Digital marketing is a blessing and a curse for real estate agents

Arlington, Virginia-based Realtor Coral Gundlach spent $100 to $200 marketing a listing when she entered the business in 2004. Today, she sometimes shells out more than ten times that amount.

Twelve years ago, she spent up to $200 on postcards, flyers and a few listing photos. She would also sometimes buy a newspaper ad. But now she forks over up to $1,500 per listing on home staging, professional photos, video, 3-D virtual tours, CMA software and Zillow promotion, among other things.

“Now we have virtually limitless options for marketing both ourselves and our listings,” encouraging agents to sink much more money into marketing, said Gundlach, an agent at Century 21 Redwood Realty. “The real estate technology boom has streamlined things a bit, but it has also made the business more complicated and expensive for agents, no doubt.”

Driven by the rise of digital advertising, spending on residential and commercial advertising by agents and brokers jumped 65 percent over the last decade, rising to $13.86 billion in 2015 from $8.39 billion in 2005, around the height of the housing boom, according to marketing research firm Borrell Associates.

Meanwhile, gross commission from residential sales only grew by 13 percent during that period, hitting an all-time high of $64.3 billion in 2015, up from $57.13 billion in 2005, according to real estate research firm Real Trends.

Many agents like Gundlach are boosting their business with digital advertising. But the rise of the internet has put new pressure on the industry and resulted in wasteful spending from agents who often fail to vet marketing products, don’t use lead-conversion systems and don’t track return on investment, some experts say.

“The opportunity to spend more is definitely out there, and agents are being told by [portal] salespeople that they must do so to keep up. But getting free exposure is easier than it has ever been,” said Keller Williams Realty CEO Chris Heller.

“In the old days, we had to buy classified ads, expensive flyers and mailings, and now we can put a listing out on hundreds of websites instantly — getting exposure through the internet is easier now than ever.”

Why agents are shelling out

To be sure, the internet has made it easier — and, in some ways, cheaper — for agents to connect with buyers and market their listings. Syndicating listings to popular property search sites, for example, costs nothing.

But although agents can get by without spending as much, they often are choosing to shell out more.

The biggest reason is that digital marketing can help agents and teams acquire clients beyond “their sphere of influence” at a pace never dreamed of during the reign of print advertising, according to Maple Grove, Minnesota-based Realtor Brandon Doyle.

“It allows us to grow faster and provides more access to clients than ever before,” said Doyle, whose team, the Doyle Real Estate Team, works at Re/Max Results.

Marketing shifts online, away from brokers

As money spent on real estate marketing has jumped over the last decade, the share of total marketing dollars spent on digital advertising climbed to 76 percent in 2015 from 15 percent in 2005.

Online advertising has empowered agents to buy leads directly, causing agents to claim more responsibility for marketing, which was largely the province of brokers in the past. In 2015, brokers spent only 1.14 percent of their gross commission on marketing, down from 2.57 percent in 2005, according to Real Trends.

Supermarket of products

The sheer number of vendors further contributes to digital real estate marketing’s popularity. Many agents are bombarded by sales calls on a daily basis. 

The most popular products include listing portal, search-engine and Facebook ads. But the supermarket of options expands every day. 3-D virtual tours, leads from predictive-analytics firms and Snapchat ads are among the latest products to stock its shelves.

‘Bidding up costs’

The pressure and the allure to get on the bandwagon can be overwhelming. Many agents snap up products without properly evaluating them because they suffer from “shiny object syndrome,” are captivated by success stories or feel pressed to claw back “mindshare” from competitors, experts say. They often end up with low-quality products or products they don’t know how to exploit properly.

“The concerning thing is that agents are bidding costs up but don’t understand what they’re buying,” Doyle said in a conversation on Facebook. “Then when they don’t get the results they’re looking for they’re just off to the next thing and the cycle repeats.”

Pitfalls

Linda Hove-Maxwell, broker-owner of Concord, Massachusetts-based Premier Properties of New England, said she was scammed by a company peddling leads in a real estate Facebook group.

She paid the firm $1,000 for what she was told would be 50 leads looking in certain ZIP code. But most were either fake, looking outside her market or not looking at all, she said. 

That’s a worst-case scenario. More often, agents buy digital marketing products that can bear fruit but fail to produce results because the agents don’t know how to extract their value.  

