Real Estate Portals Costs – It Could Always Be Worse!

5 minute read

In the past month I have purchased a new Subaru Liberty 3.6R MY10 model and I took some time out during that process to check out how the internet, emarketing and social media is effecting the motor vehicle industry and I was genuinely surprised by the results.

First I tried to do some research on the make and model I was looking to purchase and found very very little information on the car itself outside of the standard manufacturers blurb. Even all the online driving reviews were only 10 to 20% original and the rest was padded out with the manufacturers press releases word for word.

I visited a number of dealer websites and they were flashy enough but provided very little substance or information.  I found only one business based site that went to the trouble of creating unique content and conducted significant research. The only other websites that provided anything original were the enthusiast websites and forums.

I could not find any blogs run by Subaru dealers, nobody on Twitter tweeting the latest news for that manufacturer or any dealer fan pages on Facebook. No matter what I tried emarketing seemed to be non existent.

I started searching outside of Australia and found excellent examples of Motor Dealers embracing social media. Austin Subaru for instance has around 4000 facebook fans. Every time they post something to their facebook page 4000 local subaru enthusiasts get the message and when one of those 4000 fans comment or click on the “like” button all their friends get the message too.

The next thing for me to check out was the Portals. The motor industry online is dominated by several portals the same as the real estate industry but that is where the similarities stop. What I did not notice at first was that you do not see on the portals any dealer contact information anywhere. The portals completely control all contact between the dealer and the interested party. To make a phone enquiry you have to dial a number and punch in the car ID to be connected.

As a prospective purchaser this was downright annoying but it wasn’t till I realised that the portals were controlling every single enquiry so they could charge an enquiry rate that I was really disgusted as it made the whole enquiry experience very frustrating.

So how much was a dealer being charged for a single enquiry? What would you think would be fair? I was thinking $2 or $3 maybe. I naturally asked my dealer and was shocked with the answer. They told me car dealers are paying well over $30 per enquiry and apparently many are paying much more than that as well. That’s $30 for every phone call or email generated by the portal. Apparently it’s not unusual for a potential customer to continue to use the portals phone number to contact the dealer again which just magnifies the whole cost.

As you can imagine large car dealers are paying a serious amount of money to these portals every single month. It appears to me that because they have not created their own online presence or invested in other forms of emarketing they are locked into using these portals and their extortionate prices.

Now this is the part that really confused me. The keyword tools in my Google Adwords account tells me that the average CPC rate for  keywords like subaru, subaru liberty and subaru impreza is under 40 cents so if you are going to pay that much for each enquiry from the dealers why dont they invest in pay per click campaigns targeted specifically at new car purchasers. Google Adwords allow you to geographically target your ads down to a particular town or city which is perfect for the car industry. Real Estate agents generally operate in much smaller areas, as small in some cases as one or two suburbs of a whole city. This means that geographic targetting can have mixed results for our industry but not so with car dealers.

I ran a few searches online for Subaru cars and all the ad slots were filled with the different car portals including carsales.com.au, carpoint.com.au, privatefleet.com.au and carsguide.com.au. Not one local dealer trying to generate enquiries at a fraction of what the portals would charge.

Now real estate portals use adwords too but because of the per enquiry charge rate  of the car portals they are effectively engaging in a form of “Enquiry Arbitrage”.   They buy an enquiry or a click for $1 from Google then they sell it to a dealer for $30. Now not all those clicks will convert to an enquiry but what if they get just a 10% conversion rate that’s still a 300% return on their investment.

Too often we look back and say that real estate agents as an industry have not done enough to insulate themselves against the sheer market strength of the real estate portals. But in light of how the motor industry are treated maybe we should be looking at the glass half full not half empty.

On another note, maybe REA should look at the motor industry. A corporation has to be constantly growing or its share prices suffer. Because they have saturated the Australian market they tried to expand overseas but was obviously no success and they ended up retreating out of some markets and blowing their investment. So instead of ramping the prices up on agents why dont they diversify in the motor industry. They have the experience in online classified advertising and their model would compete well against the per enquiry models.

Now I am the first to admit that my experience with the motor industry online is pretty limited so if anybody has anything to add on the subject I would love to hear it.