Below is a list of tech company’s who IPO’d in 2011. Can you plug in the appropriate stock performance?

The choices are:
-0.98%
-37.15%
+40.16%
-0.95%
-20.99%
-33.15%

What is your guess? Notice. Two stocks were relatively flat. Three lost more than 20%, with the average being closer to 30%. Only one was positive and by a lot.

Is your guess something like this?

What if we said the actual answer looked like this?

That’s right. Of all the tech IPO’s including some of the most anticipated and hyped companies, only one had a win, and only one looked like this:

Bankrate (RATE).

That was certainly the case with ClassesUSA when they inked a deal with MSN. The media property didn’t care that ClassesUSA was just a startup. They had a rate, and they stuck to it. Similarly, ClassesUSA knew they had guarantee as much revenue as possible in order to get the cost down. What most people didn’t know about this story is that when they first started working together, ClassesUSA didn’t really work with the lead buying institutions. They approached online learning in a more literal manner trying to provide classes to interested students. An almost accidental pivot led them to working with the schools we today think of when we say online education. The rest as they say is history – a successful exit and still one of the largest, most consistent suppliers of student inquiries.

The ClassesUSA story could have turned out quite differently had they not taken the media risk and especially had they not changed horses mid-stream. Their story is one of the more memorable, assuming you actually were there to remember it, because it didn’t take much time until companies much larger started to take note. With today’s fragmentation, it isn’t as easy to craft a similar coup, for it wasn’t just an issue of volume but figuring out inventory that seems unattainable to others. Another company that comes to mind is Education Connection. No one else came close to owning television like they did. How a girl in her pajamas have anything to do with a degree? The connection, no pun intended, was definitely tenuous, but they managed to inspire threads about the commercial in forums and have auto-complete suggest “education connection girl” as the second most searched term.

Recently, we learned of another ambitious arbitrage, a less trackable but no less ambitious effort. ED Ideas, who operates CollegeComplete.com has done something that certainly no one in performance marketing has – sponsored a NASCAR car. As the company writes, “The traditional NASCAR audience has been, to a large extent, overlooked by higher education.” Well, no longer. And, how did they choose their driver? They chose to sponsor Nationwide Series driver Chase Mattioli “primarily because he is one of the only NASCAR drivers who is – simultaneously and in between races – an active college student.“ May they be so lucky that in short order their brand will be associated with the driver or with NASCAR.

Arbitrage seems to know no limit, online of offline. It’s less a matter of the what and more a question of the potential economics. So what might constitute one of the more extreme experiments? The answer might be at the root of all online, the top level domain. With domain name registrations mirroring McDonald’s in quantity sold, obtaining a brandable one has become either impossible or extremely expensive. A good single word domain runs at a minimum in the low six figures and into the seven figures. What if instead of focusing on just the “.com” you could own the whole URL. Imagine replacing .com with .yourbrand or .yourcategory? These are the discussions now taking place at most major brands. The ruling body for domain names (ICANN.org) has created a process by which just about anyone can apply for their very own dot something (gTLD) and own the complete URL.

There are several plays here for brands and generics.  For brands, there can be no denying the authenticity of a URL ending with .nike, .ibm, or .att, not to mention their never having to wonder if a domain name is available or how much it would cost.  For generics, think of Hollywood. Someone will certainly apply for .movie or .music, hopefully ridding us of ridiculous movie domain names, like BlackSwanMovie2010. The question / opportunity now is for performance marketing. What if you had .college, .money, .wealth, .diet, .date etc. Would that make your ads more credible, increase clicks and conversions? As a network, it could mean countless white labels, each having their own domain name. All interesting applications, but all, like many opportunities are also a gamble. By gamble we mean you will have to pony up. It costs $185,000 just to apply for the name, and then there comes the cost to operate the technology for registering names and making sure those you do register resolve correctly and quickly. Companies like Neustar help make the process manageable, i.e., no additional tech resources needed, but the barrier to profitability is still going to be something like $200,000 per year if not more. As mentioned, not cheap, but it could be game changer for someone. Will any in the performance marketing space wants to take the risk.

