The mortgage lead generation bottom is close. How close I am not exactly sure, but here is my two cents on the situation.

Over a year ago we discussed the possible ramifications of a declining marketplace and overall price reductions. We speculated that lower lead prices would drive companies to use cheaper marketing, create less leads and possibly go out of business. Those companies that have only focused on mortgage have experienced all three of these predictions.

I just received an email from the very efficient paid search and display advertiser Adchemy. This makes me believe that they are testing other alternatives for marketing and more specifically they are testing or using lesser expensive marketing to generate leads. The reality of this market is that no matter how technical or smart your marketing engine may be, it still needs to be cost efficient.

Here is an example of what Adchemy is sending out:

Along the same lines of email marketing, when did it become alright to target specific religions to market and solicit? I guess it is always alright, however I think these people would be disappointed if a lead from this advertisement got to sailer Bob who just got off the boat and decided to sell loans. Yikes

Back to the current market. I think we are nearing the bottom. I am not sure how long the bottom will last and begin to come back, but here is what we currently have happing. We have seen mortgage specific lead companies post losses every quarter and even go out business or restructure their offerings. This is long over due and smart companies were diversifying years ago. Those that did not are starting to now. They are focusing money and resources and launching new verticals and spending less time on the mortgage vertical. They are not going to leave the vertical, but they are reallocating their time and resources to build out new ones. This results in less volume for big mortgage lead buyers. We are seeing this in some of the sub categories like home equity leads. Volume across many of the big and small providers have dropped and now many buyers our left scrambling for volume. This is also goes for state specific buyers. If you are buying only in one state you are forced to business with multiple lead providers to acquire the desired volume amounts.

This is going to continue throughout the year and possibly into next. A few more companies will call it quits or shut off their mortgage vertical to focus on others that are profitable. They will focus on cheaper marketing and continue to decrease overall volume to what makes economical sense. This will lead to a stabilization of lead prices, which I think we are already starting to see. Of course there are companies that buy remnant leads for cheap and they are not totally concerned with quality rather cheap volume, but there are also companies that need volume and are willing to pay for it and you will see more and more of those come out of the woodwork.

The downfall for lead buyers is the possible decline in volume and increase in prices. Lead generation companies are not crazy, well some are, but most realize that there are more profitable verticals and are entering them every day. This started happening over a year ago on the ground floor of many marketing campaigns with affiliates. Once pay outs were lowered they turned to gaming, edu., debt, etc.

Soon LMB will no longer be known as a mortgage lead generator, but something totally different.
Mortgage is a high ticket service and the leads are worth more then what many are paying for them. Enjoy the low prices, because they may not last. The lack of quality supply is going to drive prices up.

We will see…maybe these are all pipe dreams….

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