Facebook has always played an important role in the marketing of real estate professionals.
Based on reports, real estate agents are twice as likely to advertise on a listing portal than on social media. On the other hand, Facebook has never built features that directly provides services to real estate consumers and professionals until recent years.
This all changed for Facebook when it announced a major update to the “Property Rentals” section on Facebook Marketplace. It launched a new front-end that allows mobile users to search for rentals using a variety of new filters: rental type, location, number of bedrooms, pet friendliness and more.
With regards to that, this is the second major step that Facebook has taken into residential real estate in three months. Moreover, the launch of Dynamic Ads for Real Estate, which lets real estate agencies and real estate websites promote live listings to Facebook users. Hence these changes in Facebook signals a shift in strategy with major implications to real estate portals.
What do these features reveal about Facebook’s real estate strategy? What does Facebook’s growing interest in real estate mean for portals?
In this blog, we will first take a closer look at Facebook’s recent moves into the residential real estate, then assess its motivations and forward-looking roadmap. Lastly, discuss the implications for existing players, especially real estate portals.
Facebook and Real Estate
Facebook has established itself as an important marketing resource for property managers, real estate agents and agencies well before the launch of Property Rentals and Dynamic Ads.
On the rental front, individual landlords already have been able to post listings to Facebook Marketplace since the product’s launch this year. However, rudimentary search and lack of quality inventory on portals have stopped rentals conversion from really taking off on Marketplace.
On the sales front, real estate agents are using Facebook to build local awareness of their services or conduct targeted promotion of their listings. Consequently, they they are taking advantage of relatively slim competition to generate strong return of investment (ROI).
In a recent survey conducted on agents and their use of Facebook this past September, one agent noted that she once spent $750 on a listing ad that generated six contracts and “hundreds” of leads. Another agent reported that his average cost per lead from Facebook is around $5, comparing favorably to an average of $100 per lead from portals. However, that cost per lead has jumped six-fold over the past three years as more agents bid for ad inventory.
In conclusion, Facebook has delivered high ROI to agents, but only for those willing to manually upload listings, optimize ad creative and nurture leads over a longer period of time.
Assessing Facebook’s New Real Estate Features
The revamped Property Rentals section and Dynamic Ads for real estate seem like simple optimizations at first sight, but their impact is substantial.
On the rental front, the product refresh and accompanying listing partnerships are game changers. Syndicating listings from established rental sites and improving the user experience for renters will make rental search more useful on Facebook. Hence attracting users who will ultimately incentivize more landlords to post inventory directly to Facebook.
In short, Facebook is smart to focus on rentals. It is an ideal entry point into residential real estate because the competition is fragmented – there is no MLS or single source of truth for rental inventory.
On the sale side, the launch of Dynamic Ads for Real Estate makes Facebook a far more powerful tool for real estate agents. Up till recent years, agents could only target broad audiences, capturing leads with less intent than users actively surfing a real estate portal for homes.
By allowing real estate agencies to upload a catalog of live listings and target users based on their past interaction with specific listings, Facebook allows agents to market to users who directly demonstrates an affinity for their homes for sale, which would improve lead quality and ROI.
Facebook’s Real Estate Strategy: All About Inventory
What do these new features have in common? They both incentivize suppliers of real estate inventory—property managers and landlords on the rental side, agents and real estate agencies on the sale side—to upload more listings to Facebook.
The fundamental competency of an advertising platform is surfacing the right product or service (in our case, inventory) to the right consumer at the right time (in our case, transactional intent): in other words, identifying a consumer’s need and offering a relevant solution. With more than two billion users between its various products, Facebook is one of the few platforms that already has the right consumer in its grasp and its real estate strategy targets the other pieces of the equation.
Listing inventory is the key to Facebook’s strategy to capture market share in a real estate ad spend. Even if Facebook had perfect knowledge of a consumer’s intent to rent or buy a home, it can only monetize that intent if it has a ‘product’ (listings inventory) to display.
Accumulating a greater volume and variety of real estate inventory has another major benefit. By giving consumers more opportunities to interact with real estate, Facebook learns more about their preferences and intent which enables more effective targeting.
For example, Dynamic Ads for Real Estate helps agents automatically target consumers who have visited their websites and browsed their listings. But a strong rental platform allows Facebook to add another powerful targeting tool to the mix, allowing them to advertise to folks searching for rentals with demographic characteristics that also make them likely buyers.
The more precise the available targeting options are to agents, the stronger a case Facebook can make to real estate agencies that they should syndicate listings directly to Facebook.
