Quick Answer Series: What about Advertising in Classifieds?

I think it’s a total waste of money!  As bad as it gets!  Even with a call capture hotline, the price paid for the few leads captured makes it a poor investment.  Here’s why it’s such a bad investment.

The newspaper industry has finally reached the point of failure.  Don’t believe me?  Google “newspaper failure” and check out the results.  Sure there are still a few on life support, but the newspaper industry is going the way of the buggy whip business.  Maybe it’s not their fault.  Maybe it is.  That’s a topic for another article.

Either way, as newspaper readership dries up, the industry’s answer to declining revenues is to… get this… raise prices on those few poor agents who’ll still advertise there.  And because our industry is filled with practitioners who are, shall we say, “mature”, many of them still enjoy the daily ritual of walking out into their yard, picking up their morning paper, coming in, and reading it with breakfast.

I’m looking for a nice way to say “out of touch with the mainstream”, but I can’t think of one.  So because many of us like to read the paper, we assume everyone else does.  So we throw our advertising dollars at a broken and over-the-hill industry because somebody once told us about a time when they got a client from an ad in the paper.  Know what they call agents who get all their business from classifieds?  Retired.  If you find yourself in a hole, the first rule is to stop digging!

But I want you to see it for yourself, so let’s crunch the numbers.  I am not aware of a newspaper where you can run a classified in the real estate section for less than $50.  Many are much higher.  Add to that your time cost of a minimum of an hour of your time.  Don’t forget, if you want to make $100K this year, your time is worth $50 per hour.  So we have a total cost of $100 for the ad.

Now what is your budget?  Assuming your market has an average sale price of $200,000 and an average commission side of 2.5%, then your average GCI or gross commission income is $5,000.  Your budget per closed deal is 10% or $500.  Now take the $500 and divide it by the 24 average leads you need to close one deal, and you have a maximum budget of $20.83 per lead.

So all I’m saying is do the math.  If the classified costs you $100, you better get 5 leads or you’re going backwards.  And I’ve never seen a classified perform like that.  You want to make your phone ring, place an ad on CraigsList for free.  And that’s my quick answer.

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