As a part of connecting with real estate agents the Gold Coast Bulletin recently invited Gold Coast agents from different real estate groups for a Seminar with Tom Panos, the Real Estate Advertising Director for News Limited.
Now these seminars were a little different. They were held in a boardroom atmosphere and each real estate group had their own session with Tom and other Bully representatives. For reasons that I wont get into we did not get the rah rah seminar that was probably on the agenda. Instead we had a more open discussion of how Print fits into our offices and I for one got a lot more out of it that way.
As you would expect they were justifying Print’s as a major partner in the Real Estate industry and the agents on the other side were pointing out that Print is playing a lesser role than it ever has.
Now this is where it gets interesting. I asked Tom Panos when News would be rolling out the ability to charge sellers for real estate print advertising direct rather than charging the real estate offices for the advertising.
A part industry owned real estate print publication on the Sunshine Coast called MyPropertyReview has rolled out a seller direct payment system and had used it as the cornerstone to capture a massive market share in very short time. They really use real estate salespeople as booking agents for the newspaper rather than as the client.
The system is a really a win win for everyone concerned. The property sellers enter into a payment system that spreads the marketing over many payments and for a lot of owners they only need to pay when the property settles. Real Estate agents can get on with the job for marketing, promoting, selling and negotiating the sale without having to be a debt collector, a job that is notoriously hard if the property has not sold.
MyPropertyReview has decimated the real estate sections in the local newspapers. In typical style the established players responded very slowly but once they lost a large slice of their business they have had to slash their price trying to entice clients back and introduce similar billing systems.
Tom Panos confirmed that News is trialling such a system in at least one marketplace and it is up for review and consideration for a much wider release. I got the feeling that Tom himself was not too keen on the whole concept and he quickly offered problems with the system. His main objection was the fact that the newspapers were not geared to collect thousands of payments that this sort of system would create. This really seemed a bit of cop out as the classified departments would take far more credit card payments than any real estate section would create.
The biggest problem I see with implementing such a system is the mates rates deals being offered for certain real estate groups would cause even more problems in the marketplace than they do now. If some agents are on a higher print rate they can effectively mask their higher cost by only providing a total figure for all marketing costs. But if two agents provide a booking sheet with the same ad size in the same publication on the same dates and one is nearly half the price of the other, its not that easy to hide, or to explain away. The huge differences most newspapers have in their tiered charge system would be working against this sort of model. the need to have a flat rate, or something close to a flat rate to really get the most of it.
However… I think the real problem with this concept rolling out everywhere lies with the fact that for many markets they simply don’t have to… Sadly it has been a long long time since an old media company has come up with anything even close to being innovative for the Real Estate industry.
I know in our market place this sort of billing system would be very welcome by many agents.
I would like to think News is trialling this for serious consideration for a national roll out but I fear that its a very localised response to a competitor. Maybe I am wrong but I reckon the major newspapers will have to be dragged kicking and screaming to release this without a competitor doing so but if your local newspaper were to introduce such a billing scheme would you welcome it? Would this cause your yearly investment in print advertising to increase? and would you offer newspaper advertising as an option to owner when previously you might have held back?
27 Comments
PaulD
There was an interview with Tom Panos in the Sold Magazine Vol 3 Issue 3.
He was asked a couple of questions and responded. If you can get a copy, it makes interesting reading. I was surprised by some of his answers, considering his position in the print industry.
For example: when asked Is the internet taking revenue from print ? His answer was ” Yes, but not in any significant level. Up until Christmas last year our numbers looked excellent nationally so it is not like all this revenue has migrated to online in the last three months”.
Further when asked “What are the strengths of print advertising over online?’
his answer was quite long but some of it was :- “For a start, Trust. Independent research carried out in 2008 by The Leading Edge found that in order of trust in the media environment, newspapers come in first, followed by radio. The problem with the internet is that it is not transparent. What you read on the internet can be posted by a criminal in jail. People are becoming wary of the internet due to this fact. Secondly as a real estate agent, it is very difficult to build a brand on the property portals.”
