Disclosure upfront – for over 10 years now I’ve been running a niche real estate portal and web development business. During that time, I’ve often pondered how much money was being collectively wasted on real estate print advertising. I believe that figure (in Australia alone) is now over $1 billion.
According to IBIS World Research (July 2009), real estate advertising will this year (2009/2010) reach $1.56 billion in Australia. That makes it the second largest advertising sector after fast food ($3.3bn), and is greater than auto industry ($997m), banks ($966m) and supermarkets ($774m). Now, every time I turn on the TV these days (which admittedly, is less and less) ads for burgers, cars, banks and supermarkets abound. The 4 great necessities of life I suppose. I’d imagine these guys to be spending big time.
I’d always known real estate would be spending lots too, but to see them firmly in second place (above the other named high ad spenders)?
Moreover, when you consider the fact that 55% of all property enquiry now comes from online advertising (Macquarie Bank, Real Estate Report, Nov 09) then there is something seriously wrong.
If we take the 55% as an average across the country – most of my clients tell me it’s more like 70 or 80% – then at least $850m should be spent on online advertising. However, the best guesstimate I can make is it’s actually $240m. (Frost & Sullivan’s 2008-2012 Report suggested 15% of total real estate ad spending is online). If realestate.com.au takes in $150m or so, Domain $50m and the table scraps are being picked up by the rest ($40m), this also suggests a $240mn total.
So if 55% (or more) enquiries are coming from less than 20% of the spending, where is the other 80%+ of spending going? I think we all know the answer to that one – print.
Now I know that advertising is not only about selling, it’s also about branding, differentiating and getting new listings (in the case of real estate), but how can the remaining $1.3 billion be justified if it is not creating the business enquiry of a spend one quarter of its size? (I’d also argue that branding and the rest can be done online too.)
When posed the question, most real estate agents tell me it’s because their sellers expect print ads. Even if told it is a waste. Perhaps the sellers need educating. Perhaps some agents also like to see their name in lights (well, the local rag made from dead trees anyway) and it’s a competitive forces (“they advertise all over it, so we have to be there”). How much business would be lost if they (collectively, or even unilaterally) halved their print spend? How much money would be saved?
Yes, the print spend is falling (slowly, but inexorably). However, more than a decade into the new economy I can only see justification for maybe an equal split of offline and online ad spend – say $250m each or so on each – and that still leaves a $1 billion dollar black hole.
Please excuse me while I go and have a quiet sob in a darkened room.
Photo credit: the Torus Black Hole, NASA 2003
10 Comments
Craig
Nathan, using a sample of just one day would be too little to come to any real conclusion. You probably need to do it for several more days to really confirm the correlation.
Robert Simeon
Brilliant article Charlie and OUCH!!
By pure coincidence I just had this discussion with two agents in my office who were discussing why agents keep recommending Auctions. I jumped in and said it’s easy – they can’t find a buyer because their oxygen is Vendor Paid Advertising.
It is an industry embarrassment how backwards agents are with technology – absolute laziness. They refuse to run database because they takes time and effort as against continually asking vendors for their pocket money so that they can survive.
I just printed this article and delivered a copy to our sales team – guess what is going into our marketing submissions 🙂
Nick
Unfortunately, your black hole pic seems to be missing. 🙂
I’ve wondered for a while why you see real estate ads in papers advertising individual properties rather than saying Brand XYZ has houses where you want to live. brandxyz.com.au
I’ve come to the conclusion that before the net, newspapers were effectively real estate portals. Nothing has changed since then.
If a agent has a fancy new house to put on the market, they put it on all the portals: RealEstate.com.au, Domain, Luxury Homes Australia and then the news papers.
It doesnt seem to cross their minds what the relative cost is. They just need to put it on all the portals.
Nathan Krisanski
Interesting article. We hear this over and over again.
Something to consider…
We recently had a larger than normal spread in a Sunday paper and our online numbers shot through the roof that day! Over 100% increase in traffic. You just can’t explain that other than people saw these properties in the paper and went online to find out more.
So surely there is a need to find a balance between online and print advertising costs.
Glenn Batten
Charlie,
Great article . Although it is something we have all “felt” you have quantified it beautifully!
PaulD
So Nathan, are you saying that if the properties were not in the paper, the people wouldn’t have seen them – I don’t think so ! I understand that the percentage of people who go to the internet first is approaching 90% these days.
Glenn Batten
Nathan,
I dont fully understand your point. Charlie is talking about the spend side of it. IMHO your example actually reinforces his point.
You can throw money at a range of different media to increase your web traffic. Billboards, magazines, direct mail, SEM etc etc. but at the end of the day this article is primarily about we spend the money.
Lets look at just that one day you refer to. 50% of your traffic cost you a fortune because it was driven by print. A Sunday spread even at Ray White rates don’t come cheap. 50% came from a range of other online initiatives.. such as portals, SEM, SEO etc etc. that we already in place.
Was that additional 50% value for money well spent?
In an apples to apples comparison print is the big loser but naturally there is far more to it…which got more people to call on the phone?, which got more people to open houses? and to conduct and inspections? who would have called anyway even if it wasnt into the paper? None of these things are easy to answer…
That debate will wage on!
Bill Burdin
However, the best guesstimate I can make is it
Charlie
So if we are agreed $1bn is wasted (are we?) then I’m interested in some answers – is it the sellers’ fault? agents? both? anyone else?
– how can we help agents convert sellers/themselves away from print? throwing scorn won’t work, so more education (facts and figures) is required? case studies of people who’ve been weaned off print and done well nonetheless?
Interested in more thoughts…
Simon Baker
Charlie
Great article
Here’s a little comparison for you. It is estimated the the spend on real estate advertising in Germany and the UK is about the same as in Australia. Yet these markets are substantially larger.
So what is the big difference? Vendor paid advertising.
In these other markets, the agents actually pay to advertise their listings out of their commission.
So, you have to wonder, if Australia was like the rest of the world and agents paid for advertising out of their commission, just how much advertising would end up in the papers? The answer, probably very minimal.
The winner is clearly the newspapers – they are getting revenues they dont deserve and are being proped up by crazy practice. Still it is only a matter of time.
Simon Baker
CEO
Classified Ad Ventures