Real estate advertising spending has softened, but within the category, ad spending continues to shift to online venues, according to a report published by a research firm covering the classified and local advertising industry.

Overall, real estate advertising has been sluggish, with a projected $11.4 billion in ad spend for 2005, up just 2.2 percent from 2004, according to Portsmouth, Va.-based Borrell Associates’ “2005 Update: Online Real Estate Advertising.” But within the category, online advertising is gaining, the report said.

Real estate has been a key money-maker for the newspaper classified business model. That model is changing as real estate brokers and agents take advantage of more advertising opportunities online, such as search engine advertising and lead aggregator services like HouseValues and HomeGain.

Online advertising spent per home sold has already reached $210, more than one-third of the newspaper ad spend, and the trend will continue through 2009, according to the report.

Borrell’s 2004 report found newspapers had a 2 percent loss in real estate advertising market share between 2003 and 2004, while online venues gained 2 percent. The 2005 report found that this trend is continuing, with Web advertising predicted to reach 34 percent of all annual real estate ad spend by 2009.

Because there is strong potential for a slowdown in home sales in the near future, the report predicted that overall real estate advertising would shrink as the online portion continues to swell. By 2009, the report said, online ad spending will reach $3 billion and overall real estate ad spend will decline to $9 million.

The Borrell report also touched on the real estate bubble, predicting that there will be no “overnight burst of a national bubble.”

According to the report, real estate markets are highly regional in nature, and this factor plus the continuing stream of baby boomer retirees used to paying high home prices, mitigate against a bubble burst.

Rather, the report said, home sales will continue to slow as interest rates climb, sales in the Sun Belt will increase above national rates, population shrinkage in the Northeast and Midwest will create real estate bargains, and the emerging immigrant population will have a substantial impact on home sales.

The report noted that one-fourth of all Internet users visited a real estate or apartment site in April 2005, a leap of 26 percent in six months. These visits aren’t necessarily immediately sale-oriented, the report said, but serve to help consumers educate themselves and make plans., HomeGain, AOL Real Estate, and RealtyTrac are the top five real estate Web sites, according to a Nielsen/NetRatings survey presented in the Borrell report. Century 21,, Yahoo! Real Estate, RE/MAX and Coldwell Banker have the five next most visited sites.

The $1.8 billion predicted for online real estate ad spend this year will be split up between traditional media’s Web sites, which will garner 23 percent of the pie, search engines with 27 percent and aggregators and lead generators such as HomeGain, with 50 percent, the report said.

Aggregators and lead generators, including, Homestore, and, account for as much as half of all online ad revenue, or around $900 million, the report said.

This year, according to the report, estate advertisers will spend more than $500 million on paid search listings. “What’s more remarkable is that this form of advertising didn’t even exist three years ago,” the report noted. While the aggregators and referral sites have shown the highest growth rates recently, the report said the search engines “bear closer watching.”

The top search engines for real estate information are Google, with an impressive 77 percent of the market, Yahoo, with 61 percent, MSN, with 31 percent, and Ask Jeeves, with 18 percent, the study found.

“Google is pursuing the real estate market directly,” the report said. The company has been making presentations to major brokerage firms, according to the report.

The full 2005 Borrell Associates report can be found at

The Newspaper Association of America also found in a recent study that classified advertising market share is increasingly moving from print newspapers to online venues, and the association has advised newspapers to take immediate action to protect the franchise.

Print newspapers still dominate classified advertising, but market share is shrinking, the NAA study said. In 2001, print newspapers had 57 percent of the classified advertising market. In 2004, that share shrank to 50 percent, with online newspapers absorbing 2 percent and pure-play venues grabbing 8 percent.

Although real estate advertising remains strong, online advertising in this category has grown approximately seven times as fast as newspaper print advertising over the last eight years and might face a scenario similar to employment, the NAA study said.


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