I must admit, I have never heard anyone say they weren’t going to look at a property because it may have been put there by someone in jail. After reading that article I am sure that our increased online and reduced print strategy is the right way to go, despite that not being the aim of the interview.
Glenn Batten
He spent most of the time listening and I found him fairly receptive. Whilst I am sure given the chance to discuss the matters we would not agree on quite a few subjects especially those related around print advertising and the internet, I respect his opinion. Print is still valid… just not as much as it was and his opinion is of course clearly based on his position at News Limited.
Anyway… . If your not doing much print now… If you could have the owner billed direct rather than your office, would you at least present that to more sellers as an option? and do you think that would increase your print advertising spend to what it is now?
Greg Vincent
Glenn, I’d be interested to know if MyPropertyReview’s seller direct payment system leaves them open to sellers moving & running off without paying the bill?
I think it’s a great concept but could be one of the reasons why the other papers haven’t done it.
Glenn Batten
Apparently they take the full risk.. The agent is not involved in the financial aspect of the transaction at all other than completing the booking and payment form.
In the case of MyPropertyReview they don’t get a commission either in case anybody was wondering but when it launched quite a few local agents became shareholders so in the end I guess they each wear a bad debt a little bit.
The same risk to the paper if a Real Estate agent closes down and does not pay their bill I suppose.
This does not have anything to do with the billing concept … but apparently… and the final figures are due for release soon… Most of the MyPropertyReview investors will receive more than their original investment back as a first year dividend. Nice return for those who took the punt on a pretty innovative concept 🙂
PaulD
Glenn, I guess that is a good idea, however APN have tried it to some extent, I think it was a bit of a hybrid of the system that you described. I think the agent had a bit more accountability than just the newspaper. It seems to have stopped for some reason, at least they don’t seem to mention the fact anymore. I heard that one of the agents that was using the scheme had difficulty in recovering the payments and had to foot the bill ( or part of it)
If the newspaper took the full responsibility – It would certainly indicate how serious the vendor was if he entered into an advertising agreement. Someone like News Limited would have an iron clad agreement, so at least the agent wouldn’t have to chase up the payments. It may however breed a bit of discontent from the Vendor towards the Agent, when News Limited issued a final notice. The Agent would certainly have to keep up good communication with the Vendor – but I guess that is the way it needs to be in any case.
Sal Espro
And it still wouldn’t affect the agents getting illegal kickbacks (mostly from Fairfax), would it, as the agents would be credited with the sales, I guess.
Glenn Batten
PaulD,
I think the core difference here with your APN example is the separation between the advertising medium and the agent. Quite frankly that is the speed bump in the road that any of the media groups would have to get over. Without that separation there really is no difference.
I believe that when an owner has to pay the newspaper for running that ad they understand that there is a real cost regardless if they well or not.
Too often sellers object to pay advertising if their property is not sold but as we all know advertising is a real cost that has to be paid no matter the sale outcome. By separating the two I think it would help from a pricing point of view and the sale prospects as well.
I wrote an article many years ago for our local newsletter that focussed around outstanding advertising placing undue effect on an agents fiduciary duty to their client. It questioned if an agent was negotiating a contract would the fact that there was an outstanding advertising bill for $4000 effect how the agent handled that negotiations even if it was subconciously.
Using the myPropertyReview scenario as an example I know agents are loving the concept of playing on an even playing field. Shareholders get a very small discount over non shareholders (I think around 10%) but other than that everything else is the same. myPropertyReview has also used it to gain marketshare so they obviously like and the owners are not asked to pay upfront or within 7 days of publication etc etc so they are liking it..