‘The leads “suck” because the agent sucks’

Adopting software and practices to capture, follow up with and convert leads is key, experts say.

“The leads ‘suck’ because the agent sucks,” said Realtor Kerby Skurat, in a jab at how many agents handle leads.

Skurat and his wife lead the Plymouth, Minnesota-based Kerby & Cristina Real Estate Experts at Re/Max Results.

The team spends $15,500 a month on digital marketing from Zillow, TigerLeads and Commissions Inc. and $1,300 a month on a team-wide customer relationship management system (CRM) provided by Infusionsoft.

Emails and pre-recorded voicemails are sent automatically to leads as soon as they’re captured. Then a team member promptly follows up with a phone call.

No dice? Over the next 10 days, the team calls another eight times and sends a variety of email and pre-recorded voicemail.

If that fusillade of communications doesn’t lead to an appointment, the lead is dropped into an ever-growing basket of contacts known as the team’s “sphere of influence,” which also comprises past clients. 

The team’s sphere of influence receives a steady stream of communications into perpetuity, albeit one that is gentler than the opening salvo the team fires at fresh leads.

‘If General Mills didn’t run ads every month…’

Marketing to contacts over the long term is absolutely essential to generating returns from digital marketing, experts say. Online leads, after all, are often months or even years away from buying or selling.

“If we didn’t continue to market to them, Zillow marketing costs more and more and more,” Skurat said.

Agents should use digital tools in concert with offline marketing, Skurat and others say. 

Skurat’s team sends contacts monthly email market updates and mailers, birthday cards, cookies on Valentine’s Day and invitations to the team’s annual BBQ and Thanksgiving pie giveaway. Past clients also get home-anniversary calls or emails.

The team receives business — either direct or referral — from about 10 percent of its sphere-of-influence contacts per year, according to Skurat.

“Way too many people focus on the new stuff. They’re just too scared to market to their database,” Skurat said. “If General Mills didn’t run ads every month, they would not have Cheerios — consistent Cheerios sales.”

After factoring in business expenses, including commission splits paid to agent team members, Skurat says his business earns $11 for every $1 spent on Zillow marketing, $5 for every $1 spent on TigerLeads marketing and $4 for every $1 spent on Commissions Inc. marketing.

Some real estate pros that put lead-conversion systems in place still end up squandering their marketing investments because the systems lack the glue necessary to hold them together: operational support.  

Leslie Ebersole, director of the T3 Fellows brokerage accelerator program, said that marketing software can be “pretty much a waste of money” without support staff, training and content development.

‘Just spending money to spend money’

Even among those who build the infrastructure necessary for exploiting digital marketing, many don’t follow business 101 and track the return on investment of the leads they process through that infrastructure, industry observers say.

Doyle was so frustrated by the half-baked marketing he observed at his first brokerage that he co-wrote a book that probes real estate marketing ROI and best practices called “Mindset, Method & Metrics.”

“I found out overwhelmingly that no one was tracking anything and that the no. 1 guy in our office was just spending money to spend money,” he said.  

Granted, gauging the results of some marketing can be challenging. For example, it’s hard to assess the payoff of pushing your name, headshot and tagline to prospects. But the lion’s share of digital ads can be used to capture the contact information of leads.

Real estate pros can match leads from those ads to closed transactions, tally up the income generated by those transactions and divide the total by what they spent on the ad product and associated expenses.

If they did that math, plenty of agents would discover that some of their investments aren’t defensible, Doyle said. 

Digital marketing as a drug

The tendency to overlook ROI can even lead some to form a relationship with digital advertising that can look something like a drug addiction, Doyle said.

Those with sound lead-conversion systems in place find that the more ads they buy, the more homes they sell. Heavy users can catapult themselves to “top producer” status.

But while they’re flying high, they might not notice that their habit is arguably doing more harm than good. They may not realize that they are earning less money than they did when they closed fewer transactions.

Or they may notice but just not care, more concerned with maintaining their market share than maximizing profit — choosing, you could say, the life of a junkie with their eyes wide open.

Some huge spenders on online marketing have admitted to Doyle that they’ve prioritized prestige over profit.

“I stopped caring about the money a while ago,” one told Doyle. “It’s all about getting to the no. 1 spot.”

Email Teke Wiggin