“Coverage” is a topic in and off itself, but in short coverage refers to a generators ability to sell leads regardless of location. National brands generally mean greater coverage. There are only so many large, national brands though. For many of the growth areas of lead generation, coverage comes from a greater number of buyers who buy smaller amounts of leads, often with greater restrictions (time of day, geography, etc.). Connecting buyers and sellers is a little bit of a chicken and the egg. As a seller, you want to get paid for your leads, especially as there was a cost to generate them. As the buyer, you don’t want to get ripped off.

It’s a game of trust that to date has left a bad taste in many people’s mouths when an imbalance occurs.  For an example of the chicken and the egg, read the below, shared by a buyer in a newer vertical (non-mortgage, non-edu):

With [redacted], they want our business and [redacted] is dealing with someone.  The issue there is that they want 5k up front committed funds.  We have no problem sending them 5k.  Our problem comes in that if they send us a bunch of garbage, we want the ability to cancel and get a refund on the unused balance.  So far, we have been unable to accomplish this.  So, I was hoping to get [redacted] a contact that might waive this provision.  We have been burned a few times by companies promising good leads only to send bad leads.  We have no problem testing a company for 1k or so to see how they do but 5k is a hefty test to take a chance on given our experience.  Make sense?

Chicken and egg considerations:

• Pre-pay vs. credit – This is ultimately dictated by leverage. The bigger player gets to decide on average. If you are Quicken Loans, you get to pay on credit. If you are Google AdWords, you get advertisers to pay upfront with a credit card until they reach a certain size. There is no right answer. But, the onus is more on the seller than the buyer. If a seller wants pre-payment (assuming they do not have a credit card, auto-charge system), they and the seller must come to an agreement regarding the product and expectations. That is really the key.
• Trust – When two parties have an established working relationship, what they really have is trust. If you are a buyer, you know that you will receive a certain quality product, and more importantly, you have assurances of what will happen if those conditions are not met. As the seller, you want to know that the buyer won’t just use you for free product. You also want to know that the buyer won’t blame you for their shortcomings, e.g., too busy to call on all leads, not trying leads more than once, expecting 100% close ratio, etc. Trust is the aim, but trust must be earned. The barrier for trust can be low ($1k versus $5k), and both sides need to earn it.
• Refund, Refund, Refund – I’m a big believer in a good refund policy. A good refund policy is not whatever the buyer wants, nor is it draconian restrictions. It’s just like buying merchandise at a store. The best retailers generally have some of the best refund policies. Why? Because they believe in their product. The same should be true here. If a seller has a good product, they can afford to stand behind it. Those that require high pre-pays with poor return policies don’t mean they are bad. They too could have been burned by buyers, but I still think the onus is more on the lead generator than end buyer.

Today, at almost every organization large and small who spends money online, you will find if not an entire team dedicated to search, then certainly at least one in-house expert focusing on it. For those working in the online space, that wasn’t necessarily the case three years ago, and it certainly wasn’t common five or more years ago. That such a role has developed and become both commonplace and essential is one of the many neat developments that have transpired as the internet has evolved. The same holds true for social media experts. More and more companies need them, but there isn’t a

In online lead generation space, a new such role is starting to exist – that of a lead quality expert. We haven’t quite hit the point yet where companies will think of having a Chief Lead Office, but it wouldn’t come as a surprise if one came to exist in the near future, especially at companies whose main source of revenue comes from either the generation or purchase of leads. Until then, we are starting to see the seeds of its predecessor, a role that for lack of a better title could go by Lead Quality Expert, Lead Quality Guru, or what I suspect will take shape, Lead Quality Manager.

David Rodnitzky wrote about the need for a Lead Revenue Officer in his Quick Hits piece on LeadsCon, saying, “‘Lead quality’ is just a metaphor for ‘revenue from leads.’” I think David’s correct, but perhaps his view is a little too advanced. The majority of people understand the need for quality, but they cannot separate out in practical sense the notion of quantity from revenue. When you talk about making more money, the knee-jerk reaction is still to look at that from a volume perspective. If viewed more holistically, though, making more money off leads would span not just quantity metrics but quality as well.

