The supply chain of real estate participants must be addressed in order to modernize the residential real estate process.
I took upon myself to understand the impact of the forecasted real estate advertising spend by brokers and agents as researched by Borrell & Associates. Without question, Borrell is an industry leader who measures and reports on ad spends in many industries, real estate being one of those.
Based on my research, assumptions, and calculations, it appears that the ad spend projected by the Borrell research would consume almost 19% of the gross commission income of the entire industry. If applied to the individual agent or broker, that level of expenditure would be unattainable. Spending that much to generate leads and impressions would literally put agents in an unprofitable situation, especially when added to the fixed and variable operating costs of being an agent or broker.
Yet, search portals like Zillow tell Wall Street analysts that the addressable ad spend market is a robust $12Billion (I presume based on Borrell’s numbers) and that Zillow only has 2% of that pool, plus another 2% from its newest acquisition, Trulia.
As an investor myself, I would be attracted to a media business with only 2% of a $12Billion market, especially if it could demonstrate its roadmap to capture more of that $12Billion.
But what if that ad market isn’t $12Billion? And what if 75% of that ad market is already online? Might that affect my appetite to invest in an online media company? Or alter my enthusiasm for other software innovators that believe the ad spend category is $12Billion, or for other companies wanting to build software products based on ad revenues?
For all the details, please read my Confidential Report.