Real estate industry's move to digital marketing speeds up
Walk past any real estate office and you will probably see a couple of wire-framed baskets chocked full of the latest copies of the local property magazine – in Auckland these tend to be for Property Press, the Herald Homes and then there are some other local options and usually these days a Chinese language real estate magazine.
I don't need to procrastinate on the visual pollution these create on the high street or the lack of value they represent, nor the fact they never seem to diminish in number of copies until the next week's edition rolls in. The fact is, the world over, real estate marketing is going digital – it's only a matter of time before we see fewer of these publications cluttering up our footpaths.
The scale and pace of this transition is something I am often asked about when providing advice and consulting to businesses. I hold a fairly detailed and what I think is accurate picture of this for New Zealand. So it was with great interest whilst reading the prospectus for the IPO for Zoopla Property Group, the operator of the UK property portal Zoppla, that I found data for the UK market on just this subject.
Quoting from the report:
It is anticipated that during the current year in the UK year the total spent on digital marketing by the real estate industry will for the first time exceed that spent on print advertising. In total the UK real estate industry will spend £427 million on advertising this year. The future trend estimates for the next three years clearly show an accelerated divergence between print and digital with digital set to grow by 50%.
In New Zealand the makeup of the spend by the real estate industry is somewhat different. Print media has done a laudable job of defending its position and, through its relationship with the major franchise groups, has constrained the digital media spend to less than 20% at this time, although it is, like the UK forecast to grow significantly in the coming years in my estimation. It is, though, not expected to exceed the print media spend in the next three years.
Clearly the drive for the cannibalisation of the print media across the globe holds the prospect of a significant pot of gold for the challenging companies in each country which more and more these days are publicly listed companies of significant value; be that Rightmove and Zoopla in the UK, Trulia and Zillow in the US or REA Group and Domain in Australia. Each is fighting for an ever greater share of the cake of advertising dollars of its customers – the real estate agents of each respective country. In New Zealand we have the challengers of Realestate.co.nz and Trade Me Property – a duelling pair, although the pot of gold for which Trade Me aspires may not be the same reward sought by Realestate.co.nz as an industry-owned portal.
Comparing such data of advertising dollars between countries is hard to undertake unless some benchmark can be established. For this analysis I have chosen to index the NZ and UK real estate digital marketing spend by an index to the number of property transactions in New Zealand dollar terms. Presented below is this analysis showing the extent of advertising spend per country over the past seven years per property sale. In the UK total property sales over this time peaked at 1.23 million in 2007 before falling to 616,000 in 2009. In New Zealand over the same period sales peaked at 92,000 in 2007 before falling to a low of 56,000 in both 2008 and 2010.
It's interesting to see the New Zealand real estate industry spends more per sale than its UK counterpart. The relative difference in the digital spend is staggering – a two and a half times factor. It makes the whole discussion around the relative cost / value of a charge of $159 per listing from Trade Me seem a bit moot!
The other point to note in this index comparison is the fact that the total of $NZ1065 spent per property sale by the UK real estate industry comes straight out of agents' commission margin where average commissions on sale are near 1.5% whereas New Zealand agents who charge about 3% commission on sale price secure an average of $200 a sale of vendor marketing contribution to offset their average spend of $NZ1244.
Former Realestate.co.nz chief executive Alistair Helm is founder of Properazzi.