LEADCRITICWhy the Lead Exchange Model Can’t Work
Filed Under: Lead Exchange, featured
Digg.com | Netscape.com | Reddit.com | Del.icio.us | Stumbleupon.com | Google.com | Socialogs.com | Others social services
There have been some interesting posts lately about the lead exchange model. I felt it might be an entertaining topic, so entertaining that it may even be worth coming out from my long slumber to make another contribution. Firstly, I’ll try and give a little color to the background of the lead exchange as I understand it. Ultimately, there have only ever been a few lead exchanges in existence.
There is one relatively new attempt. The first lead exchange remains solvent, but has required numerous rounds of funding to do so. The second lead exchange which is now out of business, was started with a great deal of capital (from what I understand). Lewis Ranieri, who is now infamous in this industry as the father of the CDO (Collateralized Debt Obligation), contributed millions of his own funds on top of additional venture capital money that was raised to help start this company. Yet, today the company doesn’t exist. Why is one operating after raising a Series E round of funding while the other is insolvent? There are a number of contributing factors, but ultimately it is because the lead exchange model can’t work. There are two reasons why the model can’t work: the margins are too thin and the market does not need an exchange to operate. I will elaborate.The lead exchange model is different from the traditional lead model in that there is no marketing. The lead exchange is simply an efficient conduit between a lead buyer and a lead generator. They do not purchase the lead, or purchase marketing that generates a lead, mark it up for margin and re-sell it. They simply operate as the device that matches prospective lead buyers with lead generators whose leads fit the buyer’s filters. For revenue, they take a percentage of the price that the lead captures, typically in the 10%-20% range. For example, let’s say a lead is bought by 4 buyers for $20 each. That lead would be worth $80 ($20 x 4). The exchange would keep, (I am guessing based on information I have come to understand) about 20% of that, or $16 and the company that originated the lead would keep the other $64. So there you have it, the key flaw. Margins are too thin. With gross margins of approximately 15% there is not a tremendous amount of room for things like payroll, taxes, infrastructure, technology, etc. unless there is an exceptionally high volume of leads being passed through the machine. Its value is derived via efficiency. Think of Costco. The margins on the goods that you buy from Costco are paper-thin. But because Costco moves a very high volume of these goods they are able to make money, (also there are the membership fees which are where Costco really makes its money, but I digress…).
In my opinion, the lead exchanges have not really been able to make significant traction in products beyond the financial arena. And furthermore, with the contraction that the mortgage industry has seen, probably 40-50% smaller today than it was two years ago, the arena has actually gotten altogether smaller. So with the contraction of the financial sector coupled with the inability for the lead model to gain significant traction in other verticals, there simply isn’t a big enough market to feed a low margin, high volume business model. The second reason why the exchange model can’t work is because the market doesn’t need an exchange to operate.
Think of an example of where an exchange does work; the most obvious one being the stock market. If we as purchasers of stock could go directly to Google to buy shares of the company, it would make the NYSE or NASDAQ irrelevant. But we can’t purchase stocks in this way. If we want to buy shares of stock, we only can do so via the exchange platform where the company has chosen to list their stock. Likewise, if the only way to buy a lead from a LendingTree or a LowerMyBills were from an exchange, then the exchange would be relevant. But since you, the lead buyer, can go directly to any number of viable and legitimate lead sellers directly, there really is no need for the exchange. The exchange is merely another means for acquiring leads and not a necessary means. With its razor thin margins, unless it is a necessary means for acquisition, I just don’t see it gaining the prominence needed - especially in the current market conditions - to be a sustainable business model.So that is my opinion.
I am sure there are many out there may feel differently. I look forward to your responses and any of the dialogue that may result. For what it is worth, I do believe that the concept is about as innovative as anything this industry has seen. Had the model been born in 2001 rather than 2005, then it very easily could have been different than it is now. Ultimately, as I have discussed, I think there are a couple of fatal flaws that have prevented the model from gaining the traction needed to be successful. What are your thoughts?…
Popularity: 3% [?]
59 Comment(s)
2 Trackback(s)
- From Lead Exchanges-Do They Work? | Lead Marketwatch | Oct 20, 2008
- From Buying Leads? Why Not? : Trade Show Feed | Oct 22, 2008
Loading ...
BootyJuice | Oct 8, 2008 | Reply
Um no. I was hoping that at least you would provide a decent article that lived up to the title “Why the exchange model hasn’t worked” but even in that sense I think this is severely lacking.
