Company ValuationPropTech

Advertising Revenues in PropTech – How Google, Facebook, and Real Estate Websites Make Money

2003
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Advertising Revenues of Google, Facebook and Amazon

Before we zoom into real estate, we need to look at the bigger picture. Google, Facebook and Amazon posted total revenues of $137 billion, $56 billion and $233 billion respectively (Nasdaq.com). To make it simple, let us zoom on Google’s revenues. As you can see below, Google earns $116 billion in advertising, leaving $20 billion to complementary businesses.

In the United States alone, it is estimated that Google makes $53 billion in advertising revenues. Comparatively, this means that Google concentrates close to 40% of the $130 billion spent on digital advertising per year. But we’re not here to speak about Google, mostly we’re interested by advertising revenues in real estate. So, how much of this cake comes from real estate?

Real Estate and Advertising: a $27 billion sleeping giant

“Facebook and Other Ad Platforms Just Woke Up to Real Estate, a $27 Billion Sleeping Giant – And they’re looking to challenge Zillow and Trulia” (AdWeek).

Researcher Borrell Associates declared then that the U.S. real estate industry spent $26.8 billion on advertising, making it one of the largest verticals for the advertising industry. And this article dates back from 2017! So we’re probably looking at an even bigger cake now, two years later.

Facebook loves Real Estate advertising dollars

Facebook is also showing a clear intention to capture its share. Indeed, Facebook launched:

Inspired by the success of websites such as LeBonCoin (7 billion page views per month in France), Facebook launched Marketplace in 2016. Yet Facebook Marketplace still isn’t active on real estate in most markets. In fact, it’s now active only in a nutshell of countries (France, UK, USA, Canada, to my knowledge). The rest of the world is coming!

Property portals, the experts in real estate advertising

Sure, Google and Facebook want to put a dent in Zillow and Trulia, and more generally to leading property portals in each country of the globe. How well do these leading real estate websites perform so far? How much do they extract from their advertisers (real estate agencies, property owners)? Using mostly Mike DelPrete’s global real estate portal report, we have:

All these property portals aka real estate websites combine into a $100 billion industry, probably extracting over $10 billion per year in advertising revenues on the real estate sector (considering multiples of company valuations, frequently 1 / 10 between revenues and valuation).

More interestingly, these advertising businesses extract an average monthly revenue per advertiser between $300 and $1,200 per month, with at least 70% which comes from real estate agents (except for Zoopla).

Revenue per lead and cost per lead

Obviously, these property portals get paid by advertisers to deliver leads: buyer leads (people who want to buy) and now increasingly seller leads (people who want to sell their home). If you haven’t read it yet, see my article about AXEL SPRINGER’s acquisition of MeilleursAgents.com, a business strong at delivering seller leads.

While the average revenue per lead made by Zillow (USA) and Zoopla (UK) stands between $3 and $5 per lead, the conversation is now moving towards lead qualification. Are those leads good? Do they generate transactions? Indeed, after years during which this has been a volume game (generating more leads), now has come the time for qualification. Fewer leads, better qualified. Hence the acquisition of OpCity by NewsCorp was simply logical: “With this acquisition, realtor.com dives deeper into the lead conversion funnel in a major way. Opcity features a referral fee business model where customers are worth 36x more than a lead, which highlights why the U.S. portals are diving deeper into the funnel.”

Advertising revenues in danger: increase quality and increase revenue per lead

“The cost per lead on Zillow ranges from $20 to $220. I estimate the average to be around $55 per lead. For Opcity, assuming a $250,000 home, a buyer’s agent commission of 2.75 percent, and a 30 percent referral fee, each customer is worth around $2,000 — or 36x higher than the value of a lead.” – Inman.com

Indeed, as property portals are being challenged (Google, Facebook) they get closer to the transaction, try to extract more revenues in each transaction, increasing their value added by offering insurance, mortgage, utilities, moving, valuation and data. And in the most extreme case, but probably most interesting, Zillow is now flipping homes to achieve $20 billion revenues in 5 years from now.

2003
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