This is when things get interesting. If there is a substatial amount of agents use Facebook real estate ads in a given market, we can imagine progressive Real Estate listing websites, who have been eager for more leverage against the portals, syndicating listings directly to Facebook.
This presents the billion dollar question: Will Facebook attempt to compete directly with real estate portals? Currently we don’t believe Facebook wants to launch a map-based real estate search, or turn the e-commerce into a fee-generating product for rental and sale listings.
In the short run, Facebook is laser-focused on improving its advertising product for real estate professionals and capturing a higher proportion of ad spend from portals.
With that being said, things could get worse for portals in the long run. We will discuss this in greater detail below, but as Facebook accumulates more inventory and learns how to precisely mate those listings to consumer needs, it may be able to leapfrog map-based search entirely by using natural language queries from the homebuyer and precise algorithms to match users with the perfect home for them.
However, this won’t happen for years but inventory would make it possible. As we’ll discuss below, cultivating and protecting proprietary inventory is one way that portals can fight back.
The Impact on Portals: Competition for Premium Spend
The primary impact of Facebook’s move, in the short- to medium-term, will be increased competition for premium ad dollars from real estate agents. In Malaysia, 70 percent of the portal revenue comes from real estate agents and the trend extends to each major international market.
Facebook’s entry into real estate advertising represents a clear and direct competition for this premium spend. Real estate agents will have another top-tier platform to spend money on to generate additional branding for themselves, generate leads, and promote the homes they are selling. Premium spend usually has no upper limit because agents can spend as much as they want to promote themselves or their listings.
The Two Key Strategic Pivot Points
Facebook’s entry into real estate will illuminate two key strategic pivot points, around which the Facebook vs. real estate portal competition will focus.
The first strategic pivot revolves around the user experience: pitting search vs. match. The current consumer experience on real estate portals is focused around searching and browsing. Visitors scan a map, enter a search criteria, or browse through featured listings. It’s equivalent to flipping through a glossy magazine or scanning the pages of a newspaper classified section.
Contrary to portals, the very nature of Facebook product lends itself to matching experience. Real estate listings will be targeted to consumers based on what Facebook knows about them in the same way it already targets advertising. This targeting is among the most sophisticated in the business given the amount of information Facebook knows about its users. As a result, the majority of Facebook users won’t be searching for real estate, but they will see real estate being presented to them.
The second key strategic pivot: all-of-market vs. some-of-market. Real estate portals maintain their reputation as the best place to find a home because they have all of the inventory available in the market. When a consumer is searching for a new home, they want to look where all of the properties for sale are available.
Facebook’s marketplace strategy, on the other hand, is not predicated on having all of the available real estate listings. At least for the foreseeable future, the listings available will be those uploaded by its advertising clients.
So while the consumer experience on Facebook will target and match listings directly to visitors, it won’t represent the entire market of possible houses for sale. This leaves a competitive opening for real estate portals. As long as the portals have a greater inventory than Facebook (which we believe will be true in the medium-term), their benefit to consumers is clear. Do you want access to all of the market or only some of the market?
Competitive Advantages: Facebook vs. Real Estate Portals
We believe a response strategy should center around the following:
Focus on providing value to agents. Deliver utility throughout the value chain and offer a complete solution. Agents who get red-carpet treatment, free call center service, and unique online products will be less likely to defect. Ultimately, the game is about delivering ROI, so push hard to deliver more value to your customers.
Act local and leverage your sales team. Real estate is national. Real estate portals have the local knowledge, relationships, and brand that are necessary to thrive in the market. By building your local indispensability to the market, you compete in an area where Facebook cannot.
Sell Facebook’s ad product. Adopting portals strategy is controversial. Consider that Facebook already has an ad product for real estate agents, it already demonstrates good ROI and agents are already spending money on the platform.
In five years, will that still be the case, or will Facebook simply go away? We’re betting that it’s here to stay, and it will only get bigger, with or without the cooperation of real estate portals. So get on board while you can and leverage your local muscle to sell Facebook’s offering to your customers.
Explore “match.” If and when the buyer experience moves toward a matching experience, have a product that matches buyers with homes. Don’t be left flat-footed if consumer preferences change.
Don’t compete on social. If you’re considering how to compete with Facebook through social products, you’re naively barking up the wrong tree. The last thing you should do is compete with Facebook where it is strongest.
Facebook’s deeper move into real estate—both in rentals and for sale listings—represents an opportunity for agents and real estate agencies and a strategic threat to a range of existing businesses. For real estate portals in particular, the first battleground is agent premium spend. Facebook is giving agents a new, powerful choice on where to spend money on leads.
This article was written by Mike DelPrete and Sib Mahapatra : https://www-mikedp-com.cdn.ampproject.org