A talk of quality is nothing new, but that doesn’t mean organizations have truly aligned themselves towards acting on it. Actions of quality mean having treated lead quality just like any important function in the business with a combination of technology, expertise, and process implementation. That can’t happen until someone at the company lives and bread lead quality. To date, it is generally someone who takes on lead quality as an ancillary function to their current job, or  a developer handed Targus Info or eBureau technical documentation and expected to make it happen. You wouldn’t find that at a company who spends meaningfully (to them) on search has their search spend handled by someone whose job function encompasses more than search. And, so it should become the same with online lead generation.

There is too much money to be made, and there is already too much money being spent, for companies who aren’t currently aligned to maximize lead quality and thus revenue not to. In slightly easier to read English, if a company spends more than a full-time person’s salary buying or selling leads, it such consider having a full-time resource dedicated to maximizing quality. This is especially true for companies who spend hundreds of thousands of dollars and millions of dollars per year in online lead generation.

For those with an analytical mind and a technical enough bent, this is a great chance to craft a role that doesn’t have any prerequisites. You get to be a pioneer and becoming an expert in this will pave the way for countless opportunities that we can’t imagine today. Not to mention, you”ll help make the industry that much better.

LeadsCon has a small number of followers, and not surprisingly, it generates almost all of its activity, around the time of the event.  Going through those tweets, though, a few started to stand out. Happy as I was to see the additional volume, they just didn’t make enough sense. Here is one such tweet:

It wasn’t until a few started appearing that I began to get curious.  Here’s a snapshot of them in context.

You most likely noticed two from different users with the exact same text but without the re-tweet. Again, for those not familiar with the event, it would seem a normal thing to say.  Except as the brand owner, I know it isn’t. That comment was four months too late, but it’s not the tardiness of the context that is the real problem. The link being promoted is. Having been in the performance marketing, online customer acquisition space for quite some time, I am used to seeing crafty affiliate tactics. This ranks up there. A click on the link takes you to a business, just not one relevant to the conference goer, unless we are talking about what a conference goer does on their personal time. Yes, you guessed it. The link goes to an adult dating site – XXXBlackbook.

Like a webmail account, signing up for a Twitter account is a frictionless process. That’ makes deciding the real users from the fake that much harder. A click on one of the profiles above doesn’t go to a blank page with no friends/followers and zero tweets. It goes to a page resembling an active user at first glance. And, while it might seem like a manual process, those doing this type of spam have it all automated, from the signups to the followers to the tweets. And, while you can rid the system of spam, you can’t rid it of human nature. Hard to say if this will become a chronic problem, something akin to Google developing Quality Score, or simply a passing fad. Having finally made Twitter a part of my business, and increasingly valuable part, I hope they can squash this sooner than later. With the upcoming $100 million investment and increasing omnipresence, something tells me they will.

There is a topic for which I am unusually passionate. It is a distinction that to many even inside the world of internet advertising means little, yet it explains the difference between so much of what we see online today – that of affiliate vs. arbitrager.  As I wrote previously, “At its most essential, the affiliate has an audience they try to which they cater, where as the arbitrager has only traffic. The true affiliate has their own site, their own brand in which they’ve invested time, money, and ego. They have something to lose if they mess-up. They can’t just fold-up shop and start again. The arbitrager on the other hand is the day trader who at the extreme is ephemeral, defined by his appearing and then disappearing act.” The fake blog fiasco which has culminated in lawsuits against 500 individuals and companies and will result in countless more when the FTC investigations become public has seen its fair share of blame thrown at affiliates, but the true culprit is the arbitrage.  When people take financial risk and make decisions purely based on the need to recover costs and then some, that leads to behavioral detrimental to advertisers and the marketers.

