Vantage Media and BrokersWeb Combine to Create Multi-Vertical Leader in Online Customer Acquisition.

That’s the title of the release that hit the wires this morning. It’s an announcement that, in some ways, is long overdue. BrokersWeb had begun a process (the term used for a company hiring a bank for fundraising or m&a) earlier this year to seek a strategic acquirer, but it was pulled from the market relatively quickly. The company, though, did not take in any money or change their strategy, i.e., desire to be acquired. At the same time, months and months went by without any word about the not-abandoned process. Until now that is.

Had I been asked to guess which company would most likely acquire BrokersWeb, I’m not sure I would have guessed Vantage Media. In fact, I’m pretty sure I would not have guessed them at all. I would have looked to one of the two public companies in the space – QuinStreet or BankRate – as the most likely acquirers. Both QNST and RATE have core products offering vertical click marketplaces, and while each already has their own auto insurance click marketplace, buying BrokersWeb could have helped them essentially lock up the market. For QNST, buying BrokersWeb would have helped them consolidate a competitor that in the last 16 months has gone from non-existent entrant to serious pain in their side. Were I asked to guess what company Vantage Media might buy, with the hint being it could be a big acquisition, I probably would have put BrokersWeb up high on the hit list.

Vantage Media may not be a household name, but the company is anything but an upstart in the online customer acquisition space. The DiPaola brothers started the business more than a decade ago, discovering paid search when doing some almost accidental affiliate marketing for Crutchfield, and then becoming one of the earliest players to focus on education. Vantage Media focused exclusively on for-profit education via search, and the span of a few short years became a $30mm+ player at a time when very few companies had achieved such scale. The brothers sold a majority of the business to venture / private equity firms four years back, and the new management team looked to take the business beyond education. Vantage never left education, but they started to position themselves as a search marketing agency that took principal risk. Earlier this year, the company underwent a transition again with a new CEO taking over, Patrick Quigley, one of, if not the first employees of QuinStreet.

We have covered BrokersWeb a number of times on this site. The company began as a health insurance play, leveraging its suite of organic domains and a select group of partners. As QuinStreet’s auto insurance click marketplace started to take off (thanks for its acquisition of SureHits), BrokersWeb decided that they would focus their efforts less on health insurance and build an auto click marketplace. The move made sense, especially in light of the changes taking place on a policy level with health insurance with new laws lowering how much agents made on new policies. The move paid off big with BrokersWeb posting ridiculous growth, numbers like $2mm to $16mm to $40mm+. The only downside to this growth was that their overall headcount didn’t increase during their exponential growth, meaning the company didn’t have an infrastructure that would allow them to confidently continue that growth. They knew they had the proverbial bull by the horns, but they also knew it could buck them off if they didn’t take action.

Combining BrokersWeb with Vantage brings together an interesting set of disciplines across multiple verticals not to mention a company that should do well north of $150mm in 2011 with $200mm+ a realistic target for 2012. Also of note, this was less about an asset, e.g., acquiring an agent base, and all about acquiring a team. Vantage saw what the BrokersWeb team could do, and obviously views this as a chance to aid them as they look to repeat the success of auto insurance into other verticals (education anyone?). That BrokersWeb didn’t look to find just the largest buyer (Vantage is big but not that big) tells me the team at BrokersWeb cared less about the money and more about building a big business, which is great news for the industry. Congratulations to both companies.

LC: Congratulations on Being named Ernst & Young Entrepreneur Of The Year 2011 Florida Award Finalist. Sounds great. What exactly does that mean?

MT: Thank you. It means that we have a fantastic team that built one of the fastest growing companies in online media.BrokersWeb is anything but your first start-up. Take us through what brought you to this point?Our last company was a display adnetwork serving every vertical. It was a good business however we realized that there were a handful of verticals generating most of our revenue. This new company was built with the vision of focusing in one big vertical knowing that if we executed correctly we could build a dominant presence. After researching, we concluded that insurance was one of the verticals with the biggest potential. We started with health insurance and expanded rapidly into other types of insurance like auto, life, medicare supplemental, renters and home. We continue to expand our reach and depth within insurance. In full honesty it’s been hard but so far we’ve been lucky to find the right team to build all the opportunities we identified.

LC: Very impressive. How does the world of lead generation compare to the other industries you’ve served?

MT: Its so much more sophisticated in every way: technology, media buying best practices, tracking capabilities, etc. Its so ROI driven that is the best example of why online media is a great business for all the participant parties (advertisers, media, consumers). I admire so many companies in the space, we’ve learned so much from all of them.

LC: You seem to like challenges. What has the transition into other avenues of insurance, specifically auto insurance been like?

MT: Like in any other industry, building a business is all about building relationships. We were enlightened by all our clients and publishers of the big opportunity that there was in other types of insurance aside from health insurance. They were familiar with our business ethics, quality traffic and higher publisher payouts in our health vertical, they asked us to go into those new types of insurance, and we delivered.

LC: What are some of the challenges when it comes to scaling a business, especially in a new vertical?
MT: Finding and hiring the right people, identifying and assigning them the right initiative and creating the right reporting structure that force everyone to review daily (or hourly if needed) if things are developing towards goals set. This sounds simple and common sense, however because of the day to day, the challenge is to maintain clarity in all of this.

LC: If you could change anything about the online lead generation landscape, what would it be?

MT:Transparency and how marketers are held responsible for the spend of their advertisers. We really like our business model because it forces us to deliver only good quality, otherwise our bids go down almost immediately. As we continue to focus in improving the quality of our network, we’ll continue to see a growing BrokersWeb.

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.