I can only think that News and Fairfax would believe that implementing such a system as not generating any more sales, but creating more work for them. I would like to think that the financial freedom alone would create more opportunities for salespeople to present print advertising which in turn would create more ads. It will also generate advertising from agents that would not normally advertise in the newspaper because it becomes far easier for an agent to involve themselves from a risk perspective.
snoop
hmm illegal kickbacks
something Asic should be looking at
Glenn Batten
Sal,
I cant say I fully understand that Fairfax rebate scheme operating in a News Ltd city.
Is it a cash rebate or a discount from payment? Is it based on volume through the month or quarter… or is it totally predetermined?
I guess the arguement over whether it is “illegal” is if it should be passed on to owners and its not. This would fall within Fair Trading’s responsiblity I guess in the different states and I would like to think somebody has tested the issue with them at some point in time…
PaulD
Glenn, good points about the separation between the agents and advertising medium. Secondly, with regard to the advertising rebates, that’s exactly why you now have to disclose any rebates when you complete an agency agreement. There were stories from the upper end of the market in Sydney in the 80’s and 90’s where agents would get a cheque at the end of the year from their advertiser as a “rebate” and some of them into 6 figures. Perhaps Robert could neither confirm or deny those stories ?
Glenn Batten
He is in Thailand at the moment I believe… so I don’t think he is worrying too much about Real Estate right now. More about the cocktails on the beach at sunset 🙂
Sal Espro
Yes, agents did receive million dollar commissions but must now disclose media commissions/rebates to vendors. However, Agents have been allowed by the authorities to flout these laws by accepting ‘back-door’ commissions generated via vendor media advertising fees. e.g. Expensive international trips and huge advertising hordings co-branded with Fairfax media and the Agency’s name are very obvious examples.
Glenn Batten
Million Dollar rebates.. WOW!
But now I think about it.. applying that to our market.. I suppose if you do the maths that is not too hard to fathom.
Team yellow get around 50% discount over some other smaller independent offices here on the Gold Coast and other real estate groups are closer to the wrong end of that divide.
If they had to pay the same rate and then get a rebate at the end of the year their 4 or 5 pages a week for the larger offices could easily end up to a couple of million.
For many offices that would represent the majority of their net profit so they end up in the business of selling real estate advertising instead of selling real estate.
PaulD
yes, that’s right Glenn. Some offices saw their net profit when they got the cheque. It was certainly one way to maintain “loyalty” in advertising. It was a closed shop, and there was NO WAY anyone else could start a publication in opposition, because they couldn’t offer the same kind of deal. There was some activity from the ACCC a couple of years ago regarding all that in the Eastern Suburbs of Sydney and the OFT has reduced that kind of thing with legislation, but as Sal pointed out, there are always other avenues. The internet has also affected this “smoke and mirrors” behaviour as well.
Kylie Emans
I have had in interesting experience with the mates rates in print media problem, up until the GFC Beach & Bay was paying significantly higher print media costs so I subsidised the difference between what the print media charged Beach & Bay and what they charged for mates rates etc (full page for us was $2,200, full page for “mates” was as low as $1200. Things started to slow down for our local print media publication so in September last year they decided to make it based on size of individual property ad and our ad cost for full page went down as low as $1300, mates rates went and so some agencies actually experienced increases! We loved it and did full pages till April this year. Now the paper has shrunk to half its size and we rarely advertise in it at all. Too little too late I think. I also agree with Paul D, I read the interview with Tom Panos in Sold Magazine Vol 3,actually I felt a bit sorry for him, when I ask myself the question “what are the strengths of print media over internet for real estate” I can’t really think of anything?
Westie
Tom Panos was also touting the fact to agents that News print publications were seeking to get combo rates by taking REA and News print together in much the same way that Fairfax do now.
Our NSW Sales Manager for REA said that Tom pitched it to REA and they rejected it as they saw nothing in it for them and based on the comments above I feel sorry for him. He probably knows in the back of his mind that he is pushing cow dung up a hill.
Interesting that Tricky Dicky Freudenstein at News wasn’t asked to apply a bit more pressure to the REA Execs to bend over for the deal.
