Real Estate & Mortgage Round-up: Zillow Gaining Recent Traction

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I thought I would follow-up my previous January post covering the real estate January Effect with a February update.  As interest rates decline and we are entering prime home buying season (spring to early summer), we are seeing suprising resilience in the online real estate and mortgage category.  The BIGGEST surprise is that Zillow traffic has ramped significantly in the month of February.  This is very interesting.  Zillow has made a number of big announcements around acquiring more listings.  There is a high correlation between traffic, nationwide coverage, and the number of listings that a web site has.  Zillow recently broke through the 1 million listings barrier which is a major milestone for the company.  I wonder if the recent uptick in traffic has to do with increased refinance traffic.     

In Tier Two of online real estate, HomeGain appears to be on a tear growing reach nicely over the past three months.  This is largely due to HomeGain’s significant affiliate network and SEO investments.  BuyerLink is the growth engine for that business and is probably doing well in this environment.   

All players in the mortgage lead generation industry (BankRate, LendingTree, LowerMyBills) are seeing increased consumer demand for information around refinancing their mortgage ever since the Fed made its aggressive rate cuts in January.   Notice significant traffic increases in January which appear to have declined in February.  LowerMyBills and LendingTree seem to be experiencing steadier traffic levels.  It is clear that both LendingTree and LowerMyBills have reduced their ads spends significantly over the past six months.  I have been impressed by Experian swapping out LowerMyBills ads with ClassesUSA where appropriate in their banner advertising strategy.

Tier One Real Estate Reach:  real-estate-tier-1-reach.gif

Tier One Real Estate Page Views: real-estate-tier-1-page-views.gif 

Notice how Zillow reach (or unique visitors) seems to be increasing but pageviews have been declining.  Interesting trend.  Maybe an indication of more people checking the value of their home versus spending increased time searching for homes for sale or neighborhood information.

Tier Two Real Estate Reach: real-estate-tier-2-reach.gif

Tier Two Real Estate Page Views: real-estate-tier-2-page-views.gif

Mortgage Reach: mortgage-reach.gif  

Mortgage Page Views:  mortgage-page-views.gif

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Will Local Advertising Suffer in Recessionary ‘08? Print vs Online?

Interesting article from Greg Sterling on the dynamics of print versus online local advertising in a recessionary environment.  Two interesting data points:

1) The early 2000’s saw job classifieds shift dramatically from offline to online in the recession.  Employers liked the accountability, ease of use and better ROI of their online spend.  Companies like Monster and Hotjobs rode this wave, destroying the jobs section of the local newspaper. 

 2) Recently, we have seen a major pullback in the real estate and mortgage markets.  Ironically, in real estate, ALL of the online real estate advertisers have been punished.   In real estate, agents and brokers have actually returned to print advertising – newspaper and rack publications, at least in the short term. 

Why? 

1) Demographics: The average real estate agent is 51 years old.  In the real estate downturn, as many younger agents are leaving the market, the established veterans are maintaining their current media mix, in which online may be a smaller portion.

2) More Listings: As the real estate market cools, there are more listings on the market that need to be advertised.  Though a number of firms have developed online products to market listings (pay per click listings, enhanced listings etc), my sense is that most of them are ineffective.  The most effective online marketing system for listings is simply the MLS, Craig’s List, and a host of free sites which aggregate listings.

3) What’s Familiar: At the end of the day, with so many alternatives to advertise, in the real estate free fall, I believe agents and brokers are going back to what is familiar …  at least in the short term.  I think over the next three years online advertising will overtake print in real estate.  I think it will require the real estate market to get back on its legs first, or at least show that it is back on the upward curve.

Here is a link to the article: Will Print YP Suffer in Recessionary ‘08? « Screenwerk

Online Real Estate Traffic Off to the Races

Those of us who have worked in the online real estate industry are pretty familiar with the seasonality of the traffic patterns.  Generally, consumer traffic starts tapering off after school starts in September and then drops dramatically in November and December.  But for some reason, right after Christmas and New Year’s Day, traffic starts accelerating. 

