Over the last five years, Barry Jenkins has used Facebook advertising to grow his real estate business from a solo operation into a 16-agent team.
The marketing channel has been “hugely important” for Jenkins, a Virginia Beach, Virginia-based Realtor whose team closed $50 million in sales volume in 2016.
“You’re catching leads before they get to the [listing] portal, so the incubation period is greater, but the money is there.”
But the golden era of real estate Facebook advertising, a time when scrappy agents could hit the jackpot with a few bucks, may be coming to an end.
As Facebook vies with — or even eclipses — Google and Zillow Group for real estate marketing dominance, the social network’s ad prices are increasing.
Its ads may still deliver a higher return on investment far into the future, as marketing firms and Facebook find new ways to convert social media surfers into real estate clients. But their growing cost is handing an advantage to big spenders over agents with smaller budgets.
“Looks like we’re at the cusp of [Facebook] ads becoming too mainstream, thus upping the price per impression,” Realtor Nicole Lopez recently commented in a Facebook thread, in which other agents lamented rising rates.
“Shutting the small guys out because we can’t afford to pay for the reach we once had,” said the Houston, Texas-based agent.
Facebook video ads are similar to Google search ads in the early 2000s, marketing guru Gary Vaynerchuk argued in March, CNBC reported.
“We are paying $6 to $13 CPM [cost per thousand impressions] on Facebook right now that are going to be $50 to $80 in 36 and 48 months, and everybody is going to be sad that they didn’t jump on it,” he reportedly said.
Facebook’s price per ad more than doubled in both 2014 and 2015, according to SEC filings. Price growth then decelerated to only 5 percent in 2017, but has since picked up, rising 24 percent year over year in the second quarter.
Slowing growth in Facebook’s ad inventory will “play out higher pricing,” Facebook Chief Financial Officer David Wehner said in a recent earnings call.
But for now, Facebook ads still can be a steal.
Real estate broker Shannon Moore said she recently spent about $750 on a listing ad that yielded six contracts and hundreds of leads. Moore, who owns Port Charlotte, Florida-based Green Lion Realty, used Facebook’s targeting tool to push the ad to first-time homebuyers in her local market.
This Facebook ad, which Shannon Moore spent about $750 to promote, has generated more than six listings so far, she said.
Jenkins says his cost per Facebook lead is around $5, compared to over $100 or more per Zillow lead. The difference between the two is that Facebook leads tend to be six months away from transacting, while Zillow leads are much closer to pulling the trigger, he said.
Facebook ads can deliver a much higher return on investment for agents than other ad products, he said, but only if they use follow-up systems to nurture leads into clients.
Competition in Facebook marketing has increased so much in recent years that Jenkins has “unliked” the business pages of colleagues so their ads are less likely to spill into his network of Facebook contacts, he said.
“I still like them as people, but I don’t want them advertising in my sphere,” he said. “You were the only agent a few years ago. Now, there’s 20.”
But while he says his cost per 1,000 Facebook ad impressions has jumped more than sixfold since 2014, his return on investment has barely budged. That’s in large part because he’s learned how to design better ads, he said.
While some agents squander their money on poorly written come-ons, he uses laser-sharp targeting to serve up new or recently sold listings and homeseller guides to just the right people, he said.
Another reason he still gets a lot of bang for his buck is that Facebook has introduced more effective ad templates and targeting.
That’s a key part of the social network’s growth strategy.
“[If] we get better at converting our impressions into things that are valuable for advertisers, [and] we get more efficient at doing that, we’ll be rewarded with better pricing and higher demand … as a result of that hard work,” Wehner, Facebook’s CFO, said in the earnings call.
Facebook’s debut of lead forms has been particularly helpful, Jenkins said. They allow Jenkins to run ads that can capture prospective buyers and sellers’ information inside Facebook, rather than having to lure users to a registration page on his website.
“I don’t care how well my website is done,” he said. “I’m never going to gain their trust the way that Facebook does … the quality of the lead goes through the roof.”
There’s no consensus on what works best on Facebook. Marketers have wide-ranging views about ad designs and targeting, with some arguing that Facebook lead forms aren’t as effective as simply featuring an agent’s contact information.
Facebook takes aim at real estate
Facebook is scouring the social network for techniques that pack the biggest punch. It wants to adapt the cream of the crop into industry-specific products.
“Our best ideas often come from our clients,” Facebook’s Keith Watts, who oversees projects covering the real estate and financial services industries, recently told Inman.
That was the case with Facebook’s first custom product for the real estate industry, “Dynamic Ads for Real Estate.” Built for brokerages and listing portals (not individual agents), it allows advertisers to market relevant listings to Facebook users who have previously searched properties on their website.
“Real estate is an area we’re betting big on as a company,” Watts said. “We think it’s content that consumers want to see … I think there’s a lot of ways that we can help the industry in general.”
Zillow’s threat management
Zillow is acutely aware of Facebook’s potential to gobble up real estate advertising dollars.
“I am long-term long long long $FB,” tweeted Zillow Group CEO Spencer Rascoff in 2015, after disclosing that Facebook was his “largest personal stock position” after Zillow Group. “And I’m watching and learning from their playbook.”
15/ I am long-term long long long $FB. And I’m watching and learning from their playbook.
— Spencer Rascoff (@spencerrascoff) June 17, 2015
Well, more like co-authoring a chapter.
In a textbook case of “coopetition,” Zillow Group will roll out “many, many, many ad products” in partnership with Facebook, Zillow Group Chief Business Officer Greg Schwartz previously told Inman.
The first and only one unveiled so far, “Premier Agent Direct,” pushes ads for Zillow Group agent advertisers to Facebook users who have visited Zillow or Trulia. They include branding for both Zillow Group and an agent, and they can link to custom agent or property pages on Zillow or Trulia.
The strategy allows Zillow Group to piggyback on Facebook’s drive into real estate, turning what might have been a zero-sum game into an alliance.
Many other real estate marketing companies are also building products on top of Facebook advertising, including Adwerx, BoomTown, Back At You Media, Homesnap and Commissions Inc.
These products may or may not deliver a higher return on investment than do-it-yourself ads cooked up by resourceful agents, but they tend to require minimum outlays that can dent the wallets of smaller spenders.
All of this — rising demand for Facebook ads, slowing growth in inventory and the proliferation of real estate-specific products — gives an edge to deep-pocketed brokerages and teams.
It’s part of a mega-trend playing out across the digital real estate marketing, epitomized by Zillow Group’s decision to focus on “super agents” (often teams who spend at least $60,000 annually) and phase out sales to smaller spenders.
Chris Smith, co-founder of real estate software and marketing provider Curaytor, says many agents should master the art of of Facebook advertising now before the learning process becomes more expensive.
“The writing is on the wall” for real estate businesses with small marketing budgets, according to Smith. “As more and more of your competition is able to get in front of your sphere [of influence],” absent diligent follow-up, customer loyalty will fade.
“This is the golden era,” he said.