Arbitrage isn’t all bad and those who perform arbitrage, from a small search affiliate up to the venture-back technology powerhouse Adchemy, can do it such a way that it adds value throughout the entire value chain – from end user to end buyer of the lead. Arbitrage in lead generation is such a tricky topic, though, that the turning on the affiliate tap must happen with great care.  While it should be the traffic driver’s responsibility to ensure that the advertiser’s best interest are kept in mind, what we continue to see is that self-interest takes precedence and that means the advertiser must do the same. The buyer must be an informed buyer and understand the traffic side of the equation.

Let’s look at particularly interesting example that highlights:

1. The affiliate challenge – how do you find third-parties that will drive quality consumers. How do you find a partner that understands your business objectives and do not just what they say they will but in good judgment.
2. The need for informed buyers – one who enters with an understanding of what they will and won’t accept along with a target cost per acquisition. It also means a buyer that has in place the means to follow-up with leads, the ability to track the performance of leads, and communicates back to the affiliate the performance on as granular level as possible.
3. The difference between those a partner and liability – everyone in the value chain wants to make money, but when it gets of alignment, no one wins; unlike a car, where it’s easy to tell when alignment isn’t there, it’s not always as easy when profit is involved.

This example comes from a recent post from famed affiliate-marketing rabble-rouser Jeremy “Shoemoney” Shoemaker, titled “Cashing in on Cash For Clunker With MySpace.” The reader of his very well trafficked blog (and quasi-online community)  readers contain a large number of those hoping to glean the secrets to making money online. It’s a very different audience than one would find at LeadCon, for instance. This example caught my attention because it dealt 100% with lead generation. In short, Jeremy knew a local Omaha Nebraska Chevrolet dealer who already had a sales team handling internet leads and crafted an agreement to sell them leads at $10 a piece.  As he writes, “I told them I would charge them $10 per internet lead (a small fraction of what they are currently paying) but with the condition I could publish a lot of the data on my case study (what your reading). I also told them I wanted to exclusively use MySpace for this test because in past ones we mainly focused on Facebook for driving social network traffic. ”

So far so good. Enterprising guy crafts own opportunity. Where things get interesting are the results.  Jeremy writes (emphasis added),  “Our average CPC for this ad was AMAZINGLY low. 13 cents per click on average for over 800 clicks which converted to about 600+ total leads. Now at $10 per internet lead coming to us its not hard to see how crazy profitable this is.”

Below is the screenshot he shared in the post.

It goes without saying that the 74% conversion rate is rather unheard of. It helped that his landing page contained only 4 fields and paid an above market premium for that number of fields.  What’s implied from the post though is that you too could make $6000  from a spend of barely over $100.  Go to it.

Naturally there is a spread that comes from identifying opportunity from market inefficiencies. The big question is how much. In typical online lead generation opportunities, the answer is – not that much. This is a rare mix of overpriced leads ($10 auto for four fields), low value inventory (with questionable geo-targeting at the hyper local level), a high market demand (cash for clunkers), and a savvy marketer (Jeremy), no to mention the years of leg work by other companies in the lead gen world who made selling leads to a local dealer possible.

This rare mix makes from highly charged conversations, which played themselves out in the comments highlighting a new issue with third-party partners.

Partner vs. Pilferer

The comments from the Cash for Clunkers Lead Gen experiment are among the most elucidating possible when describing the distinction between the two and what we call the Affiliate Conundrum. (Those below have been shortened where needed and bad spelling fixed, not grammar though.)

Partner Persona

I don’t believe the numbers… 600 leads out of 800 clicks is extremely high. Also, How many of those leads gave fake information. short term profits, but ruining a long term relationship

Pilferer Persona

Good to know there’s people like you out there that have no interest in being profitable. When you go to a restaurant, do you ask for 80% off becuase it REALLY doesn’t cost that much to make the food? How about the computer you’re on , did you ask for 95% off because there’s only $20 worth of materials in it? If it’s not profitable for a commission based company, they won’t do it. $6000 is a drop in a bucket for many car companies, and they already are paying way more than that for online leads (about $20 for full reg info).

