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Months ago, we wrote that traditional internet marketing was dead. In August, 2008, MySpace outranked Yahoo for the top spot in ad displays. More people saw more pages – and advertising – on a social network than searching the “trusty” search engine. Did REALTORS take notice? Apparently not, since we’re still getting emails from agents asking “what website service” should they use.

They shouldn’t feel alone, since the story went largely unnoticed by everyone – except by us – while SEO and PPC web marketers tried to write it off as a fluke. Today, that fluke is setting the stage to knockout the traditional web-marketing rules of lead generation for the real estate industry.

After spending years – and millions – getting their websites up to some sort of decency of design, functionality and content, most real estate brokers spent the last five years struggling with the arcane and unclear rules of search engine superiority. Their only goal was to get in the “top ranks” of the search engines, because they equated top-ranking with lead-generation. In an ironic twist of fate, brokers found themselves on the other side of an industry that wouldn’t clearly state how they did what they did – sound familiar? Brokers and agents found themselves staring across the table with “search engine ranking specialists” who threw all sorts of acronyms at them: SEO, PPC, hits, metatags, and other uncertainties that left brokers with nothing more than trust to overcome confusion and write a check to the chieftains (charlatans?) of website traffic. For the promise of “leads,” these techno-Barnums would somehow improve the ranking of the broker’s website.

The good news is that, in the same way the veil was lifted from real estate’s secret society, the search engine crowd is about to find themselves standing naked as the tide goes out. The internet has done it again. Just as the web destroyed the Sacred Real Estate Comparables Book ten years ago, it’s about to slice away the All Holy Search Engine Superstitions. And not even Google will be able to stop it.

Like most of the significant changes in the real estate industry, this one is going to take everyone by “surprise.” Although anyone who glances at their web traffic reports shouldn’t be too shocked. Even our little island on the internet shows the signs of the next generation of our customers. Look at our traffic report for the last few days:

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As a phenomenon, social networks aren’t within anyone’s power to really control. The participants make the rules – and the platforms have even less control than the search engines had over their creations. As the daily traffic shifts from searching to networking, Google, Yahoo, MSN and other portals find themselves slowly relegated to the reference libraries of the web. Even their dashboards are losing ground as the starting point of people’s online day. Search engines still hold a lot of information, and will always remain a central destination for anyone “looking” for something. The “search and buy” phenomenon, however, has reached its limits. Not everything can be catalogued and purchased with a credit card – most especially real estate. And that’s exactly where social networks will step in to replace the search-approach to finding your next home and REALTOR.

Because social networking emulates real life, where you simply ask your friends for advice.

People prefer to get advice from other people, not machines. The mechanism doesn’t matter, as long as there’s a person on the other end. That’s why email was such a rapid-acceptance phenomenon. Combine that human-on-the-other-end-experience with an expectation of “faster-than-now” interactions, which is what text/IM offers, and search engines are doomed.

Website traffic has always been largely meaningless for real estate anyway (although they won’t admit it). REALTOR.COM is the perfect example – it dominates the real estate traffic portal and can hardly turn a profit, let alone control the participation of it’s natural users, the REALTORS. Website traffic works beautifully for sales of widgets that consumers can reserach on their own and purchase for delivery. Interestingly, even in widget industries like books, travel and computers are subject to social networking forces, as people have always asked their friends for advice on reading lists, vacation spots and computer specs.

Real estate remains a far more complex transaction. It requires serious human knowledge to conduct a transaction correctly. Placing listing inventory online is only the start of a very complex process, in which 85% of consumers still end up working with a real estate professional. Even those who try to do it themselves – on the For Sale By Owner sites – end up listing with a REALTOR 88% of the time. Most importantly – when it comes to generating new business – the transaction’s complexity is also why the majority of sellers still select their agent by referral, and only a fraction (under 4%) select an agent by “searching and viewing” their website.

People continue to trump traffic-marketing, even with the internet. Word of mouth advertising remains the most powerful form of business growth.

Sorry search engines.

The growth of social networks as a primary source of leads could also rescue the industry from recession, too. For starters, social networking is free. Unlike the vastly useless postcard and newspaper marketing that continues to sap the budgets of brokerages, social networking can be deployed and maintained with literally no cash. This would free up money for brokers to invest in sales training. Internet marketing strategies can also be redesigned- away from paying for clicks – and toward quality website content, such as higher quality photography and video.

Besides saving money, the shift in lead generation would have a qualitative impact on business growth. Rather than chasing emails from visitors, agents would focus on the fundamental core of sales: relationship management. Social networks aren’t merely “alternate” platforms for posting advertising. They are the ultimate customer-for-life platforms. They help salespeople develop and maintain relationships with their sphere of influence.

It’s called sales.

The irony here is enormous. For decades, brokers have taught (ok, encouraged) agents to organize their lists of friends and family, to generate their first sales. Sphere of influence sales strategies work. Every top agent knows it, practices it, consistently. Then along came the web and an inflation-fueled market boom, both of which distracted brokers from their core sales business. They mistakenly thought search engine traffic could substitute for relationship-based prospecting. The boom made it possible for agents to “sell” listings without building a relationships: Just sit on the steps and take orders.

Thank goodness, then, for the recession. It will help brokers clear up their misconceptions and force real estate professionals to build practices according to their missions as salespeople. Social networking will be a very powerful corrective force for the industry.

A fundamental opportunity presents itself to the industry. Real estate brokers can break the stranglehold of poor prospecting practices once and for all. They can likewise move away from third-party vendors have over their business by leveraging social networking. By breaking the perceived relationship between “traffic and leads” they can throw off the yokes of restrictive MLS systems, listing-distribution networks and pay-for-play lead schemes. Combining sales skills and social networking platforms, brokers can reassert themselves into the center of the real estate relationship.

Social networking offers an opportunity for great salespeople to be just that: focused on relationship-building not listing distribution. Social networking as a lead-generation tool will let professionals get back to leveraging their reputation, not website design, to build trust with new customers, to get referrals.

Social networking may be the best thing to happen to an industry that has focused too much for too long on simply “implementing” the latest technology and not enough on “using it” to make sales. It will get brokers back to thinking like sales people and not like they are search-engine partners.

– Matthew