Who Will Make Social Networking Pay Off for Real Estate Professionals?

by Mike Parker

Few subjects have attracted as much attention lately as Social Networking.

This communication technique is everywhere, and sites such as Facebook–with over 500 million registered users–represent a target that is just too big to ignore for any self-respecting marketer. The idea of having a 500 million person target to shoot at brings chills to the heart of any hunter worth his salt.

It’s also hard to leave Twitter out of your thinking: even if a high percentage of Twitter sign-ups have been shown to make only one “tweet” and never return. It is just too big a user base to ignore. This is especially true when we see large companies posting “Follow us on Facebook and Twitter” all over their advertising materials. If it’s good enough for “them”, it must be good enough for us!

The problem is that while there are some ideas everyone recognizes as good ones–like tying in to those networks, figuring out how to convert that network tie-in to money in the bank is not as instantly obvious.

Why the conventional sales approach may not work in social media

It’s one thing to push a social phenomena but quite another to marry it to the purchase of the biggest asset a consumer will make and to do it in a way that doesn’t turn off the networker. Think of it this way: you are sitting in your office, telling your network how you found a great buy on designer dresses at some out-of-the-way little store, when suddenly and simultaneously, a brick is thrown through the window of everyone you are conversing with bearing the message “Designer clothes for less at Joes!” I have always felt that advertising on social networking sites is about as welcome as that hypothetical brick and about as welcome to the conversation, as well.

Effective social networking, then, is not conventional hard sell advertising; it is about what used to be called “guerilla marketing.” The online encyclopedia Wikipedia defines guerilla marketing thusly:

“The concept of guerrilla marketing was invented as an unconventional system of promotions that relies on time, energy and imagination rather than a big marketing budget. Typically, guerrilla marketing campaigns are unexpected and unconventional; potentially interactive; and consumers are targeted in unexpected places The objective of guerrilla marketing is to create a unique, engaging and thought-provoking concept to generate buzz, and consequently turn viral. The term was coined and defined by Jay Conrad Levinson in his book Guerrilla Marketing. The term has since entered the popular vocabulary and marketing textbooks.

Guerrilla marketing involves unusual approaches such as intercept encounters in public places, street giveaways of products, PR stunts, any unconventional marketing intended to get maximum results from minimal resources. More innovative approaches to Guerrilla marketing now utilize cutting edge digital technologies to really engage the consumer and create a memorable brand experience.” –Wikipedia

The social networking concept for real estate stands on the principle that in working to develop relationships with strangers with like-minded interests online it is possible to influence how those interests live their lives, choose their vendors and (ultimately) purchase their homes. It is the hope of the validity of that premise that has everyone excited: after all, if hundreds of millions of people can be interacted with online, there ought to be a few that can develop into a business relationship, right?

Three new studies indicate huge growth in Social Media Marketing

A recent University of Maryland study posits that economic struggles have been a catalyst for social media’s rapid popularity. That study also shows that social media usage by small business owners increased from 12% to 24% in the past year and that almost one out of 5 small business owners uses social media as part of their marketing strategy. That study also reported that 58% of users felt that social media “met their expectations.”

The consulting firm E Marketer took this a bit further, identifying the “expectations” of small business owners in utilizing social media and the percentage of owners reporting success. Here, then, are the top reported goals in that report:

To identify and attract new customers. 73% of the poll reported that goal and 61% reported that their expectations were met;
To develop a higher awareness of your organization within your target market. 54% listed that as a goal and 52% reported that goal met expectations;
To stay engaged with current customers. 46% of respondents listed that goal and 46% of that group reported their expectations were met;
To collaborate more effectively externally with suppliers, partners and colleagues. 34% of respondents shared that goal and 35% of those people reported meeting expectations;
To collaborate more effectively internally. 26% of respondents listed this as a goal and 21% of those reported meeting expectations.<!–[if !supportLists]–>
Duke University chimes in with a key finding in their report based on their CMO Survey that current marketing budgets allocate 5.6% of that budget to social media, up from 3.6% in April 2009. They also expect significant increases in those budgets for social media over the next five years.

The difficulty that even large companies have had in monetizing social media

Facebook has been rumored to be preparing to charge $14.95 a month for membership. Many feel that if that is initiated, membership will take a drastic drop. Of course, with 500 million members, if only 10% of them go forward on the monthly plan, that’s $747 MILLION in annual revenues. Up until now, Facebook has not reported significant earnings. A leaked earnings report from 2006 showed a net loss of $3.6 million. Venture capitalists, however, have stated that Facebook is worth billions, and it undoubtedly is. After all, Microsoft invested $240 million in Facebook in 2007. Thus far, though, it apparently doesn’t earn money.

Then, there’s YouTube. Acquired by Google in 2006 for $1.65 billion, it’s another social networking site that has great monetary value but whose revenues were dismissed as “not material” in a 2007 Google regulatory filing. Forbes magazine estimated 2008 revenues as about $200 million. It’s safe to say that Google has not yet received its original investment back. Eventually, I believe, it will cost money to post on the network. YouTube spends millions monthly just for their bandwidth access and revenue is required to offset that and all the other tremendous expenses of providing that fabulous social service to the marketplace.

Closer to our industry, there’s a host of other networking sites. Each of the two best known real estate content sites has about 100,000 free subscribers and has yet to institute a subscription model.

You’re going to be able to bid on keywords at Twitter, soon; is this beginning of a trend?