Partner Persona

do you think they are asking for the $10 for that fake lead back, or do they just let go, because according to you, that $10 is just a drop in the bucket. I doubt 100% of these leads are real, and that adds up…

leads from cars.com, autobytel, vehix are easily worth $20 for full reg… those are people looking for a car and serious… $10 for a phone number from myspace???

everything aside… do you really believe 100% of the leads are valid??? what percent do you guys think are fake? 40%, 50%, 60%…

Pilferer Persona

I never thought one could earn from such a scheme. You really think out of the box.

Partner Persona

800 clicks which converted to about 600+ total leads >>> NOT POSSIBLE, no one gets this conversion rate on any website. This is a joke and flat out fabrication. Never in the history of doing this for 11 years can you get this type of conversion of a quality lead. Garbage yes, quality, not way.

What matters is cost per sale and based on MySpace demographics today, it doesn’t add up. In the off chance this worked for Cash for Clunkers, it isn’t a model that will work long term. Where is the info on the dealers actual close rate on these leads?

Pilferer Persona

Excellent case study, and a meaningful recipe to make some decent cash.

ShoeMoney

This is also why we started doing the leads for only $10 which was a small fraction of what they were paying another company for internet leads. They asked me not to reveal exact specifics but in general car dealerships make about 1-1.5k per car on the low end that they sell. On 600 people if they sold 10 cars then this was profitable for them. Again they asked me not to reveal exact stats (believe me I would love to) but there is a reason they are calling me every day to see if I know anyone who can do this for them full time for 100k/year or so.

Summing it up

Luckily, it seems that in this example, the only true fail was the dealer’s prior online lead generation campaigns. That this example didn’t result in a complete meltdown makes it at least easier to objectively analyze the types of players involved.  What we see are definitely those that seem aware of the end buyer’s needs and genuinely interested in seeing those goal hit. We also see a vocal contingent more interested with the profit available to them, independent of how their results transalte upstream. The defining metric seems relative profitability. Jeremy writes, “I know to a lot of people out there would think 6k/profit per month was a lot of money.”

For legitimate partners, several thousand dollars doesn’t mean much, but for individuals it can make a big difference. And, more often than not individuals comprise the pilferers. They are the hungry souls who hang on to every word that a guru writes, the group that acts like they have nothing to lose because more often than not they do. They are the ones that give the notion of third-party partners a bad name and make arbitrage seem the culprit as opposed to human nature being the culprit. They want quick results, and wary be the advertiser who like those affiliates doesn’t want to put in the time to see lasting results. They will instead see results that last, but they won’t be the desired ones.

Last week,  on the evening of August 26th, 2009, the New York Times Blog asked, “Is Google Entering the Mortgage Quote Business?” An hour later, a story appeared in the Wall Street Journal titled, “LendingTree Suit Claims Google is Getting into Mortgages.” By the next morning, the floodgates had opened with stories like the one on Yahoo asking, “Is Google Launching a Leding Tree Killer?” The answer is in the statement made by Google representatives, where they said (according to the Times piece), “We’re constantly looking for new ways to help people find what they are looking for on the Internet. As part of that effort, we are currently working on a small ad unit test that will run against a limited number of mortgage-related search queries in the U.S.”

Search Engine Land, who first broke the news about a similar test done in the UK last year, Google Merchant Search, correctly summarizes the issue (the indirect battle between LendingTree and Google via a suit against Mortech) by saying, “The focus on mortgage search or quotes is a bit of a red herring…” and that “The UK test was really about developing a model to deliver leads on a CPA or pay-per-call basis.” John Batelle adds, “There’s a lot of demand out there for leads. Google smells an opportunity to cut out a middle man, and increase margins.” LeadCritic wonders very aptly “What will stop Google from running their own lead generation strategies in any other vertical?”

