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Real Estate Portals Costs – It Could Always Be Worse!

5 minute read

In the past month I have purchased a new Subaru Liberty 3.6R MY10 model and I took some time out during that process to check out how the internet, emarketing and social media is effecting the motor vehicle industry and I was genuinely surprised by the results.

First I tried to do some research on the make and model I was looking to purchase and found very very little information on the car itself outside of the standard manufacturers blurb. Even all the online driving reviews were only 10 to 20% original and the rest was padded out with the manufacturers press releases word for word.

I visited a number of dealer websites and they were flashy enough but provided very little substance or information.  I found only one business based site that went to the trouble of creating unique content and conducted significant research. The only other websites that provided anything original were the enthusiast websites and forums.

I could not find any blogs run by Subaru dealers, nobody on Twitter tweeting the latest news for that manufacturer or any dealer fan pages on Facebook. No matter what I tried emarketing seemed to be non existent.

I started searching outside of Australia and found excellent examples of Motor Dealers embracing social media. Austin Subaru for instance has around 4000 facebook fans. Every time they post something to their facebook page 4000 local subaru enthusiasts get the message and when one of those 4000 fans comment or click on the “like” button all their friends get the message too.

The next thing for me to check out was the Portals. The motor industry online is dominated by several portals the same as the real estate industry but that is where the similarities stop. What I did not notice at first was that you do not see on the portals any dealer contact information anywhere. The portals completely control all contact between the dealer and the interested party. To make a phone enquiry you have to dial a number and punch in the car ID to be connected.

As a prospective purchaser this was downright annoying but it wasn’t till I realised that the portals were controlling every single enquiry so they could charge an enquiry rate that I was really disgusted as it made the whole enquiry experience very frustrating.

So how much was a dealer being charged for a single enquiry? What would you think would be fair? I was thinking $2 or $3 maybe. I naturally asked my dealer and was shocked with the answer. They told me car dealers are paying well over $30 per enquiry and apparently many are paying much more than that as well. That’s $30 for every phone call or email generated by the portal. Apparently it’s not unusual for a potential customer to continue to use the portals phone number to contact the dealer again which just magnifies the whole cost.

As you can imagine large car dealers are paying a serious amount of money to these portals every single month. It appears to me that because they have not created their own online presence or invested in other forms of emarketing they are locked into using these portals and their extortionate prices.

Now this is the part that really confused me. The keyword tools in my Google Adwords account tells me that the average CPC rate for  keywords like subaru, subaru liberty and subaru impreza is under 40 cents so if you are going to pay that much for each enquiry from the dealers why dont they invest in pay per click campaigns targeted specifically at new car purchasers. Google Adwords allow you to geographically target your ads down to a particular town or city which is perfect for the car industry. Real Estate agents generally operate in much smaller areas, as small in some cases as one or two suburbs of a whole city. This means that geographic targetting can have mixed results for our industry but not so with car dealers.

I ran a few searches online for Subaru cars and all the ad slots were filled with the different car portals including carsales.com.au, carpoint.com.au, privatefleet.com.au and carsguide.com.au. Not one local dealer trying to generate enquiries at a fraction of what the portals would charge.

Now real estate portals use adwords too but because of the per enquiry charge rate  of the car portals they are effectively engaging in a form of “Enquiry Arbitrage”.   They buy an enquiry or a click for $1 from Google then they sell it to a dealer for $30. Now not all those clicks will convert to an enquiry but what if they get just a 10% conversion rate that’s still a 300% return on their investment.

Too often we look back and say that real estate agents as an industry have not done enough to insulate themselves against the sheer market strength of the real estate portals. But in light of how the motor industry are treated maybe we should be looking at the glass half full not half empty.

On another note, maybe REA should look at the motor industry. A corporation has to be constantly growing or its share prices suffer. Because they have saturated the Australian market they tried to expand overseas but was obviously no success and they ended up retreating out of some markets and blowing their investment. So instead of ramping the prices up on agents why dont they diversify in the motor industry. They have the experience in online classified advertising and their model would compete well against the per enquiry models.

Now I am the first to admit that my experience with the motor industry online is pretty limited so if anybody has anything to add on the subject I would love to hear it.

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19 Comments

  • Aryan
    Posted January 28, 2010 at 2:13 pm 0Likes

    I think you need to check thoes numbers again. They are not charged AUD 30 per enquiry. They pay a monthly fee like us. The 30 AUD is sometimes paid as a referal fee if the sale goes thru.

