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Why doesn’t Legal Zoom buy its competitors

The biggest machine in our industry is Legalzoom.  You’ve all seen their ads on TV or heard them on the radio.  A lot of people in our industry always complain about them to me, saying things like “They get all the filings because they spend millions on advertising.”  I always kind of thought they spent 10-20 million a year.  The filing for LegalZoom Inc., to become a public company was fun to see the actual numbers and I have to be honest; I was really surprised to learn that they spend 41 MILLION a year in advertising.  That’s SO much money!!!

There’s a lot of risk associated with spending that kind of money, and you have to give Legalzoom SERIOUS props for having the guts to grind out that type of spending with the resolve and determination to meet their goals.  The most obvious risk is that you have to sell AND service a crapload of clients to make any money with that type of expense.  Which leads to this post; if I were Legalzoom, and I had 41 million to spend, it would be hard for my ego to not want to just buy all my competitors out.  I would spend a year with a lower marketing expense and buy up my main competitors.  You could spend 10 million and play around with 30.  I mean they could buy up every company that ranks anywhere on Google for just about any phrase they compete on.  After a year or two they could then go back to dominating every advertising method possible.  But they don’t do this.  It’s an interesting thing to think about their determination and goal of building a brand over profitability and market share.  It’s a pretty inspiring story to put your ego on the shelf and stay committed to your end goal and vision.

But here’s maybe one big explanation of why they don’t buy all their competitors.  In looking at Google tools, people google a couple exact match varieties of the keyword “legal zoom” 134,000 times a month!!!   People Google the exact phrase “legal zoom” 74,000 times a month.  To put that in perspective, people Google the phrase “LLC” 60,000 times a month and probably 75% of that traffic is not for someone looking to form a LLC.

Here are a couple more fun stats:
People google the exact phrase:

Wyoming:  74,000 times a month
Colorado:  201,000 times a month

The funny part, let’s look at whom Legalzoom listed on their SEC filing as their competitors:

Bizfilings:  1,780 times a month
Rocketlawyer: 2,400 times a month
The company corporation: 1,600 times a month

The term “legal zoom” is not a generic term.  There’s nothing about that that would skew these results.  Someone googling that is looking for Legalzoom.  Basically there isn’t a competitor that is even in the same hemisphere as Legalzoom.  Heck, probably 80% of the states of America get googled less than Legalzoom.

Furthermore, people google legal zoom more than EVERY phrase in our industry combined.  This is just Google.  This isn’t even counting people typing in the domain name (which is easy to say, remember, and type), using other search engines, or get referred through means that Google can’t track.  I guess this is what 41 million a year accomplishes:  more interest in your company than the entire industry you dominate.

It’s fun to think about their story and relate it to your business.  Are you building a brand, market share, or relationships.  You’d love to think you’re doing all of them, but the reality is that most businesses don’t have 41 million a year to spend on marketing.  I think Legalzoom chose branding and had the discipline to stick with that plan.  Branding is an amazingly hard thing to do on a national level.  I think in our case we are building relationships and are hoping the rest works out.

The next Legal Zoom?

I get an email from someone trying to sell a domain or website at least once a month that is relevant to our industry.  You can almost recite the pipe dream pitch that “This domain could be the next Legalzoom”, or “Legalzoom would easily pay 200,000 for this if they wanted it.”  I just start laughing which makes me come off like a jerk, but domainers just don’t understand a lot of real world business principals.  Legalzoom cares about a brand, not buying some other domain or website.  Even if you had a website that brought in 1000 signups a month, it wouldn’t even show up on Legalzooms radar; maybe if your website got 4000 signups a month…, but they still probably wouldn’t care.  On their SEC filing they stated they got 490,000 clients in 2011.  That’s 1300 a day!!!!  Buying up their competition probably just isn’t even worth the effort.  It will be interesting to see if they buy some people just because they don’t know what to do with all the money.  With going public they just installed a massive rocket onto the Legalzoom machine.  Rocketlawyer is going to need more than a rocket to keep up.

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