Glenn Batten
Print is definitely losing its grip on the industry but it will still be a major player for awhile to come yet.
The problem for print is trying to stay relevant. Do they accept that business will be on a constant slide? Do they focus on minimising that slide or do they fool themselves into thinking its not really happening?
For my mind the whole tiered pricing structure and rebate schemes like those described by everyone else here only work against print in the long run. It forces everyone else not at the pointy end of the price range to look for alternative solutions.
I think this sort of billing system combined with a flat (or much flatter) rate scheme would assist agents immensely, incentivise increased print usage in a typical real estate agency and thus keep print more relevant. But if they continue to do what they have always done, they will continue to see a reduction in their revenues from real estate advertising.
Kylie Emans
I think the major portals are going the same way with a tiered pricing strategy, why don’t they do per property and then everyone is on equal playing field. They fail to take into consideration the huge influence the agent has over where the vendor spends their money…
PaulD
Glenn & Kylie —- EXACTLY. And that is why Google will eventually be the one. They couldn’t care less about who you are. They make the playing field level ( at least more level) than the other players, and from what I can see, they would rather extract a little from everyone at a lower rate, than to have a tiered structure where you comparitively pay less for more – if that makes sense.
Kylie Emans
Glenn and PaulD – and now google has competition, does anyone know much about this bing.com? Can it become real competition for google? Everyone needs competition!
Westie
Bing Sming!
Seems Bing have got into bed with that other dog with fleas ninemsn who as we all know have had a dramatic fall from their lofty heights a couple of years back.
Bet the goon squad at Fairfax that paid a gizillion $$ for the ninemsn feed that REA dropped are feeling good about that investment and its associated return.
Their net return appears to be zilch on that deal if you look at the marketing spin coming out of the two portals.
Kylie,
Google is and will be still be the king and will crush the zing out of Bing.
Sorry couldn’t help it
MC
Fairfax really are strugglers, aren’t they!
I’d love to see an analysis of the combined market share drop of Sensis + Fairfax’s ‘Rivers of gold’ over the past 10 years! Two leviathans who have been so caught-up in the beauty of their own reflections to not notice what they have needed to do to make a paradigm shift – an not just in real estate.
snoop
Fairfaxs problem is a board full of old krusty print people who dont get the web.
Fairfax digital has some good people but it needs to run well funded and stand alone to be succesful
News were smart in taking a stake in a dedicated web play like REA and letting Baker run with it without too much inteference.
Westie
Couldn’t agree with you more Snoop and MC.
Whilst REA have turned over an incredible amount of senior people in the last year, the previous 4-5 years was where REA did the damage. They built the majority market share in each capital city and State whilst the Sydney centric Fairfax lurched from one new boss to the next, and one management strategy to the next.
It will be interesting to see if the post-Baker era at REA takes any learnings from the Fairfax failures as it would seem the turnover rate of those people that made REA a success is almost complete.
My NSW Sales Manager informed me that following Shaun Di Gregorio out the door in the last few weeks has been the Australian Sales Effectiveness Manager who was with the business for 7 years including time running their best sales team of which this person was a member and the Australian Operations Manager who heathunted some of REA’s best Sales people including 6 or 7 of Fairfax’s finest. Whilst Shaun was the General these two guys played a great role in ensuring REA stayed ahead of its competitors on the ground in its day to day performance and customer interaction.
My point is REA has to be careful they don’t become what Fairfax has always been, a business that can’t execute a plan because its key people keep turning over.
Google must be laughing
Kylie Emans
What does everyone think of realestate.com.au’s email today stating “Property seekers continue to use realestate.com.au as their real estate website of choice with 78% of visitors to realestate.com.au NOT visiting domain.com.au”
Craig
Stats can be made to say anything you want, which is probably why they are so useful for marketing.
Kylie Emans
You should see the bill I just got from one of the portals, double charged just like the doubling up of email enquiries that they use to boost their stats.