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Where your real estate ad dollars go
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Realestate.com.au is by far the most widely viewed real estate advertising site. The website had a unique audience reach of 2.4 million in December, according to Nielsen Online Ratings, which was around 1.8 times more than the second-most-popular site, Domain.com.au. Photo: Rob Homer
BEN HURLEY
Advertising your house for sale used to be a relatively straightforward matter. Sellers would spend most of their money on newspapers and glossy magazines while putting a smaller amount aside for websites such as realestate.com.au or domain.com.au.
However, a series of price rises by REA Group, the owner of market leader realestate.com.au, is changing that. The price rises mean the gap between print and online advertising options is narrowing.
Online advertising has always been cheaper than print. But base subscription fees charged by REA Group to real estate agents were increased 13 per cent in February – seemingly a consistent annual rise. Agents pass on some of the cost of the subcription fees to vendors as part of a marketing budget.
However, it is not that simple. A standard subscription allows agents to put up as many standard ads as they like on realestate.com.au. But up to $2500 can be spent on upgrade products, these costs typically being passed on to the home seller. Many agents argue that there is a risk properties will not stand out from countless standard listings without the upgrades.
Andrew McCann, group sales manager at Melbourne real estate group Bennison Mackinnon, said his online spend could triple in the next year. Most of this increase is expected to go to realestate.com.au.
“There are more products available so it’s about positioning your listings as close to the top of the search page as possible,” Mr McCann said. “To remain competitive for your customers, if you feel that’s important, it’s costing more.”
For example, he said the Premium Property upgrade, introduced in the past year, costs $2250 for a 30-day period. Another upgrade, the Highlight, new over Christmas, costs $700. The cost of buying certain upgrades in bulk had also gone up.
He said realestate.com.au brought the best results, so he would be encouraging his clients to make the extra spend. “It’s the number-one website for buyer enquiry based on our own research,” Mr McCann said.
Another major Melbourne agency, which asked to remain anonymous, said its spend on realestate.com.au would increase by about 300 per cent. Melbourne is a focal point because upgrades are more popular there than in other cities.
This shift could have big ramifications for print operators such Fairfax, publisher of The Australian Financial Review.
Fairfax’s Domain brand has print liftouts in The Sydney Morning Herald and The Age.
The company is also in the process of buying Anthony Catalano’s glossy real estate magazine, The Weekly Review. The price rises have sparked a debate about whether advertising in print still makes financial sense.
Said one head of a big real estate firm: “[REA Group] feel they are getting enough market penetration and traction now to put pressure on the market spend in print. So if you’re in an area of the marketplace [where sellers regularly pay for upgrades], you have to reallocate. That will come from local papers or newspapers or elsewhere.”
Realestate.com.au is by far the most widely viewed real estate advertising site. The website had a unique audience reach of 2.4 million in December, according to Nielsen Online Ratings, which was around 1.8 times more than the second-most-popular site, Domain.com.au.
But other agents such as Marshall White director John Bongiorno say the benefit of online does not justify REA’s price rises, which he labelled “obscene”. He says the maximum spend on market number-two, Domain.com.au, is $266. And the most he spends on industry-owned Realestateview.com.au is $115.
He said he won’t be cutting his print budget, and if anything he will be increasing it. While online works well for cheaper properties, print brings better results for those priced at more than $1 million.
“We have had a number of internet-based campaigns this year that haven’t been going all that well, where we have suggested to the vendor we had better go back and do some print media,” Mr Bongiorno said. “Sure enough, it’s been the magic trick that has created interest.”
But while online prices are rising, Mr Bongiorno’s numbers show the gap between online and print is still stark. He says his customers typically spend $15,000 to $20,000 on an advertising campaign, with only about $1500 of that going online.
REA Group points to research that shows online advertising is far more cost-effective than print.
Research by Morgan Stanley last year found online advertising was five to seven times more cost- effective than print and that about 70 per cent of real-estate sales started from the internet.
Arthur Charlaftis, general manager of sales and operations for realestate.com.au, said his company “has invested over $70 million in new products, technology and innovations over the past three years, which has resulted in an increased audience and significantly improved return on investment for our customers. We believe our pricing remains extremely cost-effective compared with other forms of media advertising.”
The debate in Melbourne is somewhat complicated. Many of the agents, including Mr Bongiorno’s Marshall White and Mr McCann’s Bennison Mackinnon, own shares in The Weekly Review and may be predisposed to be critical of REA. They are also part-owners of realestateview.com.au.
A neutral observer, CBA analyst Nick Maclean, argues that REA’s price rises were reasonable in terms of the exposure it offered to customers.
“The vendors and agents have got to take up the product, REA is not forcing it on them,” he said. “I personally think if I was selling my house I would want to be on realestate.com.au, I think every person out there would want that.”
But Scott Marshall, an analyst at Shaw Stockbroking, said: “They are probably close at the moment to how far they can push it.”
Fairfax clearly still considers print to be a crucial element for sellers. The company is negotiating to spend $35 million merging its community newspaper division with The Weekly Review, a publication that ate into its Melbourne real estate earnings.
The debate over the benefits of online was kicked along by REA chief executive Greg Ellis in February when he told investors Fairfax had made a “mind-numbing” decision in buying into The Weekly Review. Fairfax chief executive of marketplaces, Nic Cola, responded by saying it was a good deal that would increase its earnings. And even former Telstra executive Ted Pretty weighed in, saying Mr Ellis could “learn the hard way” that his company should have put more effort into deepening its relationship with the print products of majority shareholder News Limited.
It seems everyone has a view.
The Australian Financial Review
BEN HURLEY
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