  • Nick
    Posted January 28, 2010 at 2:20 pm 0Likes

    Looking for a original car review? Try Top Gear. 🙂

    Thats kind of interesting because a car costs less than a house.
    The sense of scale is inverted.

  • Glenn Batten
    Posted January 28, 2010 at 4:16 pm 0Likes

    Aryan,

    Some of the portals might indeed be a flat rate but my dealer specifically told me the leading site, (which I am 99% sure is carsales.com.au) is per enquiry for them.

    I discussed how we pay a flat rate no matter the number of listings and two different guys in the dealership confirmed they were definitely not on that sort of arrangement. Don’t get me wrong they could have told me a pack of lies and I must admit I was skeptical when they first mentioned it but the whole concept that every enquiry has to pass through the portal seemed to confirm what they were saying.

    I can’t see how a referral fee would work. How would a portal know what enquiry purchased a car. That does not seem as though it would be workable as who would admit to it.

  • Aryan
    Posted January 28, 2010 at 5:22 pm 0Likes

    Hey Glen,

    There is a reason why car salesmen are hated around the world (they lie a lot). I am sure you can verify what I said by calling carsales.com.au.

    As I said some portal charge a referal fee in case of sale not all I am not sure how it works

  • John P
    Posted January 28, 2010 at 7:23 pm 0Likes

    hmmm…I think you are overlooking some issues. Car dealers like most businesses probably want qualified enquiries rather than clicks to their website – but the principal of charging per action i.e. google’s model; would on one part of your argument seem to be wholeheartedly supported, but when adopted by a car portal it made you “really disgusted”. Is it the model or the pricing that is disgusting you? If it’s the price – surely dealers do their maths and work out if it’s good business or not compared to the $10,000 per page they probably pay the newspapers for a one day run and maybe 10 enquiries?? i.e. $1000 per enquiry
    And scale versus us realestate agents…perhaps you should consider the margins each of us make rather than the cost of the goods sold?
    Also, if I pay a subscription fee of $600 and get 1 enquiry i.e. $600 per enquiry – am i better off or worse off than a dealer who pays $30 per enquiry and only if an enquiry is generated?
    -John

  • Mike
    Posted January 28, 2010 at 8:52 pm 0Likes

    They definitely pay more than $30 per lead for each lead generated through the website.

  • Mac
    Posted January 29, 2010 at 11:02 am 0Likes

    The auto industry portal model began as an extension of the internal IT inventory management systems they used. To complicate matters, about 30 of the largest dealerships had equity in it when PBL bought-in. What you say makes sense, Glenn, but re-education and change of culture are the most expensive of all marketing components, even with significant $ savings as the lure. i.e. it’s hard to change a model once it is so dominant, although not impossible. IMHO REA doesn’t have the smarts, inclination or need for such a move. However, they could easily implement auto models into real estate e.g. pay-per-lead, especially now that you have to click to get agents details 🙂
    Thankyou for the stimulation (as the Bishop said to the Nun).

  • max
    Posted January 29, 2010 at 11:11 am 0Likes

    Aryan, Glen is right. Some car portals are CPL.

    Glen, you’re barking up the wrong tree again.

    Portals have built a high repeat consumer base because their sites have more listings and generally better functions that any industry or company driven site.

    Building an average site and picking up an SEM campaign wont help the dealers at all…maybe if they all got together and put politics aside 10 years ago they might have had a shot….oh that sounds like another industry I know.

  • Aryan
    Posted January 29, 2010 at 12:31 pm 0Likes

    Hi Guys,

    For carsales.com.au 1300 728 800 is the number to call and check they have 2 pricing models one is per car and other is per enquiry.

    30 AUD pricing is per car for small dealers

    Regards

  • Zac
    Posted January 30, 2010 at 6:44 am 0Likes

    As a consumer I like dealers getting back to me and treating my lead as important. So if the dealer is paying all the better. The lead should be qualified tough and I can assure you dealers would be smart enough here. Also if I was a dealer I would welcome qualifies leads, the more the better. As someone else said as a dealer I want to move stock and at $30 or even at $100 (if it takes three leads). also I assume, advertising on google may get you clicks but qualified leads may be very expensive and I am going to miss out. Anyhow with my limited knowledge of motors this is what I can say.

  • Mac
    Posted February 1, 2010 at 9:38 am 0Likes

    Ha ha ha Quite right, Max. Try 15 years ago! There is certainly a story to tell there some day! *L*

  • Tim
    Posted February 1, 2010 at 11:20 am 0Likes

    Glen, thanks for your article. I have a brother who sells cars and was amazed to find this out a couple years ago….don’t know how they get away with charging that. But as Max said it is all linked to their accounting software and is very hard to change the culture.

