Wednesday, July 22, 2009

Realtors repudiate newspaper ads

If the near-term prospects for the housing market are grim, the outlook appears to be even worse for an eventual recovery for real estate advertising in newspapers.

That’s the impresion left from a survey released today by the Aim Group, a consulting organization that used to be known as Classified Intelligence. Being intelligent enough to see how rapidly the classified business is wasting, founder Peter M. Zollman has changed the name of his company.

But there’s no perfuming the results of his new poll, which discovered that nearly 6 out of every 10 real estate agents think newspaper advertising is useless.

While the survey found that nearly 80% of agents still buy print ads from time to time, they report doing so to appease the sellers they represent – not because they actually think it will move any homes.

The survey of some 200 agents by Zollman and colleague Jim Townsend is contained in an in-depth study of the global real estate classified business summarized here.

Real estate advertising in newspapers boomed along with the funny money-fueled housing market, rising to what probably will be an all-time high of nearly $5.2 billion in 2006 from annual levels of approximately $3 billion at the beginning of the decade. (See chart below.)

When the bubble popped in 2008, ad sales came in just shy of $2.5 billion, making for the lowest level since the mid-1990s, according to the Newspaper Association of America.

Given the comparatively high cost of newspaper advertising and low confidence in its effectiveness on the part of agents, it is not surprising that the Aim Group learned 43% of Realtors cut their newspaper ad budgets in the last 12 months while only 6% increased them.

If real estate advertising placed by agents isn’t long for this world, the agents themselves may be endangered, too.

By the time the housing market revives, you can bet a good number of consumers will have forsaken real estate agents in favor of buying and selling homes on their own.

Market information, detailed comps and other free tools make it a cinch to sell- or buy-it-yourself at websites like Zillow.Com. Unless you are flogging real estate in New York, there’s no charge for listing a flat, a farm or a villa with Craig, either.

For those who want a little low-priced handholding, consumers may opt to use such discount brokers as Redfin.Com, which charges buyers and sellers fixed fees for brokerage assistance that saves thousands of dollars over the 5% and 6% commissions customary among most traditional Realtors.

As proof of the growing popularity of its discount-brokerage concept, Redfin, a venture-funded company founded in 2004, reported that it recently moved to profitability despite the real estate meltdown.

Faced with the prospects of fewer transactions and more pressure on their profit margins during the prolonged housing slump, real estate agents are shifting their scarce marketing dollars into cheaper alternatives to newspapers.

According to Zollman and Townsend, the preferred venues include their own websites; social networks like MySpace and Face Book; specialized websites like Zillow and Trulia, and search marketing through Google and Yahoo.

The high-priced, online real estate sites operated by most newspapers “don’t impress,” says the Aim study. Newspaper sites frequently lack the tools and often lack the depth of inventory available at specialized web competitors.

Although demand from home sellers appears to be the largest reason that Realtors still use newspapers, a funny thing happens when buyers start shopping for new digs.

“When sellers become buyers, overwhelmingly they look for listings online, not in print,” noted the Aim report. “In its 2008 survey, the National Association of Realtors reported that 87% of home buyers used the Internet in their home search.”

Not good news for newspapers.

13 Comments:

Anonymous Social Media Commando said...

Moving the dollars comes at a price:

It's exciting to see Realtors (who are on the whole a very tech savvy bunch) move deeper into the Online space.

...But be careful how you 'advertise' on the web.

Some business people don't grasp that Twitter, Facebook, YouTube, LinkedIn, etc work best when they are used as tools to start genuine conversations.

The new media world is focused on two-way conversation, not blasting the hell out of potential buyers/sellers with spam or repetitive messages.

Tremendous opportunity lies ahead for Realtors on the web -- just don't try to slap an old print ad onto a web site or - gasp! - Social Networking utility.

--P.S. It's going to be interesting and exciting to see news organizations like Gannett respond with new services. You know they won't let customers leave without a fight, to be sure.

9:44 AM  
Blogger Hallandale Beach Blog said...

Allan, your fact-filled post today is particularly insightful into the current newspaper scene/real estate mindset in South Florida, and the area of it that I live in, just north of upscale Aventura in neighboring Miami-Dade County, and south of public policy-friendly Hollywood -where the new Trump Hollywood is opening- and close to the beach.

After reading your post, it certainly better explains why there are SO many hundreds of pseudo-blogs that pop-up when you do an internet search for Aventura,
Hallandale Beach or Hollywood that are run by individual realtors or realty groups. Many have laughably phony renderings of condos on A1A in Hollywood, Hallandale Beach, Aventura and Sunny Isles depicting this traffic-congested area looking like leafy green 19th-century Vermont -except for a large condo tower or two sticking up! LOL!

Dave at Hallandale Beach Blog

9:56 AM  
Anonymous Rick said...

Nice news to share, but this revelation is old, old news. Realtors have been telling newspapers this for years...they only spend money with us to appease sellers.
Anyone just finding this out has not worked a single day selling real estate advertising in a newspaper.

11:36 AM  
Anonymous Anonymous said...

I agree with the "old news" comment ... and in reference to this quote:

“When sellers become buyers, overwhelmingly they look for listings online, not in print,” noted the Aim report. “In its 2008 survey, the National Association of Realtors reported that 87% of home buyers used the Internet in their home search.”

Where's the percentage of home buyers who used the newspapers? Is it also a high percentage? I think if you're in the market for a home, you look everywhere.

4:55 PM  
Anonymous Anonymous said...

Social Media Commando raises, inadvertantly, why the rush to digital might be a dead end. My Facebook, Twitter - and not to forget - email accounts have become cesspools of spam. Popularity becomes a magnet for JunkMail 3.0

5:01 PM  
Anonymous sanri56 said...

