The power of paid search in 2016

There are three primary ways to gain business in real estate: sphere of influence. Many agents rely solely or mostly on their sphere of influence.

The people you go to church with, your Facebook friends and your spouse’s boss — these individuals know you and your profession and will likely reach out when they need real estate services.

Existing leads are, of course, the best source of business. People from previous transactions or those active leads you are currently speaking with in search of buying or selling a home are what you keep in the little black book and are certainly higher on the list of “most likely to close business with soon.”

But what about new leads? Referrals are a great asset though it’s difficult to rely on those alone. In most cases, you have to advertise to recruit new leads. As digital as today’s world is, these prospects have so many choices that you have to use technology to make them come to you.

Advertising today

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According to a recent publication by McKinsey and Company, internet and mobile ads will soon be the largest advertising category for the first time in history, even overtaking television ads.

This is a monumental technological advancement in the world of real estate sales and also many other industries.

This isn’t surprising at all considering how many people cannot seem to be away from their tablets or phones for more than a few minutes. When the average American spends an astounding 4.7 hours each day on his or her phone, it would be unrealistic to think that internet ads are not beneficial in promoting your business.

In fact, Magna Global forecasts that in the year 2016, digital media will indeed outperform television as the largest advertising medium, to the tune of $66 billion.

If you plan to continue only depending on your mail-out flyers to get new leads in, perhaps you should reconsider.

Among the biggest benefits of using paid search is instant traffic, usually within a day of launching the pay-per-click (PPC) campaign, and you are able to specifically target who sees your ad.

Another way to look at it is that you only pay for performance. If ads are running for your website and the prospective buyer/seller doesn’t click, then you don’t have to pay for it.

Number crunch

So how much money do you want to make in 2016? Let’s do some math and try to estimate your return on investment using PPC with a lead generation platform.

Take an arbitrary home price of $250,000 and an average commission of 2.5 percent with a humble three closings every two months.

Typically the average conversion rate for PPC leads/Web-based lead generation is roughly just less than 2.5 percent. With a monthly marketing budget of $1,000 and the industry standard monthly platform cost of $1,500, your annual cost is $30,000.

It seems like a really big number, right? Well, remember that week you bought generic macaroni and cheese to save grocery money? Then you remembered the adage “you get what you pay for.”

Except in the case of paid search you get a lot more than you pay for. Because with the modest sales numbers that I have given, $30,000 is put in and $82,500 comes out.

With just 18 closings a year, that’s a return on investment of 275 percent! For the same investment every month, you are getting an astronomical return that only gets higher as the sales price increases.

In summary, PPC has been a big spender for a long time. If you aren’t on board, then jump on the ship now because it’s very likely your competitor has already figured out the potential for making money using paid search.

You can, too, as long as you understand you have to make the right investments to see the biggest return. Although search engine technology can take a lot of the face time out of the homeselling equation, you can use it to your advantage to make your life easier and see higher returns in the end. Your success lies in your own talents and hard work, but with the right tools you can achieve and even exceed your goals in 2016.

Candi Looney is a marketing research analyst for Quantum Elite.

Email Candi Looney.