It’s no secret that the real estate industry has a rocky relationship with REA (the parent company of Realestate.com.au).  While the industry is addicted to the reliable stream of buyer leads that REA sends them, the downside is that it costs more to market a property online in Australian than anywhere else on earth. While this cost is borne in most cases by the seller of a property, many agents claim that the high cost of advertising a property for sale results in sellers putting pressure on agents to reduce commissions.

So bad is the relationship between REA and the industry, that there have been multiple attempts by the industry to create their own online portals to stop the dominance of REA and their seemingly endless price increases. There have been many attempts to create industry owned portals but realestate.com.au has a characteristic technology investors refer to as the “Network Effect”.

The network effect is the name given to a phenomenon whereby a product or service gains additional value as more people use it. In REA’s case, the more properties listed for sale, the more buyers use it, which in turn results in more reason for sellers to advertise there, and less reason to advertise on a competing portal.

The network effect creates enormous barriers to entry once an incumbent has reached scale, making it almost impossible for a competitor with a similar product or service to succeed. Other examples of the network effect are enjoyed by companies like UBER, Facebook and AirBnB.

That’s why a simple duplicate of the portal model, irrespective of how well it is supported by the industry won’t remove REA’s dominant position.

Put simply, to remove REA’s virtual monopoly on online real estate advertising in Australia, an alternative model needs to be created.

That alternative could well be Facebook.

Facebook advertising has many advantages over the current model of the traditional real estate portal. Firstly, it allows buyers to consume real estate advertisements in an environment they are already comfortable in. Secondly, Facebook serves users appropriate property listings without having to go through the often painful search process. Thirdly, it is very targeted and has the capacity to advertise the right properties to the right potential buyers with a high degree of accuracy.

The fourth significant advantage that Facebook has is a very big audience. Most of REA’s competitors have focused on first getting all the listings and then finding the audience of buyers. This approach, tried multiple times, has had millions of dollars thrown at it and failed consistently. According to Ollie Moore of Facebook Australia, “Facebook reaches 80% of the internet population in Australia”. He goes on to say that more than 15 million Australians use Facebook every month. In short, Facebook already has an audience of buyers far bigger than REA will ever have.

In August 2017 Facebook announced the global launch of Dynamic Ads for Real Estate. The first serious attempt by Facebook to tap into the real estate advertising vertical.

According to Facebook the service is ideally suited to agencies that hold at least 100 listings. The model works by utilising an API feed that allows Facebook to display specific listings to a pre-selected targeted audience, who can register their interest instantly, without the need for the buyer to enter all their contact information, (because Facebook already has it). Over time it’s very conceivable to think that with all the data, Facebook will be able to deliver not only more buyer leads than a standard property portal but also much better quality leads.

But wait there’s more, it’s highly likely that as Facebook users start responding to property advertisements for sale, Facebook will also be able to deliver high quality listing leads to agents as well.

Picture this scenario; Julie, a mother of two, announces on Facebook that she is expecting a third child. Facebook already know from pictures Julie previously posted, that she lives in a 3 bedroom house in the Brisbane suburb of Kelvin Grove. They also know that Julie owns the house, because they’ve matched her personal information with publicly available records. They know both hers and her husband’s occupations, and their total household income, based on data captured from their lifestyle posts and holiday photos as well as who their circle of friends are. They know the new baby is due in 6 months and that both her and her husband have been searching for houses to buy. Furthermore they also know, because of their spending habits, many of which are trackable through Facebook posts, online purchases etc., that Julie is unlikely to keep their existing home as a rental property. All this information points to a 70% likelihood that Julie and her husband are going to sell their house in Kelvin Grove and upgrade to a 4 bedroom house in Newstead in the next 3 months.

No other organisation on the planet has this level of in depth data on so many people. Of course if this plays out to be true, then REA’s monopolistic grip on online advertising for real estate might be coming to an end, however, there’s nothing to suggest that Facebook will be any less ruthless!

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