I gave a presentation last week in Portland where I asked the audience of about 300 REALTORS two questions:

1. Do you drive most of your business from referrals… friends, family, past clients, other agents, etc.?
2. Do you drive most of your business by reaching out directly to consumers… ads, online home search, etc.?

A little over half the audience raised their hand to the first question, while under 10% raised their hand to the second, which didn’t really surprise me because I asked a similar (but more convoluted) question in an online poll about a month ago and got similar results (i.e. 58% said referrals).

I think it’s extremely safe to say that in terms of generating business, most real estate agents (and most professionals for that matter), are better at reaching into their network of friends (and friends of friends) to drive business than reaching consumers directly.  And yet, almost all online tools, commentary and critiques of social media within real estate focus on the inability to of the tools to directly reach consumers.  (One of the more eloquent critiques was written by Marc Davison).

Let’s break down the skills and tools that an agent needs to successfully run online campaign that directly targets consumers:

1. Project management. Hire someone with web design, marketing and coding skills (or sometimes a team of people with these skills) and make sure the site actually gets built!
2. Writing. Either need to write content, or at least advising and managing the person creating the content.
3. Online promotion. Either need to optimize your landing pages and drive lots of inbound links to your site (so that you can get free traffic from the search engines) or buy traffic through online ads
4. Conversion optimization. Optimize your site to get consumers to register (probably through a IDX/home search tool, which also has to be integrated into your site)
5. Prospecting. Prospect the database of users (assuming your IDX allows for this) and ask them for your business. Otherwise, wait for the consumers to contact you (probably when they “request a showing”).

None of these skills are particularly hard, and I’ve seen agents with almost zero internet experience pick them up and start generating business in less than half a year. However, I’ve seen way more agents get frustrated at the lack of results afte they “master” only one or two of these skills…

For example, I’ve seen agents spend two years just trying to get a good site built (project management #fail)… or they get a beautiful site built for them, but never add any content (writing #fail)… or they write well, but don’t know how to get anyone to link to their content (promotion #fail)… or they get people to their site, but don’t give users a logical way to register (conversion #fail)… or they get people in their database, but aren’t setting appointments (prospecting #fail).  In other words, none of the skills are all that hard, but they aren’t necessarily intuitive to everyone either.

Now, let’s compare that to the skills and tools used for a referral campaign that’s the bread and butter for most agents:

1. Networking. Make a connection with friends, family, past clients, other professionals, etc. (could be through events, organizations, or outreach via postcards, etc.)
2. Sales. Ask them for your business (or more likely, if they know of any business they can send your way)

If it’s not obvious, the skills that drive the bulk of real estate business today (i.e. referral business), are vastly different than the skills needed to convert consumers into clients on the internet… so no wonder most agents get frustrated when their initial internet activities don’t effectively reach online consumers.    It’s a completely different set of skills.

Instead, if you’re an agent that does most of your business from referrals, you should be thinking “how can I use internet tools to reach and build my referral network?”

And the answer to that question is definitely something I’m going to continue exploring in the near future.   My opinion is that the tools currently marketed to real estate agents do really crappy job of building up a sphere because they almost inevitably focus on helping REALTORS reach consumers directly.  When I searched for a referral networking tool last month to feature in this article: Getting Serious about Lead Management, I couldn’t find one that I liked well enough to mention.

However, I’m going to write a post in the next day or so on a new favorite tool of mine: Gist.   It’s the best sphere building tool I’ve used, because of the way it let’s me filter through people within my network based on criteria that I set… a feature simply not available on tools like Facebook, Twitter, Google Buzz, Seesmic, TweetDeck, etc.

I’m going to be presenting the general idea mentioned in this post at lots of conferences in the next few months (Chicago, Atlanta, Las Vegas, Toronto, etc.) and more than your agreement, I would really love to hear your critiques…

Where are the holes in my argument?   Am I screwed up thinking agents should forget focusing on reaching consumers directly and instead focus on building up their referral networking?