Paid Content ran a blurb today regarding somewhat stealthy startup, Inadco, titled “Lead Generation Firm Inadco Raises $5 Million; Spends $3 Million Of It On Acquisition.” Alas, we know no more than they do regarding the firm behind the funding or the company that was rumored to have been acquired. What the story did do, though, is bring to light one of the best trends we are seeing in online lead generation – the platform play.
There are a several different approaches that those in the online lead generation world have taken. The first is arguably the oldest and most classic approach – a direct marketing / arbitrage business. In this model, a company spends money to make money. It is fair to say that the vast majority of revenues flowing through online customer acquisition today follow-this model. They include some storied firms with impressive revenues. Quinstreet, for example, took the bold step of publicly disclosed its fiscal year 2008 earnings – an unusual step for a coming that has historically kept all information tightly guarded. (FYI, from the article, “QuinStreet said it generated revenue of $261 million, up 36% from a year ago, and earnings before interest, taxes, depreciation and amortization, or Ebitda, of $57 million, up 57%.”) Regardless of why they shared the numbers, it’s great to see, as it they wouldn’t do so were they not confident in their business and the industry. Sneaky large companies such as CollegeBound also fall into this direct response based model.
The second model is the brand building approach. It’s one that is very new and epitomized by companies like BillShrink, CreditKarma, and KnowBeforeYouApply.com. The premise sounds easy enough – create a compelling consumer proposition such that users choose to visit your site. They either hear about you through PR / friends, or they find it through organic search results. While many companies own well ranked organic sites, Quinstreet chief among them, what differentiates that SEO approach from the brand approach is the investment in recall, in building a service that users don’t just use once but come back to time again. Among contenders, BillShrink has had the most high profile attention (hard to beat inclusion in a national T-Mobile commercial), but none can yet claim victory for the approach. If lead generation is in the second inning, then the brand approach is just getting drafted. Like the disclosure of earnings by Quinstreet, that companies like these exist is a boon to the long-term future of online customer acquisition, because it signals investor’s willingness to embrace the sector and a real focus on the user.
Third comes the impetus for the post, Inadco and the platform approach. When we look out over the landscape of internet advertising companies, we see plenty that fall into the above categories – from direct response firms to consumer plays. The largest plays, though, have often been platform plays. Google, for example, makes all of their money by creating efficiencies for advertisers to reach publishers and for publishers to earn money off ads. They just happen to be their own publisher as well. Creating a platform is no easy feat, but doing so means being able to achieve a scale that most other businesses can’t – in reach and revenue. The best are technology driven and can create true barriers to entry. Such is what Inadco certainly hopes to build. And, while we have no shortage of platforms offering this level of efficiency on a CPM/CPC basis to advertisers, we have very few doing it on a per lead basis. The belief is that they can create a monetization engine that for a good chunk of inventory will perform better for publishers than the click to a third-party site options today. It’s not an easy business to build, because it takes time to get to scale, and there are no dumb money short-cuts that exist with some other forms of online ad spend. Inadco will earn their success, but when they do, they will really have earned it. Two others focusing on the platform approach – Pontiflex and Performline. What’s great is that each has the chance to succeed without needing the other to fail.