The Real Deal New York

Premier Agent prices skyrocket, but brokers pay up

On the UWS, cost per lead rose to $197 from $72 over nine months
By E.B. Solomont | November 14, 2017 09:40AM

(Illustration by Lexi Pilgrim for The Real Deal)

The city’s residential brokers slammed Premier Agent when it debuted in March.  But now, they’re fighting each other for a seat at the table.

Thanks to auction-based pricing, the cost to participate in StreetEasy’s agent advertising program — where agents purchase buyer leads in specific ZIP codes — has shot up over the past few months.

On the Upper West Side, for example, the price per lead skyrocketed 183 percent to $196.88 in October, compared to just $72.07 in May, according to data obtained by The Real Deal. On the Upper East Side, the cost per lead climbed to $166.84 from $107.08 over the same time period.

StreetEasy’s parent company, Zillow Group, acknowledged the price jumps last week, when it reported revenue from Premier Agent rose to $197.1 million during the third quarter, up 24 percent year over year — in part because of New York agents’ participation.

“We were dramatically undermonetized in New York relative to the size of our leads, the size of our audience,” CEO Spencer Rascoff said during an earnings call on Nov. 7. “So there was a bit of a gold rush in New York where agents and teams were buying impressions at a very low price and leads at a very low price.”

Rascoff said Premier Agent’s rollout in the five boroughs “exceeded” expectations, and fees have gone up “materially” as a result of the auction-based pricing model. He also noted that return on investment in New York is still “outsized” compared to other parts of the country.

While Zillow doesn’t break out revenue from New York, the real estate giant made over $600 million off Premier Agent last year. And it could make $86 million more off New York agents over the next two years, according to a Deutsche Bank report.

As for the price jump for buyer leads, it was to be expected, according to firms that specialize in lead generation.

“The thing about Zillow and StreetEasy is, they make money one way. They have one lever to pull,” said Aaron Graf, CEO of LG Fairmont. “They’re going to keep raising it.”

Graf said he’s prepared to double his advertising budget if necessary. “It wouldn’t be beautiful, but we’d still make it happen,” he said. “I know I can convert it. It’s worth it for us.”

David Walker, founder and CEO of Triplemint, shared the sentiment. “No platform is too expensive if it can generate business,” he said. “If you can do a great job, what may have seemed like an expensive advertising spend will seem cheap to the agent who can convert better.”

But Walker said it can take a while for brokers to pinpoint exactly how much to spend and where — which has resulted in price volatility in some pockets across the city. “It’s not where you spend a dollar and see if you make $1, $2 or $3 the next day,” he said.

Indeed, some neighborhoods saw price drops — potentially as agents with sticker shock decided to put their money elsewhere. In Greenwich Village’s 10012 ZIP code, the price per lead dropped to $98.03 in October from $280.15 in February. During the same period, the prices in Midtown’s 10011 dropped to $163.82 from $188.12, and prices in 10019, the ZIP code that includes Columbus Circle, slipped to $125 from $191.67.

Zach Ehrlich, CEO of Mdrn., said brokers at his firm are still using Premier Agent, but the cost is becoming a problem. “It’s gotten to a level where the ROI makes less sense,” he said of the higher prices. “The market has also become a lot less active for buyers.”

Some have stopped participating in the program altogether. “The leads were not real leads,” said an agent at one of the city’s largest firms. “I spent 10, 12 grand on it and nothing came out of it.”

He said he tried Premier Agent for six months, but found that consumers were confused about who they were reaching, and were often upset to discover it wasn’t the listing agent — a concern some brokers raised when the program was first announced.

Following initial protests over Premier Agent from some of the city’s biggest residential brokerages, several firms — including the Corcoran Group, Douglas Elliman, Nest Seekers International and BOND New York — signed on to participate in “Premier Broker,” a version of the program that lets companies purchase bundles of buyer leads.

Halstead Property adopted Premier Broker two months ago, and has put together an “e-team” of 15 agents to manage the leads as part of a six-month beta test.

Jim Cahill, executive vice president and chief information officer of Halstead’s parent company Terra Holdings, said the brokerage is currently advertising in various markets — from the Upper East Side to Long Island City — to measure the effectiveness. Ultimately, how much the firm spends will be dictated by those results.

“It’s a lot of work to make it work,” he said. “We’re evaluating how it goes.”