Editor’s note: This is the second story in a three-part series on portal advertising best practices. See part one here.
San Francisco broker Kevin Markarian’s young, 18-agent firm expects to close 65 units this year, more than three times last year’s total.
The $15,000 his brokerage, Marker Real Estate, spends each month on realtor.com buyer leads drives this explosive growth. The portal accounts for 65 percent of its business.
Zillow-powered Florida brokerage Robert Slack Fine Homes has a similar story. Robert Slack founded the 30-agent firm last October and expects to sell 300 homes this year; 90 percent of its business comes from Zillow buyer agent ads.
The parallels don’t stop there. Markarian’s and Slack’s firms operate as well-oiled, online lead-processing machines with models featuring sharp, well-defined divisions of agent and staff labor.
Their early success signals another way online real estate’s swelling gravity is molding the industry.
Zillow, sister site Trulia and realtor.com accounted for more than 42 percent of traffic to all real estate sites in August, according to Experian Marketing Services. That’s close to a 13-percentage-point jump from November 2013.
A growing percentage of buyers find their own homes online, too, contributing to the portals’ ballooning role in real estate.
Where buyers found the home they purchased
|Real estate agent||34%||38%||34%||33%|
Source: NAR 2014 Profile of Homebuyers and Sellers
A peek into Markarian’s and Slack’s business models may provide a glimpse of the future.
Lean companies, portal-fueled margins
Ready leads from the portals induce a lean, scientific structure at Marker Real Estate and Robert Slack Fine Homes. They spend next to nothing on marketing or advertising outside of their respective portal contracts.
Markarian has one transaction coordinator and one sales manager to support his 18 agents. His realtor.com dollars account for 70 percent of all his business expenses.
Slack’s 30-agent firm has no inside sales agents and just one staffperson. His Zillow spend comprises more than three times his overall business operating costs, including all technology, office space and insurance.
Both Markarian and Slack charge their agents a premium for the portal leads they feed them, a reimbursement for the brokers’ heavy portal advertising outlay.
Markarian’s agents pay a 50 percent referral fee for leads that turn into deals; their split is typically higher when they drum up business on their own. Slack’s agents pay a 40 percent referral fee; they pay a 10 percent split on other deals they do.
Buyers represent approximately 90 percent of Slack’s and Markasian’s firm’s clients, but their companies are young. Today’s buyer is tomorrow’s seller.
|Slack and Markarian’s generalized portal lead-conversion process:
For more details on the firms’ division of labor and lead processing, see part one of this series.
Too reliant on the portals?
Markarian and Slack said they aren’t nervous that their business models are so tied to the portals. Both cited trust.
Realtor.com’s relationship with the National Association of Realtors and its big, new owner, News Corp., fuels Markarian’s trust in the firm.
He also pointed out that he can adapt his model to accommodate different online lead sources if realtor.com ever shifted its model.
Slack, likewise, trusts Zillow Group, the firm that operates Zillow and Trulia. He knows the firm’s leadership, he said, and he has “faith” in them.
He pointed to the recent integration of Zillow and Trulia’s buyer agent ad products as an example (his Zillow impressions now show up across Trulia). In the time since they’ve merged in his market, his lead count has jumped 25 percent.
As a Florida broker — a place that gets a heavy dose of out-of-town buyers — he also thinks that online real estate will be increasingly critical to success in his market.
If things go south? “I’m 68, so I’m not looking 10 years down the road,” he quipped.
Portal mastermind groups help hone models
Both Markarian and Slack maintain a close-knit group of portal-powered colleagues to share portal advertising best practices and continually hone their models.
Markarian has about 20 people in his informal realtor.com group. He typically talks to one or more each month, and the group has talked about doing a conference call. They also may set up a channel on the popular messaging app Slack, he said.
Slack spearheaded his Zillow mastermind group; it has a little more structure than Markarian’s. It, too, has about 20 members, but they use a private Facebook group to communicate regularly back and forth.
Each member spends at least $5,000 per month on Zillow and gets at least 50 percent of their business from the portal, Slack said.