Fast forward to 2003. There is now plenty of evidence to demonstrate that while the Internet may not have lived up to all the hype, it was much ado about something after all.
Where Have All the Buyers Gone?
According to the recent Realtors® survey, 71% of home buyers used the Internet as part of their home search in the first quarter of 2003, compared to 49% who used the newspaper.
When the NAR first started comparing the use of the two media in 1995, only 2% of home buyers used the Internet, while 51% used the newspaper.
The trend is clear, and no one expects the lines to converge again.
Web Sites Are Just Sales Centers
Most builders correctly view their Web sites as extensions of their “brick and mortar” sales process. As a result, they have become accustomed to measuring the traffic to their sites, and in many instances the actual home sales that can be traced to these Web sites.
While there is still some confusion about the best way to count online traffic, most industry experts suggest that “unique users,” rather than “hits” or “visits,” are the best measure of prospective home buyers on a builder’s Web site.
What is less clear to most is where the traffic comes from, how much it costs and how to generate both quality and quantity.
Traffic Is Not Free
One of the earliest perceived benefits of the Internet was that it would facilitate the proliferation of information and communication for free.
But the reality is that consumers are more concentrated among fewer information providers on the Internet than in any other medium. Since there is effectively no barrier to adding new content to the Internet (there are more than 3.3 billion pages currently indexed by Google, a leading search engine), it makes sense that consumers would require one or more gatekeepers (portals, search engines and Internet Service Providers) to help them find their desired information and content.
In fact, the three major portal sites — AOL, MSN and Yahoo! — now reach more than 99% of all consumers on the Internet in the United States, according to comScore Media Metrix.
This “gating” of the Internet wasn’t predicted several years ago, and it has serious economic implications for builders interested in growing their online traffic beyond what they can reach through the existing public awareness of their brand and their online marketing efforts
After experiencing heavy growth in Web site traffic in 2000 and 2001 as the masses were adopting the Internet as a new information medium, most builders have reached a “plateau” in their online audience.
This has caused builders to actively pursue online traffic growth. These efforts, in turn, have been met with varying degrees of success and have come with some surprising price tags.
Search Engines and Portals
The most Web-savvy builders in recent years have been attempting to improve the placement of links to their sites within the search results generated by one or more of the prominent search engines, such as Google or Overture.
Search engines are powerful tools used by consumers to find information on the Internet. They are embedded within portal sites, and in some instances have their own Web sites as well.
Search engines use one of two methods to rank the results they generate in response to a query or phrase. They either use sophisticated (and constantly changing) algorithms to “match” the best results to the inquiry, or they sell placement to advertisers for the privilege of being ranked at the top of the search results.
Because in most instances, they actually use both methods, builders attempting to increase traffic to their sites need to understand these models and the limitations associated with each of them.
In the case of the “formulaic” or “algorithmic” search results, the builder’s in-house Web master (or outside Web consultant) needs to understand the ranking structure used by the search engines. Even then, it is a challenge to retain a top ranking, because other builders are constantly jockeying for top placement for their sites.
A source of frustration for many large builders, good placement simply can’t be bought through the algorithmic search engines.
In the case of paid search results, money does matter. In fact, it is the only thing that matters. The more a builder is willing to bid for each consumer transfer to his Web site, the higher he will place within the search results.
Since virtually all search traffic is transferred to one of the top 10 search results, achieving a top placement matters.
These engines allow some level of geographic and demographic targeting, but most of the consumers who use the search engines type in generic words or questions such as “Atlanta new homes” or “quality Denver home builder.”
Again, ensuring top placement is difficult and expensive since top placement always goes to the highest bidder in this auction environment. For example, the average prices paid to transfer a single user to the home pages of builders in Atlanta and Denver were $2.02 and $2.66, respectively. If only 1% of these unique users become buyers, the effective online marketing cost for these sales is roughly $250.
Beyond the search engines, there are several additional online traffic acquisition opportunities, such as inclusion in listing services — like HomeBuilder.com, NewHomesOnline and NewHomeSource — and traditional banner advertising on highly visited Web sites. Each opportunity has its advantages and disadvantages.
Banner advertising is perhaps the most recognizable form of online advertising. Banner campaigns can be used to create visibility for upcoming grand openings, new releases and other events or simply to create brand awareness. Whatever the purpose, builders should not depend solely on banner ads to drive significant traffic.
A typical banner campaign is purchased based on the number of impressions or times the ad will be displayed, and the price per thousand impressions (CPM). Depending on both the number of impressions acquired and the quality of the audience (active home shoppers are clearly more valuable than users of a stock price quote service), CPMs for 1,000 impressions can range from under $1 to over $50, with typical click-through rates ranging from .01% for non-targeted ads to over 1% for targeted ads.
The cost of acquiring traffic through banner advertising can be quite high. On the other hand, the cost of reaching consumers with a branding message is actually quite low relative to other general advertising media like newspapers, radio spots, billboards and other outdoor advertising.
Listing services are another vehicle to promote a builder’s brand or events and to drive traffic to their Web sites.
Unlike paid search or banner ads, listing sites also may provide qualified leads from consumers who are well acquainted with the builders’ offerings. They can provide branding in addition to well-qualified audiences, site transfers and leads and, not coincidentally, the highest volume of consumer traffic aggregated from portals and search engines.
The fact that the listing sites may provide different types of value makes them more difficult to evaluate. Because of the significant differences in size and quality of the audiences, comparing prices is difficult. Prices can range from $100 to more than $500 per new home community per month.
Online marketing needs to be an integral component of a home builder’s overall marketing strategy. According to a recent survey, 71% of all home buyers start their search online for one basic reason — to save time. Use of the Internet is only going to grow over time.
That means that what’s true today will become even truer in the future: online marketing is the best place to reach consumers before they leave their house to tour model homes.
Tom Vetter is senior vice president fort HomeBuilder.com, which is the official new home Web site of NAHB and is the exclusive new home content partner for AOL, MSN, Yahoo!, Earthlink, MonsterMoving and Juno/Net Zero.
Find Out More In 'Internet Connections for Marketing Success'
"Internet Connections for Marketing Success," available from BuilderBooks.com, explains how to integrate the latest online technology into your marketing strategy and use the Internet to increase sales and customer satisfaction. It also shows readers how to develop an online marketing budget, create an e-mail marketing plan and build a Web site based on time and dollars available. To view or purchase the book online, click here, or to order it, call 800-223-2665.
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