Real Estate Spending on Web Ads to Drop Even Further in 2010

The persistent sluggishness of the real estate market will continue to be a drag on Internet display sales in 2010, according to a new report from Borrell Associates.

The Report, “Real Estate Outlook 2010,” predicts that real estate businesses — management companies, developers, agents and brokers — will spend $7.2 billion on Internet advertising in 2010, down 4 percent from 2009. That number dipped only 1 percent from 2008 to 2009, despite the collapse of the housing market.

The 2010 decline is significant because real estate businesses accounted for 19 percent of all online advertising in 2009, according to the report.

But the economy won’t be solely to blame for the depleted spending. Colby Atwood, president of Borrell, said that real estate advertisers — typically among the more savvy of display clients — are moving away from Internet advertising in favor of more cost-effective channels, like promotions and direct marketing, and are not expected to come back in any significant way.

“Advertisers across the board are beginning to flatten out the amount of money that they put into advertising per se, and they are increasing their investment in promotions,” he said. “Once companies learn about how to contact an individual, if they’re savvy, and many of them are becoming this way, they remarket directly to that individual using e-mails and other directed forms of promotions.”

Indeed, the amount of money that real estate business will spend on advertising in 2010 is projected to go up about 2 percent, to $20 billion, despite the drop in Web spending. That number plummeted 20 percent in 2009, from $24 billion to $19 billion.

The report pegs 2009 as the year when real estate businesses finally spent more on Internet ads than newspaper ads. While that is expected to continue in 2010, the gap will likely close a bit, as spending on newspaper ads goes up 16 percent to $4.4 billion, and Internet spending decreases.

The increase in spending on newspaper ads doesn’t reflect a return to the medium so much as the rising cost of print ads, Atwood said.

Display ad executives should pay attention to the spending habits of real estate businesses not just because they make up such a large chunk of the market, said Atwood, but because they often foreshadow the moves of other industries.

“Real estate advertisers were among the first to jump into the Internet, so they are a little more savvy than other groups of online adverisers, who are still learning to exploit the medium,” he said.

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