Looking at Quinstreet’s market cap recently, you might presume something is wrong with the business. They are trading almost one-third off of their peak and almost twenty percent below their IPO. Yet, stock analysts who cover the sector estimate nothing but continued growth. Some of this selling of the stock is a result of perceived exposure to the Department of Education’s ongoing process to overhaul portions of the Higher Education Act. It’s a complex topic that is even more complex the further one is from an educational institution. The uncertainty and complexity hasn’t helped education institutions, most notably the for-profit education companies and those who service them like Quinstreet.
The online education business might comprise the largest segment of Quinstreet’s business, as it was their primary line of business. But, education does not represent their fastest growing segment, financial services does. For those with some familiarity with Quinstreet’s business, financial services means SureHits, the auto insurance click marketplace the company acquired several years back. The SureHits business differs fundamentally with the cost-per-lead approach of Quinstreet’s online education business and with the cost per lead approach favored by a large number of other marketing services firms in insurance such as Netquote, InsWeb, and AllWebLeads.
Outside of the obvious, namely that vertical click marketplaces charge on a click basis, vertical marketplaces have other differences that many advertisers favor. An advertiser in a vertical click marketplace owns the conversion experience. A common complaint of lead aggregators is that buyers do not know from where the leads come – what was said in the steps of the funnel up to their acquiring the name. In the click marketplace, they own the ad, the landing page, and are responsible for the conversion. The ultimate cost per lead could end up much higher than through a lead aggregator, but it is the only option for many brands who have policies against leads. The marketplace is all about control, and judging from SureHits success, there is something to be said for vertical marketplaces as an alternate vehicle in the quest leads. But, they are not for everyone. If you do not have expertise in online advertising, you will find yourself spending a lot for little in return.
This week brings news of a new entrant into the vertical click marketplace for auto insurance – BrokersWeb. Those in the health care space most likely know BrokersWeb by their HealthCare.com brand and their additional owned properties HealthInsuranceFinders.com, HealthCare.org, MedicareSupplemental.com, MedicareSupplement.com, and LifeInsurance.org. In addition to owned properties, they also have robust network of highly-targeted website distribution partners. (HealthCare.com purchased the BrokersWeb assets in Q3 2008 and has grown them 5x since – primarily through partner distribution). As you can see from the domains, the company goes deep into the health care vertical, and it is my understanding too that they are the only solution for those niche health insurance sub-categories, i.e. Medicare Supplements, Group Health Insurance and Dental Insurance. Prior to this week’s auto insurance launch, life insurance was the most recent, launching in 2009 and buoyed significantly by the organic traffic coming through the highly ranked LifeInsurance.org.
Auto insurance may not seem like a logical next step for a company with deep health expertise, but from a market perspective, it is the exact right choice. Everyone who drives needs it, i.e. a large overall market, relatively high natural churn so advertisers must spend to grow, and those insured with one company can switch to a new carrier with less friction than cell phone. Plus, there are a lot of major brands spending for direct access to customers – perfect for a vertical click marketplace. As such, it’s a logical next step for a company with an operating history in vertical click marketplaces. Like any entering, there is still the classic chicken and egg scenario of having enough buyers and sellers. Distribution partners will want high CPC’s, and advertisers will want to see quality before coughing up the high CPCs. It’s a slow process, and simply saying, we’re doing it doesn’t mean both sides will come. Luckily, there is enough latent demand from both that BrokersWeb stands a good chance of speeding up this process in order to become a viable player, and they are kicking off the launch with several high profile players on each side at launch. This includes top-tier bidders such as GEICO, Esurance and The Hartford on the advertiser side and AutoInsurance.com and OnlineAutoInsurance.com on the distribution side. We wish them luck as it’s always good to see growth in the space.