Consumers start searching for homes online about three to six months before they get serious about buying or selling and contacting an agent. Consumers get back to work on January 2nd and are still shaking off the holiday blues by casually surfing and visiting real estate sites.   The first quarter of the year really determines what web site is going to be the most useful to both consumers and real estate professionals.

Though we are in the worst real estate downturn since the 80’s, consumers came back to real estate in a big way.  Take a look at the below graphs from Alexa (we need to make the assumption that trends in Alexa are accurate).  Nearly every real estate web site experienced a ncie uptick in traffic in the last week.  Realtor.com (owned by Move, Inc. and partnered with the National Association of Realtors – NAR) saw the most dramatic gains.  VERY SURPRISING.  I am not sure why Realtor.com moved so much more than anyone else.  I will need to do some research.  Anyone have an idea?

The below graph is the tier 1 of online real estate: Realtor.com, Zillow, Remax, Trulia, Homes.com

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The below graph is my Tier 2 of online real estate – generally made of companies focused on marketing services, web sites or lead generation for agents.  Though it doesn’t show up on the above graph, Homes.com seems to be doing a very nice job in growing their online traffic.  Dominion, formerly known as Trader Publications, bought Homes.com in 2002.  Homes.com was a survivor of the dotcom boom and bust and was in difficult shape when they were acquired.  Since then, traffic has grown nicely.  I give Jamie Clymer a lot of credit for his work with Homes.com and Dominion’s real estate businesses.

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We’ll keep watching the trends over the first quarter of 2008 to see how the online real estate industry plays out in 2008.

The Evolution of Your Media Mix

HouseValues was started in 1999 by Mark Powell who was a second generation real estate agent in Seattle, WA.  Mark had worked for ValPak before entering real estate and had a strong understanding of direct response marketing, particularly among local businesses.  As a real estate agent, Mark took out a number of small ads in the Seattle Times offering consumers a free home evaluation.   The ads generated leads for Mark in his target markets of Bellevue, but he also got a number of consumer inquiries throughout the greater Seattle-Tacoma market, areas that Mark did not work (like Tacoma or Everett).  Mark referred the leads he did not want to other real estate agents and collected the standard 25-35% referral fee on closed deals.  The more Mark advertised, the more “out of area” leads he generated.  Mark knew that there was a bigger business opportunity here.  Mark incorporated the business and raised a small angel round before finally landing Second Avenue Partners as the first institutional capital for HouseValues.  Nick Hanauer and Pete Higgins immediately liked the business opportunity.

 The key to success for HouseValues was bringing down the cost per lead.  Refer to the chart below for the evolution of the HouseValues media mix, which I assume is very similar to other traditional and online companies.  The company started using print to generate its leads, but there was a bigger opportunity to scale the consumer marketing. 

In late 2000 / early 2001, Mark hired Bob Schultze to manage the media buys.  Bob is an experienced long and short form TV media buyer, working on campaigns such as the George Foreman Grill and the Juice Man.  Based on Bob’s TV experience in local media and local broadcast relationships, Bob was able to reduce the cost per lead by 2/3rds, immediately making the business model profitable.  At this point, HouseValues started rolling the business plan out aggressively across the country and limited the amount of capital that was needed to fund the company.

The next step in the evolution came in 2002 when HouseValues was national in nearly 220 markets buying local boardcast in most of the markets.  At this point, we started to test cable television.  Cable again dropped our cost per lead significantly such that we were able to scale back on our local broadcast spend and aggressively grow our cable spend.  

Finally in late 2002, after numerous tests with banner advertising, HouseValues tested search.  Search was able to drop the cost per lead significantly again.  Search generated results at 60% of the cost of cable television and about 25% of the cost of local television.  Banner advertising was largely comparable with cable television.

The below chart covers the evolution of the HouseValues media mix for its primary products and the cost improvements that the business saw transitioning from media to media.  Of course, with each media form, we saw volume limitations and it was important to maintain a mix and constantly both the volumes and price points by product.  We will talk more about the local media mix, volume, and price points. 

Evolution of Media Mix