewed as dominant in their own marketplace. “Just getting listings out is important, but not enough,” Breithaupt said. “You also have to set yourself out from the pack and highlight your brand.” Yet Breithaupt also observed that brokers and agents will be “looking harder at where they spend every dollar (to see) what is paying off and what’s not.”

Others say realty practitioners don’t spend more on advertising in slow-moving markets because they simply don’t have as much money in their budgets. Sam Sebastian, director of classifieds at Google, observed that newspaper realty ads in particular had “gone off a cliff” and that data suggested the conventional wisdom of increased ad expenditures was “not a valid argument.”

Sebastian, also at the NAR convention, speculated that realty marketing dollars would “sit on the sidelines” for perhaps six to 12 months while brokers and agents “recalibrated” and “put some dollars in their pockets.” After that, he suggested, the market shift could be an important and significant catalyst for growth in online realty advertising.

A study released last week by Borrell Associates was even more bullish than Sebastian’s speculations. The firm predicted that the online component of real estate advertising would grow almost 26 percent to $2.6 billion this year, moderate to a still-strong 12 percent growth in 2008 and then soar to $3.3 billion in 2011. By then, Borrell suggested, Web sites could control 37 percent of the realty advertising market, a larger share than all other forms of advertising.

One way to reconcile these disparate predictions may be to segment the broker and sales associate population by productivity. Errol Samuelson, president of Realtor.com, a division of Move Inc., said Realtors who are new to the business may not have the means to spend more, but highly productive Realtors may view a seller’s market as an opportunity to gain market share through increased visibility. Either way, he said, many agents will “get thoughtful” in this market and take a closer look at their expenses. Samuelson also commented at the NAR convention last week.

Either way, these companies and their competitors still need to figure out how to capture brokers’ and agents’ advertising dollars. One popular approach is to press the purported advantages of online marketing compared with other traditional forms of realty advertising such as newspaper ads, postcard mailers, church bulletins, customer newsletters, bus bench ads and for-sale signs, among others.

Proponents claim that online advertising captures a larger pool of prospective home buyers and sellers, and that those prospects are better-informed about real estate markets and transactions. But two caveats apply: First, those prospects may be no more ready, able or willing to transact than prospects identified through other means, and second, these supposedly well-educated people may have been exposed to biased or even erroneous information online.

Moreover, realty Web sites as a group have yet to demonstrate convincingly that online advertising results not just in more leads, but also in more closed business. Advertisers can track the connection between an online ad and an “initial expression of interest,” to use Sebastian’s words. But beyond that, the system breaks down because there is no direct reliable way to track whether an online ad caused or contributed to the sale of a particular home.

Sebastian believes Web site operators need to make a significant investment to educate realty brokers and salespeople about the utility of online advertising’s products and tools. Companies need to at least “double down” or even better triple or quadruple their efforts, he said.

In the meantime, every Web site in the space is hurt by the lack of back-end measurement of online advertising’s effectiveness, Breithaupt noted. “The (realty brokerage) industry doesn’t understand the media or recognize the value,” he said. “If they don’t answer the leads and evaluate the leads, that would be a waste and that would be a shame.”

Marcie Geffner is a real estate reporter in Los Angeles.

Copyright 2007 Marcie Geffner. All rights reserved. No part of this article may be used or reproduced in any manner whatsoever without written permission of the author.