Putting it all together here is what we have:

• LendingTree vs. Mortech – someone was looking out for LendingTree. They received informaiton that Google would almost never want them to have which allowed them to delay (for a bit) a significant entry into the mortgage lead generation business by Google.  The technology that Mortech provides adds significant value as it enables mortgage brokers to offer conditional loan offers. Only LendingTree currently offers those who complete its form actual offers.
• Google vs. LendingTree – we don’t know that many people at Google, but we know that Google doesn’t really spend a lot of time focusing on other companies. They are competitive but not in the traditional sense. That they entered into mortgages has nothing to do with LendingTree. It only has to do with the scale and complexity of the mortgage market, with scale and complexity being two key ingredients that Google looks for when deciding on new initiatives.
• Google and Lead Generation – this is where it gets very interesting, and where an entire chapter the length of some books could be written. A) Given what we know of Google, i.e., they are a platform play, while they will be entering into mortgages at some point in time, they designed the product (AdLeads?) to work with any number of buyers. We don’t know whether buyers pay on a per lead or per call basis, but I suspect per lead is the easiest. B) Google doesn’t just disintermediate because they can. They aren’t getting into leads, mortgage leads in particular, because they felt too much money was going to the aggregators. The only reason they would enter is because they felt not enough value was coming from them. Not monetary value but customer value, and that’s the key.

We wrote recently about doing right by the customer and still making money. The focus on money is what often leads to a poor user experience, or said differently, the need to cover costs has companies make decisions they might not make were money not an issue. Any lead company in a vertical selling multiple / shared leads goes through this. People like choice, it’s why Google shows more than one ad on its search results pages, and why the average person clicking on a paid ad clicks on more than one. But what is the right number? Clicks aren’t like leads. There is very little friction to an incremental click. There is a higher threshold from a user’s standpoint to becoming a lead. Because there is no right answer without testing at a high potential loss, we as an industry have allowed someone else to potentially answer it for us. And, it could result in an answer some don’t like.

The “low-hanging fruit” predictions regarding Google’s lead generation product:

1. Google will not collect user data, i.e. unlike today’s approach, the user will not have to fill out any contact details before being connected to buyers
2. Google will err on the side of unhappy advertisers not users; they have such a funnel of traffic that the role will be reversed from a traditional aggregator
3. Users will click to connect on a listing, which is when they can decide whether to share their information, and at the point of true transparency (seeing the actual broker for instance), the advertiser is charged.
4. The onus will also be on the user to follow-up, i.e., they will according to prediction 3 get to see the advertiser’s info without the reverse happening. Were Google to allow users to connect with eight advertisers at the click of button and lead to eight calls right away, users will blame Google, so they should in theory disable this at first.

Before panic sets in to those in online lead generation, Google’s entry is no sure thing. True, switching to a lead model is a Pandora’s Box and once that option becomes available, it’s not easy to close it off. But, their predicted conservative approach means that it might not be a financial windfall off the bat. While Google has what the rest of us only dream about – tons of traffic at their disposal – if the lead based approach doesn’t produce close enough to the returns that the click based approach does, no matter how not evil the new approach is, it won’t last. Finally, there is always a role for a middle man, but it needs to be a value-added middle man. Marketing services firms can always fill a void. To me, it’s just like the designer clothing market.  Some people will shop retail, others discount chains. The two aren’t mutually exclusive. This move while seemingly scary, will in the end just lift the tide for all and equally important validate much of the hard work done by others.

It certainly didn’t make sense to me that ads for refinance running contextually outperformed the lead based ads. As an AdSense publisher, he has two factors working against him. The first is the revenue share. He is paid a percentage of what Google receives, at best 50%. The second factor that should hinder contextual’s performance is that ultimately the vast majority of refinance advertisers base their click spend with Google on leads. In other words, if they pay $5 a click to Google, they base that bid off the percentage of clicks that turn into a lead. If their average lead price climbs too high, they will lower the price per click. A publisher being paid on a lead basis means receiving the full allowable for a lead (as opposed to a blended click price based on an average desired cost per lead target). Or does mean that?

In trying to understand how a publisher could make less money on a per lead basis than being paid on a per click basis (and just a fraction of the total click revenue), three hypotheses come to mind.

1. Traffic Quality Issues – one thing about the lead ecosystem is that when executed properly, it allows buyers to place an accurate value of traffic. How to do this properly gets into a more complex issue, but assuming that as a buyer whether through an aggregator or through direct buys, you view all leads as granularly as possible. You then measure the conversion rate of the leads by source to figure out what you want to pay for that source. It was possible that these sites run by the publisher did not convert well and as a result, he was paid less per lead. With Google, advertisers cannot as easily determine value by lead source.

