Lead Gen 2.0 is here

When it comes to lead generation, we believe a transition is going on, just like the transition from big media conglomerates generating all the content on the web to regular citizens today using wiki, blogs, videos and other tools to generate reams of content. What we call Lead Gen 1.0 is characterized by single-vertical large aggregators who take the lion’s share of the profits that a lead throws out as it travels from consumer to end user. There are several of these bigger older companies in the Auto Purchase and Mortgage leads categories to name a few. Another characteristic of Lead Gen 1.0 is lack of transparency around the disposition of the lead. Very little information is shared back to the actual lead generator about what leads were valid, how many were sold, how much they were sold for, etc. Often, all a lead seller gets is check 30-45 days after month end. Fixed pricing also characterizes Lead Gen 1.0 companies. Pricing of leads to the end user is often flat, based on the last contract that was negotiated with a Sales Rep, and pricing to the Seller is often fixed, with quality and lead types having no impact. Finally, Lead Gen 1.0 is plagued by quality issues. Many of these companies simply do not have the automated systems to track, rate and discipline the hundreds of affiliates that pass leads through them to their end users. Their primary source of lead quality feedback is from angry customer phone calls.Because of these issues and more, we are now seeing a transition to what we call Lead Gen 2.0. As opposed to Lead Gen 1.0, we see the emergence of smaller, more efficient lead marketplaces that serve multiple verticals. No longer do sellers who want to sell mortgage leads, auto leads and debt leads have to go to 3 different vendors, sign 3 different contracts, and deal with 3 different account managers. Another benefit of serving multiple verticals is the economies of scale these exchanges can reach. As a result, they can often charge much lower transaction costs to buyers and sellers than Lead Gen 1.0 companies. As opposed to Lead Gen 1.0, total transparency is the watch word for Lead Gen 2.0. Any seller or buyer can see exactly what they sold or bought, when they did it, how much it sold for, plus, in LeadPoint’s case, hundreds of other metrics to help them refine their marketing strategies. Market forces of demand and supply, powered by bidding (think ebay), drive pricing, not negotiated contracts and fixed pricing. Buyers pay more for more valuable leads and sellers who generate those get compensated handsomely for generating that type of lead. Finally, we see many of the quality issues disappearing that have plagued Lead Gen 2.0. By only allowing certain high quality sellers into the marketplace and convincing buyers to provide online feedback on every lead they receive, companies like LeadPoint are able to track the quality of every seller in real time, and we often know about and address quality issues before receiving any buyer complaints at all.

At the Affiliate Summit last week, many lead sellers were interested in understanding some of the best practices that we see in the marketplace around generating leads. While not an exhaustive list, below are a few things we have observed the more sophisticated players doing:

Pick an aggregator that gives you the tools and reporting that enable you to understand exactly what is happening. You need to measure your ROI and adjust your marketing plans accordingly. To do that, you need real-time, 24X7 reporting tools, that give you insight into what is really going on.

Pick a partner that can help you leverage your strengths across multiple verticals. If you are good at Paid Search in Mortgage, why not use those same skills in the Autos or Student Loan Consolidation verticals? You’ll make more money plus you will diversify your risk if one of the verticals you’re in suffers from seasonality or enters a soft period.

Pick a partner that helps leverage your customer. Every lead generator should be cross selling other relevant products to their customers after they have submitted a request for a quote on your site. If a consumer requests a quote for refinancing their mortgage, maybe they also need help with credit card debt or student loan consolidation? Build and nurture your database of these consumers. It’s an asset. Send a consumer an email promoting extended auto warranties 3 months after they submit an auto purchase lead. Pick a partner where you keep the consumer data and the consumer is not forced to leave your site after hitting “submit”.

Pick a partner with low transaction costs. You are generating almost all the value. Some aggregators take anywhere from a 40% to 70% cut of the total lead value. In a world of ever increasing media costs, that kind of tax makes it tough to be competitive. There are lower cost options out there; try and leverage them.

With the emergence of Lead Gen 2.0, lead gen has improved for everybody. Buyers are getting more of what they want for the price they want. Sellers are getting better insight into what is happening and are selling leads at prices traditionally only lead generators with their own direct networks of buyers were getting. Just like Youtube is rocking the world of traditional video, Lead Gen 2.0 is rocking the world of Lead Gen and there are big opportunities to profit from it.