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Commentary on The Real Estate Website Industry
Since 1997 I have monitored the activity in the real estate website industry. This was, and is, my industry. I was observing my competition. I watched as companies came into the industry, many with multi-million dollar funding, and began selling websites to Realtors. I was able to quickly perceive that the websites they were selling would not generate significant business for the Realtors. Within two years most of these companies were either out of business or had been bought out by yet other companies. What was happening here?
These companies were successful initially because they were offering Realtors what the Realtors believed they needed, websites. And, they were selling the sites at bargain prices. But, after a year, without realizing any revenue from the sites, many Realtors canceled their contract with these companies. It wasn’t long before most of these early real estate website companies disappeared. The more recent entries into this field have done better but they are still selling cheap websites. Only now they explain to the Realtors that for their cheap websites to produce revenue they must spend more money. They make the process seem simple and they quote costs that are unrealistically low. They sell the Realtors optional services that make the sites produce some activity. But, the “sites” still do not produce the results that they might.
I estimate that more than 300,000 Realtors have bought “cheap” websites. Among this group of Realtors there are some that have achieved significant results from their websites but, this is a very small number.
These companies have created a large group of Realtors who are disenchanted with the Internet. The Realtors believe that they have done all that should be done to be successful on the Internet. But, they have not realized the income that they expected from their Internet marketing. Many have ended up spending incredible amounts buying traffic and leads from yet other companies who are feeding on the Realtors needs.
Here is an example
This company sells it’s basic website for $699. There are several options such as an IDX/MLS package and an e-mail program that drive the cost up to $1,499. It then offers another optional package that it prices at $2,495 for search engine optimization. But, then it explains that there are other costs involved with this package making the estimated total for this option $5,000. Within these extras is an annual budget of $1,000 for pay per click engines. Now, anyone with knowledge of Internet marketing knows that $1,000 will only buy 600 to 800 clicks from real estate keywords. This level of traffic is a good volume for one month not for a year. At the same time this company recommends that the realtor “buy” links on a number of real estate directories that have thousands of Realtors listed. There is little value in this. At this point the Realtor has spent $6,499. not including the monthly hosting of the site at $39.95. So, the total is now $6,978.40 for the first year.
What is the real cost of Successful Internet Marketing?
The reality is that a reasonable starting budget for the first year is $12,000. This will produce almost immediate activity resulting in leads and a potential to generate sales activity within the first three months. It is possible to utilize a first year budget of $5,000. to $7,000 but this will not generate immediate activity and probably would not result in sales activity until the last half of the year. It is important to note that a large part of the first year investment is the creation of the website and the initial setup. This investment will produce results for the Realtor over a period of years. So this investment must be amortized over at least three years.
Now we really have to look at the marketing cost over a period of three years. If we assume an initial set up cost of $6,000 and amortize that over three years it breaks down to $2,000 per year. Basic hosting should cost no more than $240 per year. The Realtor should budget at least $400 per month for a combination of pay per click and other traffic promotions. We should include some regular reporting on the website activity and fine-tuning of the site itself. This can run $500 per year. Add these figures and we have a figure of $7,540 as a raw minimum cost. For most Realtors this represents the commission on two to three sales.
What is the Typical Sales Profile for a Successful Internet Realtor?
A Realtor just starting out on the Internet is dealing with a “spin up” time that will slow down the development of his Internet sales activity. On the one hand is the time it takes to develop the exposure on the search engines and directories. It takes six to twelve months to achieve top positions in the organic search results. Secondly, most home buyers visiting websites have plans to purchase a home more than six months down the road. This means that it will take the Realtor 12 to 18 months to fill the pipeline.
In the first year utilizing a serious marketing campaign a Realtor can expect to achieve a transaction volume of eight to fifteen sales. The second year will see the transaction volume increase to twenty to thirty sales. All this assumes the Realtor is diligent in following up the leads and is an effective sales person.
Summary
Most of the companies in the real estate website industry continue to utilize a marketing strategy based upon low prices without any guarantee of results. Today we see companies selling websites priced between $399 and $699. These are do-it-yourself templated websites that the Realtor is expected to complete himself. The companies offer extensive instruction and technical support for the Realtors but, fail to explain the whole story. The companies withhold significant knowledge that allows them to sell additional services to the Realtor. The result is a large group (thousands) of Realtors who do not achieve significant success with their websites.
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