The $11.5 billion that real estate brokers and agents spend on advertising is being spent in new ways, according to a new study on online real estate advertising by Borrell Associates. Brokers and agents this year will spend $1.3 billion, or 11.2 percent of their budgets on Internet media.
In the last seven years, online ad spending went from $14 to $148 per home sold, while newspaper ad spending went from $755 to $605 per home. A variety of factors have caused the change, including cheaper rates of advertising online versus print media, and the ability to track results of Web advertising.
“Two companies control nearly one-third of all ad spending in this category,” according to the report. They are InterActiveCorp’s network of LendingTree, RealEstate.com and ServiceMagic with 16 percent of online real estate advertising; and the Homestore network with 14 percent.
Newspaper-run Web sites control 10 percent of online advertising, while HouseValues, ZipRealty and HomeGain each have 3 percent. The remaining 51 percent of online ad spend is fragmented among “other sites.”
The shift in ad dollars naturally follows the shift in consumer eyeballs. Consumers can view up to 15 times more listings on a broker Web site than they can in a local newspaper, which makes it the popular choice for house hunting. The Internet is now the number two medium for reaching home buyers–second only to yard signs, and 75 percent of consumers use the Web in their home searches, according to a National Association of Realtors survey.
As more agents and brokers put money in online advertising, the competition in the space is intensifying. Two companies–HouseValues and ZipRealty–filed for an initial public offering this year. Barry Diller’s InterActiveCorp has continued its expansion by acquiring ServiceMagic, making it the largest player in online real estate in terms of revenue. Two major Web portals–Yahoo! and MSN–switched strategies and formed new partnerships: Yahoo! paired with Prudential Real Estate and MSN paired with Realtor.com.
In addition, two other aggregated listings Web sites, Homeseekers.com and Homes.com, emerged from bankruptcy.
The main source of revenue for these companies with the most online advertising share is referral fees, according to the study. Brokers and agents have pulled their ad dollars away from paying to have their listings displayed on aggregator Web sites like Realtor.com, and now spend money on lead generation and paid search channels.
Lead generation sites HomeGain and HouseValues generated nearly all of their revenue from lead-generation programs, while Homestore and Realtor.com in the first half of the year generated no revenue from listings fees, the study noted.
Multiple listings services have played a key role in the shift from print to online media. The Web has caused MLSs to change focus from publishing monthly listings data now to electronically delivering listings to broker and agent Web sites.
The study found an average 85 percent of all MLS listings are available on the Internet through Internet Data Exchange (IDX) Web sites. And 53 percent of MLSs now offer direct public access to home listings online. However, in a few cases, brokers forced their MLS to shut down the public listings Web sites because to trim competition with their own broker sites.
Despite the increased availability of listings online, MLSs maintain a “stinginess” with home listings, providing them only to a select few, the study found. About 97 percent of MLSs provide listings to Realtor.com, 27 percent provide listings to local newspapers, 17 percent provide listings to Homeseekers.com, 7 percent provide listings to Homes.com and 10 percent send listings to other channels.
“While it’s difficult to predict whether more MLSs will share their listings with online media companies, conditions indicate that the reverse might occur,” according to the study, which surveyed 30 MLS executives, representing 18 percent of the 2.1 million home listings in the U.S.
Online listings sharing has become a contentious issue because brokers now view listings as an asset. Some brokers don’t want their listings to appear on other brokers’ or advertisers’ Web sites.
Going forward, the shift in ad spent from print to online is expected to continue–even if home sales slow from their record pace.
“When the superheated home-sales cycle ends, online media may accelerate significantly as real estate advertisers weed out their less-efficient marketing efforts and focus on the most trackable advertising with the best return–the Internet,” according to the study.
A slowing market may even fuel a growth in online ad spend. “If and when (a downturn) occurs, real estate advertisers will undoubtedly sharpen their pencils and concentrate on the most efficient media.”
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