• by Mark Walsh  @markfwal, January 14, 2010

Online suffered less than many other types of media in 2009 as a result of the dramatic falloff in real estate advertising, dropping only 1% to $7.5 billion. But industry ad spending on the Web is expected to contract further in 2010 -- by 4% -- even as dollars allocated to traditional media rebound, according to a new forecast by local media researcher Borrell Associates.

The firm expects industry conditions overall to improve somewhat this year, projecting a 3% gain in real estate ad spending this year after a 20% drop in 2009. Newspapers will benefit from an increase in spending by government agencies and banks to advertise distressed properties, leading to a 16% gain to $4.4 billion after a 34% plunge last year.

Broadcast TV, cinema and other print vehicles will also enjoy big turnarounds in real estate advertising this year, but they still have not returned to 2008 levels.

"Online advertising continues to dominate the real estate market, reflecting the consumer's ongoing rapid adoption of the Web as a preferred method for researching homes for sale," states the new Borrell report. The Web has now caught up to [real estate] agents as the top way that consumers found the homes they ended up buying."

Real estate ad dollars garnered by the Web were more than double the total for newspapers ($3.8 billion) and triple that for direct mail ($2.1 billion) last year. Online increased its share of the $7.8 billion spent by U.S. real estate agents and brokers last year to 57.7% from 48.2% in 2008. That share is expected to shrink slightly this year to 55.5% as spending in other media rebounds.

The Internet also claimed a bigger share of the $8.5 billion in advertising from mortgage providers, growing from 17.3% in 2008 to 23.2% last year -- displacing broadcast TV as the primary medium to shop mortgage loans. That share is forecast to reach 29.1% in 2010.

More and more real estate dollars going online are earmarked for direct marketing efforts, from email to social media to public relations. Borrell projects that category will garner 39.2% of real estate ad budgets this year. Banners and other standard display formats will make up 27%, paid search 24% and streaming video, 10%. Although still small, video is the fastest-growing segment, almost doubling its share from 5.5% last year.

The proportion of the industry's online spend in local markets is also expected to increase from 25% to 28%, or $1.9 to $2 billion. (The difference is not the same as national versus local. A realtor just outside a market's border may want to advertise to people in a nearby market.)

Looking further ahead, Borrell expects online real estate spending to bottom out in 2010 at $7.2 billion before increasing again to $7.9 billion in 2011 and $8.3 billion in 2012. Another downturn will begin in 2013 as a result of government stimulus revenue ending and growing weakness in commercial real estate.

"As the volume of dark space continues to rise through 2010, we expect fluctuations in commercial ad spending to have a noticeable effect on total spending, and that is reflected in our long-term forecast," stated the report.