I would never go to print to search for a property. It's such a shame that newspapers have smothered the online side of the classified business by not understanding that the content is their product. They've been so worried about the delivery channel (forest products) that they've failed to notice the audience has moved. The new delivery channel can't thrive under the old rules and mindsets. So they fail to provide content to their audience in the way the audience wants to receive it. They will not survive unless they figure out that delivery of content is more important than holding on to an old model of delivery.

10:02 PM  
Blogger Steve Ross said...

I would say that the more accurate poll is the kind where votes come with dollars, not an opinion survey.

Let's see. New home sales nationally were down 20% year over year from 2006 to 2007 and have since dropped another 33 percent. Existing home sales were at 6.5 million in 2006, and dropped to 4.9 million in 2008 -- by 30%. New mortgages on existing homes were almost impossible to get in the last 3 months of 2008, but housing sales peak in summer so I'd have to dig deeper to get the exact effect on the year's total sales volume. Also, new home sales ads tend to be display classified, not straight listings and the discount dynamics are different. The raw housing sales numbers in 2008 were lower than in any year this decade. Rentals rose until early 2008 and then collapsed spectacularly, with vacancy rates at 20-year highs. But those numbers have to be looked at more closely.

Why, then, is it really surprising that housing classified dollar volume was cut in half from 2006 to 2008? That's roughly in line with the decline in homes sold.

Just as a first cut, it seems the ad revenue drop is about in line with the market and is rather weak evidence that the entire classified ad model for real estate has blown up.

And any good story based on a poll should at least note the underlying trend in what's on the market before noting the decline in marketing dollars.

5:07 AM  
Anonymous Randy said...

why don't newspapers work out deals where they partner with local agents to develop useful local sites on the newspaper web site for searches and then collect a commission on the sale of any home promoted on the site - basically pay per performance. Let the agents do the work by changing homes as they see fit... the technology is there. Do the same for auto dealers. Then promote the hell out of it. It won't get done though because publishers still believe if they cannot get 40% margin, a new idea is not worth it; and they certainly wouldn't invest in a marketing program to get the word out.

6:54 AM  
Anonymous Steve S. said...

I am a former agent, inactive right now. Newspaper advertising for agents is a joke. I would think 6 out of 10 is being optimistic. More like 9 out of 10. My former Broker-in-charge required it and was part of our desk fees. She used the newspaper to brand herself and her company and we paid for it. Rarely does an agent sell property due to a postage sized picture buried among thousands of other photos.

In good times, video will sell more property. The good times are gone and will not be back for 10 or more years easily. By then many more papers will bite the dust.

Folks, it's over. Done. Real estate companies are folding. Agents are leaving. Newspapers can kiss that revenue stream goodbye. Time to play "Taps".

8:04 AM  
Anonymous Brian Steffens said...

As usual, Steve R. offers some substance among the rhetoric. And "anonymous" said it right: when buying a house, you look everywhere. As one who has bought and sold 9 or 10 homes, I use an agent even though I suppose I could sell it myself. I'm too busy in my day job to market a home, and not all that skilled nor have the time to manage closing, title, inspections and all that other stuff. That's what I pay an agent for. My wife and I look through the newspaper ads, maybe find something we like, then, yes, look online for similar homes (comps). I do the same with most anything: look at the Sunday Best Buy insert, then maybe go online to read more about the DVD I'm interested in, then drive to the store and purchase it. It all starts with glancing through the paper ... I don't glance through the Internet. But this exchange does point out an opportunity ... for newspapers or whoever wants to tackle it. Thus far the Internet hasn't served agents well. Brokers perhaps. But the challenge is visibility for the several agents that work under the broker. That's the target.

9:20 AM  
Blogger John said...

Funny, My wife and I just bought a home we discovered in the newspaper. Our agent listed our home on every website in the state for six months with not a single offer. We bought our own ad in a local real estate classified section and had two offers within a week? Coincidence? Maybe. But I'd like to make two observations: 1.) Newspapers - especially on weekends - are still comfortable, tactile pleasures for 10s of million of readers. 2.) Our agent, who couldn't say enough about Twitter, Facebook, etc. had no more sense of how to utilize them than a tribesman from Borneo.

9:40 AM  
Anonymous Sandra Mathewson said...

John's experience is probably that one in ten thousand, like you sell the home at the open house. I agree print is dead and has been dead. One of my former broker's made us spend $100 a month on newspaper that only helped brand the office. I quit all print ad's last year and went into social media, blogs, craigslist, facebook, twitter etc. and I am having my best year ever, with more money in my pocket!

8:41 PM  
Anonymous Anonymous said...

My comment is not about real estate advertising in particular but newspaper display advertising in general.

Newspaper publishers brought the decline on themselves with an entitlement attitude. Back in the 1970s and 1980s they began teaching media buyers to hate doing business with newspapers, and their bosses eventually caught on that it was a hassle for their staff and a black hole of wasted time. Many of us remember those 4:55 PM calls on a Friday from the newspaper's credit department: "We show a $36.55 unpaid balance on your account, and therefore we're pulling all the ads of all your clients and of all the clients of all your other offices." (The balance--out of tens of thousands of dollars spent--was always their error, but you could never get it fixed because the sales department and billing department would have nothing to do with each other.)

By contrast with other media, who bent over backwards to make things go smoothly behind the scenes, newspapers seemed to feel they had no competition. It took a while, but they got some.

How easy will the "new" media be to do business with, once the initial boom levels off and the buyers and sellers stop being people of the same generation who need to stay on good terms so they can job-hop over to the other side to further their careers?

But as far as readers are concerned, print is dead for some, still alive for others. Be wary of over-generalizing during a period of transition and based just on what you and your friends do.

12:38 PM  

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