2. Google Effect – another possible hypothesis deals with what some have called the Google effect.  I recall talking to a lead buyer that spent on Google but looked to increase the number of sources of traffic. When asked what he would pay for a lead (assuming the desired lead to sale conversion rate), he answered $35. When asked what he effectively pays per lead with Google, the answer came in at $75 / lead. Most people don’t have such severe examples, but many advertisers pay more than they want for traffic from Google, not because it converts better, but because they don’t feel they have a choice. They want the traffic.

3. Brand Value – Given that many of the refinance advertisers showing up on this publishers site don’t lead to aggregator’s pages but to sites run by big banks, a third hypothesis for how he receives greater payment via Google contextual ads than lead directly deals with the not always easy to quantify value of the brand. My first reaction to hearing of his making more was to jump to the inefficiency of the Google Effect, but it is possible too that the big banks, unlike the more typical lead buyer, don’t have a performance goal in mind. Or, if they do have a performance goal, they have increased their allowable because of some perceived brand value. Then again, the true skeptic would probably just mention that big brands tend to overpay, and they work with search agencies paid on the spend, so it’s in that parties best interest to play up non-measurable factors such as brand.

Just as the small to mid-size businesses make up a great percentage of the employers, they also make up a healthy percentage of the lead buyers. Certain areas of online lead generation, like online education, will have a disproportionate percentage of the leads going to a handful of buyers, but that isn’t the case in all verticals, not in auto insurance lead generation (for aggregators with a strong buyer network) and not in moving. The small lead buyers, just like any smaller quantity advertiser, can be a Catch-22. It takes a lot of small lead buyers to make up the volume of a larger lead buyer, and the smaller lead buyers tend to have two other disadvantages – a) they are harder to deal with because they are more sensitive to fluctuations in lead performance/behavior, and b) they tend to have less sophisticated systems for following-up with leads.

It’s one thing to be a small lead buyer in a market full of just small lead buyers. It’s another to be a small lead buyer in a market where they receive the same lead as a larger, more institutionalized player. For that smaller player, a lag time of a day to get to a lead doesn’t necessarily seem like a bad thing. For a large buyer though, they often – either as a result of in-house efficiency or working with companies like Lead Qual or Double Positive – will have the phone ringing minutes after receipt of the lead. Were we speaking of just hot transfers, it would be different; instead we are focusing on just data leads. Here, the buyer is responsible for follow-up and management, and there is both challenge and opportunity. The challenge isn’t just competing to get to the lead quickly, it’s not having the staff. Unlike a large lead buyer, the small lead buyer doesn’t have a dedicated team to call on the leads. In the moving leads example, the owner of this highly lucrative company is the one who is getting on the phone and sending out emails. That’s not necessarily the best use of his time.

I see opportunity in this, because the total number of small lead buyers is already significant, and more importantly, it’s just the tip of the iceberg compared to where will be in two, five, or even ten years. While we might have specialized software for certain industries, e.g. mortgage, to manage the leads they receive, there isn’t this robust platform for all types of lead buyers. Many moving lead buyers , for instance, license an industry specific CRM system. This system allows them to fire off automatic emails to the leads they purchase repeating much of what was captured – the date of the move, size, location. And, if the agent gets a lead on the phone, they can update that information centrally, and send out a revised email that can act closer to a contract. But, it’s a clunky system with much to be desired for the lead buyer and consumer.

We will hopefully come to a point in time where there is an integrated system – lead management and analytics with modules that buyers can enable such as verification, scoring, and tapping an outside firm to translate data leads into hot transfers.  These are all things that the large buyers, but they have it only because they have had to built it or they have the savvy to integrate multiple different services. Just as Salesforce has transformed the way many sales people and sales organizations deal with their clients and prospects, so to will there come a time when a similar product can exist for those buying leads online. And, I can’t wait as strides are made because it will lower the barrier for buying leads and create a virtuous cycle of companies of all sizes using online lead generation.