The New York Times has reported that Bill Gross, one of the people allegedly responsible for inventing paid search advertising (his former company, Overture, was sold to Yahoo for $1.6 billion) has a new venture that aims to make money by allowing Twitter users to bid on key words to give their posts top ranking.

“Finding all the thoughtful tweets amid all the noise is unbelievably hard,” Gross is quoted as saying. He describes the goal of his new service, “TweetUp” as being “to cut through the clutter of thousands of irrelevant posts on topics of interest and keep the useful ones from disappearing into a torrent of messages.”

Gee; does anyone want to guess which real estate related Tweets will be adjudged “clutter” and which ones will be ruled “useful?” All I can tell you is that when people part paying “pay-per-tweet” to promote themselves all organic users will be relegated to the void. Money always talks louder than good ideas.

I believe that this is a trend–a sort of parasitic trend, at that–in which the public buys in to a new medium, builds it into something of value, then sees it hijacked by the boys in silicon valley who are all trying to out-Google Google and are excluded from relevancy in the process. Your intellectual investment in Twitter will be irrelevant when Gross’ “pay-per-Tweet” rules the TweetUp search function proprietary to the company.

When will someone design the killer search app for Facebook? When it happens, all casual users will be out all their investment and time. All new explosive growth practices will be exploited by those with big brains and deep pockets. After all, all Silicon Valley investment bankers remember Google; they remember the huge gains on YouTube and all the other great little ideas once someone figured out how to manage the information, and that’s because it is all driven by the huge corporate advertiser.

Simply put, no agent can monetize a hot new technology nearly as well as those backed by deep pocket venture capital can. ‘Big Fish, Big pond’ means little fish get eaten. Real estate agents are little fish.

Is this a huge rush to adopt something not yet fully understood?

There are many people jumping on the social networking bandwagon, but few are receiving any measurable return on investment, experts say. My personal advice is that until someone has a product or program that measurably and accurately measures actual return on investment for the time and effort spent on social media, agents are better off using social media to network or recruit. They should forego spending more than 6% of their budgets and commit only limited amounts of their time flogging social media.

Social media is definitely going to matter in many industries. Increasing amounts of money will be spent on Social Media. Many experts advise agents to limit their social media efforts to ‘no more than one hour per day.’ Maybe it’s just me, but I can’t afford to spend even one hour a day on something that has no measureable return. I’m willing to bet that you can’t either.

Experts’ guidelines for your social media efforts

Dirk Zeller is a noted trainer of agents, through his company Real Estate Champions. In a recent article “Balancing your strategy in Social Media” published online at realtor.org he outlined three basic and easily followed suggestions for tip-toeing into social media and I summarize them, here:

Don’t spend too much time on it–30 minutes a day or less;
Communicate value and exigency–position yourself as an expert;
Use it to find people–so many are on networks that it is through networks that you have the best chance of finding many people you are seeking.
Dirk also gives this particular caution:”Social media can take up your whole day, if you let it.” That resonates strongly with me, especially after reading about a woman who literally had to have a friend change her passwords so she could no longer access her Facebook page or her Twitter follows. That woman literally found herself unable to do anything but respond to “tweets” and “Friend messages” and the constant interruptions interfered with her thinking process and ability to complete even routine tasks. Perhaps you’ve seen this syndrome demonstrated by your teenage child, too. Stepping into social media can be addicting and addictions destroy the quality of life.

Will people actually purchase a house through someone they met on a social network?

Clearly, millions will be made and lost by people trying to make social media pay off for them. I liken the excitement to that when real estate websites were first available: everyone believed they’d simply put one up and make huge amounts of money. Yet even today, NAR tells us that 90+% of agents have yet to fully tap into the Internet and to be happy with their yield from the Internet.

It’s my thinking that social media will follow the same model: virtually 60% of agents will rush to utilize it and the vast majority will not know the best way to do so. Networks of “Social Media Gurus” (Google that and see what you get) will spring up, willing to tell you how to make millions in social networking for a reasonable fee. These gurus will contradict each other, leading to market confusion.

I have put forth a consistent point of view about the efficacy of social media in real estate sales for years and I have received more negative email on this subject than on any other I have written about. It is my belief that–while there are some exceptions to my position–generally, social media is not the place to pour your efforts to sell homes. I think it’s great for recruitment, for keeping in touch with friends and acquaintances (and it is there that some possibility of selling a home may exist–not with people you have only met through social networking) and for pleasure, both business and personal. It’s my opinion that any business success obtained should be viewed as a gift or a fortuitous event.

Bigger brains than mine will stoutly disagree, and that’s the basis of business. However, what works for a huge corporation employing 6% of their ad budget to randomly try to sell consumer goods to a miniscule percentage of social network members (and call it success) is not the same thing as you trying to sell homes through your tiny social network (in comparison to that those consumer marketing companies can access). It’s a game where mass marketers excel. Are you a mass marketer? I didn’t think so.

In the end, time will tell. But as for today, when the vast majority of social networking users cannot identify or quantify their return on investment, I think it is a case of mistaken marketing for real estate agents to invest their time and money in social networking as any kind of major strategy. If it works, be happy; when it doesn’t, don’t be disappointed.

Do your prospecting on the Internet, in the community, and with your existing clients. Leave social networking to the experts until they can bring it into a measurable method of bringing clients to you. Don’t be led astray by self-appointed social media gurus with a paucity of measurable results.

To summarize, keep an eye on social media, but don’t make it the centerpiece of your marketing strategy until someone can reasonably show a measurable and consistent pattern of real success with it on a scalable and sustained basis.