Online Real Estate Ad Spending to Surpass Newspapers by 2012

  |  November 21, 2007   |  Comments

UPDATE: Borrell Associates predicts agents and developers will increasingly rely on online advertising for cost effectiveness.

Despite fallout from the subprime mortgage loan fiasco, real estate advertisers will continue to spend online in the next few years. A new report shows home brokers, agents and developers are increasingly shifting their advertising dollars to the Web, almost to the exclusion of all other media, including print newspapers.

Online advertising research and consulting firm Borrell Associates predicts in its "Real Estate Outlook 2007-2012" report that online real estate advertising will outpace print newspaper advertising within the next five years. The report forecasts newspaper will receive $4.8 billion in advertising revenue in 2007, while online advertising will receive $2.6 billion. By 2012, newspapers will receive $3.3 billion compared to online advertising's $3.5 billion.

The report predicts real estate newspaper ad revenues will drop 6.8 percent this year and by the same rate in 2008, followed by a sharper 16 percent fall in 2009 and another 13 percent decline in 2010. The steady fall will also affect local homes magazines.

The real estate ad shift away from traditional media to online mirrors similar shifts in other advertiser verticals, according to Peter Conti, Jr., SVP of Borrell Associates. That transition was spurred by two years of depressed home sales have forced brokers to reassess their ad spending.

"Unlike recruitment verticals and the automotive vertical, where we've seen the dramatic shift to the Internet over the years, the rising tide of home sales kept all sorts of advertising afloat," said Conti. Now, he added, "There are less homes being sold, but at the same time advertisers and real estate brokers are looking for the most effective use of their dollars. And everybody agrees that the most efficient means is online."

According to the report, spending by real estate advertisers on online ads and promotions will account for 16.7 percent of total online spending in 2007; Web site design, communications and database services will make up the remainder. By 2009 those numbers will change only slightly with 17.3 percent of online budgets going towards online ads and promotions.

While the mortgage industry and its current excess of subprime loans have made some home buyers wary, Conti pointed out Borrell's findings apply specifically to real estate brokers and developers, who expect an increase in home sales next year.

"We see after 2008 it's going to be a healthy market, and a lot of that is going to be due to the baby boomers spending more on second homes or retirement communities," said Conti.

This story has been updated to say Borrell predicts newspaper classifieds will bring in $4.8 billion in 2007 and $3.3 billion in 2012, while online will receive $2.6 billion this year and $3.5 billion 2012. An earlier version of the story incorrectly presented the figures in millions.

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