    Thanks again

  • Glenn Batten
    Posted February 1, 2010 at 1:33 pm 0Likes

    Zac,
    It is not per qualified lead apparently. The portal does not qualify you and only charge the dealer if it is a genuine enquiry, they charge for all enquiries. What their conversion rate from enquiry to sale is I could not tell you but it would have to work or they would not be continuing you would not think.

    Aryan,
    The dealer I used that told me they pay $30+ per enquiry was part of the AHG group which is anything but a small dealership with 105 separate dealerships in their stable.

    Max,
    That other industry “you know” has many participants that average down their enquiry costs by supplementing portals costs with SEM and other online marketing. My point in the article was that from my experience car dealers do not seem to be doing this at all. I would not expect any company in either industry to forgo portals to run a PPC campaign in total replacement of running a portal subscription.

  • Mac
    Posted February 2, 2010 at 10:56 am 0Likes

    One of the reasons carsales.com.au’s original portal owner, PBL, struggled with MyHome was because they attempted to copy the carsales model to real estate. i.e. inventory integration, industry ownership (tried minority ownership unlike autos where it was greater), they also wanted to charge ‘per lead’ like car sales but couldn’t see how to get away with it!
    Anyhow, that’s autos. They’re different so let’s get back to the main game, eh 🙂

  • Anne
    Posted February 7, 2010 at 1:15 pm 0Likes

    Glen ” I can

  • john
    Posted March 24, 2010 at 11:49 am 0Likes

    Glen & others, maybe do your research a little better before you attempt to pen an article. who own a major share in REA? the same company who own one of the auto “portals” you reference in you article….. ha.

  • Glenn Batten
    Posted March 24, 2010 at 2:29 pm 0Likes

    John..

    Ha?

    Firstly… what relevance is that? News Ltd have a range of businesses they operate and a number they hold investments in. REA is just one of the latter.

    REA is run independently as a public company and the fact that it’s major shareholder also owns a company has no bearing on the article whatsoever. Yahoo also invested in Google but they were run independently of each other. In fact they even sue each other.

    The REA model and the auto models are not the same which was the crux of the article. I suggested REA should look at the Motor Industry if it wanted to keep increasing revenue. Covering a niche with two brands owned by the same or associated group is hardly earth shattering. Go and check the toothpaste next time you are at the shops. Despite all those brands and different options available just a few companies own the majority of the sales in the sector.

    Secondly.. blogs are not strictly journalistic work. Whilst they can report the news it is more about personal opinion. In this case I did actually realise the connection you raised (there logo is on the realestate.com.au websites is the first clue) but I thought it added nothing to the core of the discussion. The difference was in the models and the motor industry is IMHO being shafted and get agents to question if we have really a lot to bitch about when they increase our fees.

    The fact that it is being shafted by business who is owned by a very large public company that has also invested as a shareholder in another public company that runs numerous real estate portals around the world one of which is also the major real estate portal in Australia,,,,,, does not change the discussion at hand. I really dont have an issue providing similar sort of info to provide a background to the article… I do it all the time.. just when I think its relevant.

    Thirdly…. Plenty have people add further information to the articles, comments and opinions.. thats what the whole blogging experience is about.. I dont take offence at it at all.. Everyone has an opinion and something to add.. but in this case I specifically asked for others peoples input int he last paragraph.. If you think it was relevant then certainly add it into the mix but I wouldn’t naturally assume that I and every other person who has commented on this article missed that fact. Instead you had a bad day and want to take swipes that I and “others” have not done research before putting fingers to keyboards (or even “pen” to paper).

    If you want to explain what relevance you think there is to that connection in the context of the discussion I would love to hear it. Whilst I respect your right to have an opinion, I dont have to agree with it, nor you mine.

    ha!

  • Scott
    Posted September 23, 2010 at 9:30 pm 0Likes

    Can I just confirm, being in the car industry from a direct retail sales back ground, and now in a company that offers services to dealers, I can 100% CONFIRM that, if not all, almost all dealers pay somewhere close to $35 PER CLICK, regardless of where it came from, who inquired and how good the lead is. Almost every dealer who want to use carsales.com.au has to pay per click at about $35. Cheers

  • Scott
    Posted September 23, 2010 at 9:32 pm 0Likes

    Sorry, just to confirm, I meant Pay Per Click in the sense of pay per inquiry sent, not pay per click as in Google Adwords.

    Cheers

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