They used to be part of everyone’s business model but, increasingly, paid leads simply can’t compete with organic traffic and referrals. Read the latest in our New Normal series, and join us next week at Inman Connect when we take the conversation live.

“The New Normal” is a multistory Inman series exploring what’s returning to normal after the pandemic fades and what will never be the same. Check back tomorrow for a new installment and join us June 15-17 when we take the conversation live at Inman Connect.

There’s no shortage of real estate marketing advice and strategy available to agents today, from branding to content development to search engine optimization.

Traditionally, however, there was another option for agents and brokers who wanted a turnkey, hands-off approach to lead generation: paid leads through an online portal such as Zillow or realtor.com. 

Increasingly, however, the high price and low quality of paid leads, along with the existential threat posed by the incursion of big tech into the real estate industry, has individual agents, team leaders and broker-owners reconsidering the wisdom of outsourcing marketing to a third-party platform. So what if we all just stopped paying for leads?

What’s the problem with paid leads?

Simply put, according to a growing number of real estate agents and brokers, paid leads cost too much and provide too little return on investment. 

Kris Lindahl

In fact, real estate pros lauded Inman contributor and founder and CEO of Kris Lindahl Real Estate, Kris Lindahl, who predicted in his recent opinion column that buying leads could end your business in two years.

“Agents used to be able to say, ‘I’ve got the listings and proprietary data.’ Now, consumers and Big Tech have the data, so what’s your value? If you’re swiping your credit card every day for a third-party company to send you leads … Third parties control your destiny, not you,” Lindahl wrote.

Tarasa Hurley

Tarasa Hurley of Keller Williams Pittsburgh North has already stopped her paid Zillow lead generation due to low quality and high cost. 

“I have been a licensed Realtor for less than one year and have just put my 12th property under contract. Most of my deals have been in the past few months because of my own advertising,” she told Inman in an email interview.

“My first few leads and three deals were from Zillow and were very low price ranges. After those three deals I received no further leads from Zillow despite paying them $1,000 per month for an additional three months,” she said.

She is still paying for realtor.com leads, but she said, “Once my agreement has expired, I will no longer do so. The leads are of low to average quality.” Hurley added that she has thus far failed to convert any into actual sales. 

David Nations

According to St. Louis’ Dave Nations, founder of The Nations Network at Keller Williams Realty Southwest, though their team still pays for around 100 PPC (pay per click) leads monthly, its business is currently 80-90 percent referral-based.

Nations said referrals have the best return. “And when you work your database properly, you will generate a consistent business from it annually,” he added.

Erica Ramus

Broker-owner and Inman contributor Erica Ramus agrees with that approach.

In a recent Inman column, she laid out how her brokerage has pulled back from paid leads, in hopes of helping others who want to do the same:

“Once I realized that the playing field was shifting — that incoming leads seemed to be less and less suited to our office and how we handle the process and that the buyers calling in seemed to be of a lower quality and harder to convert — we shifted our marketing approach.

“In 2020, we revamped everything, and took the online portal buys down to almost zero. Almost. I still believe you need multiple lead-gen sources, and so we’ll keep a minor buy in the internet leads, but it really has been cut to less than 10 percent of the spend we did in 2018 and 2019. 

If not paid leads, what then?

Ramus reported that with her newly freed-up budget, her brokerage was able to diversify its spending into three categories: community building, online marketing (generated from their platform), and print and direct mail.

Michelle Coffing, director of sales with Great Vancouver Homes, Weichert Realtors Equity NW, said that she’s now focusing on SEO built through keyword-optimized blog content after experimenting with paid leads in the past.

Michelle Coffing

“Ultimately, this is a volume game,” Coffing said. “The more keyphrases we target, the greater our chances of ranking for them on Google become. With a steady stream of leads coming to us through Google, the idea of paying leads is a non-starter.”

Hurley is also focused on content generation to find organic leads through online advertising campaigns on Google, Youtube and Facebook. She continues to tweak and improve her campaigns, and she’s seen sales “increase dramatically,” receiving a few solid leads each week, she said. 

Kent Rodahaver, a Florida broker with NextHome South Pointe, uses multiple referral-based services that don’t get paid until a deal closes. However, he finds that “none of these are substitutes for working your SOI and maintaining exceptional relationships with your current and past customers.” 

In 2019, Rodahaver saw 79 percent of his business come directly from referrals and past customers. “In 2020 that number rose to 93 percent,” he said. 

How do tech companies respond to the shift?

As tech companies that sell leads delve further and further into the brokerage business, a mass exodus of paid leads might not matter much as they shift toward serving their in-house interests. However, for other tech companies, like CRM developers, a shift away from paid leads could necessitate a different kind of service for their user base. 

According to Inman’s Craig Rowe, some CRMs have hired staff to monitor agent databases and identify worthwhile activity. This automatic monitoring can help agents surface leads that are suddenly reactivated. “Tech companies are going to have to offer more tools for long-term marketing,” Rowe said, “which means they’re going to likely be more hands-on in their clients’ success.” 

Ultimately, companies that choose to continue providing paid leads may need to spend more time nurturing the leads to improve their quality or depend on less-seasoned agents who buy leads while they work on getting their own marketing platforms off the ground.

Hurley, for example, has been a licensed agent for less than one year and used her Zillow and realtor.com leads as a way to jump-start her business. However, she found that the expense, low ROI and decreasing quality of the leads meant that her own advertising was responsible for most of her first-year deals.

What does the day-to-day look like without paid leads?

Of course, agents will have to do their part and take a more hands-on approach to their marketing, focusing on analytics so that they know what messages are getting responses, what Facebook headlines are working, and what listings are getting the most activity, Rowe said.

Many of the agents we talked to were focused on branding and content-building, creating their own digital realm (online presence, social media, and virtual communication), and driving traffic to their websites.

These strategies involve significant commitments of time and money to generate and sustain long term. That financial commitment is often intimidating, and it’s one argument some agents and brokerage-owners use for sticking with paid leads.

“I find that the ROI [for platform development] is very good but the upfront cost and learning curve is extremely high,” Hurley said. “I think it would be difficult for most agents to do this themselves without paying someone to set up these campaigns.” 

Can money be saved by giving up paid leads? It can, due to the quality of the leads themselves. When agents and brokerages own the leads, that earned business stays for the long haul. “Because it took that buyer or seller more time to make that decision, which means they’re more invested in it than just clicking a few ads,” Rowe said.

Christy Murdock is a Realtor, freelance writer, coach and consultant and the owner of Writing Real Estate. She is also the creator of the online course Crafting the Property Description: The Step-by-Step Formula for Reluctant Real Estate Writers. Follow Writing Real Estate on TwitterInstagram  and YouTube.

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