You point out 2 problems - the margins are too low and an exchange isn’t needed to trade leads. Both are false. In your example, the exchange takes $16, more than Schwab charges to execute an equity trade - doesn’t look to me like Schwab is about to bite the dust. If the volume on any of the exchanges approached the volume that Tree or LMB did, they would probably be well into the black using that model.
Second premise — exchange not required for trading. Suppose Chavez decides to sell oil to Castro — does he have to execute a trade on NYMEX (or if Merkel does a deal with Putin, etc) ? Of course not. But it still makes sense to have a market… even for those who choose to execute trades off of the market.
The biggest issues I have seen were not related to what you brought up, namely : fungibility and decay. Leads are essentially commodities with a very short shelf life. But they are also not fungible in the sense that a security is and barely in the sense that commodities are. If seller LMB is offering a share of GOOG for $325, and seller TREE is offering a share of GOOG for $335, the prudent buyer buys from LMB, since the “thing” being bought is the same. But with leads, people might pay more for something with essentially the same characteristics because they “like LMB’s leads better” - a convoluted mix of reputation, hearsay, personal experience, and salesmanship on the part of the seller.
In my mind, until someone brings something new to the table to tackle the fungibility problem, the exchange model won’t be terribly interesting.
BootyJuice | Oct 8, 2008 | Reply
By the way, its funny that you used buying shares directly from Google as an example, since they were among the first companies to do an IPO directly to the public, and it was very successful - so people who bought in at Google’s IPO DID in fact buy shares directly from them in an auction (needless to say, the typical Wall St. market makers didn’t like this, but hey, a lot of them aren’t even around any more !)
MakeLoveNotLeads | Oct 9, 2008 | Reply
I generally agree with BootyJ.
The problem for lead exchanges is that I don’t think leads are commodities.
All commodities are easily substitutable for one another and can be quickly and visibly inspected to determine their quality, and thus worth.
Eggs are quickly inspectable to determine if they are grade aa or a, med, lrg or extra large. Gold is 10k, 14k, 20k. A baseball card is in mint, exc, good or poor condition.
Oil is sweet or sour crude and measured by its viscosity.
Once inspected and graded, though, commodities are easily substitutable and their worth is easily determined.
I cannot think of a liquid, working marketplace that exists today where the traded commodity cannot be quickly and visibly inspected and graded.
In fact the MBS and CDO developments show that when a commodity cannot be easily graded and trusted, the marketplace freezes up - people don’t know what they are getting so they can’t determine its worth and thus can’t trade.
Lead marketplaces probably won’t really work like a true marketplace until someone develops a standard grading system that makes them substitutable. I don’t think “publisher source” cuts it
Lead Critic | Oct 9, 2008 | Reply
MakeLove,
I agree, good points.
Booty,
The problem is their fungbility problem I agree and like MakeLove said leads are not commodities. A valuation would be beneficial addition to an exchange, however how accurate would it really be. From my experience can very at times and can be at times inconsistent.
I guess the compared exchange models could work and in some respects are working, but are they being profitable? If the answer is no, who is to blame, the management or the model? Because it is clearly not working for some.
Booty,
your thoughts on why one is out of business and the other is on a series E?
Just Another Lead Generator | Oct 9, 2008 | Reply
Correct me if I’m wrong, but don’t buyers see significantly more information than “publisher source” when bidding on a lead at LP?
Given the lack of standardized measures of lead quality, we rely on the market to determine the price. A significant number of buyers bidding on a lead will establish the market value for that lead.
Also, I believe the marketplace becomes quite profitable with increased transaction volume. Booty’s discount broker analogy is interesting, but it’s an incomplete picture of a broker’s revenue.
Schwab’s business model relies on more than just brokerage fees to stay in business. There’s other investment services, margin interest and cash float to provide significant operating revenue.
BootyJuice | Oct 9, 2008 | Reply
Critic,
you ask “your thoughts on why one is out of business and the other is on a series E?”
Simple : poor management.
Nonameleadguru | Oct 9, 2008 | Reply
So i guess we can blame the entire finacial mess and credit crunch on Lou R..? (JK) Simply worth posting:
This is strait from wikepedia…
Some news and media commentary blame the financial woes of the 2007-2008 credit crunch on the complexity of CDO products, and the failure of risk and recovery models used by credit rating agencies to value these products. Some institutions buying CDOs lacked the competency to monitor credit performance and/or estimate expected cash flows. On the other hand, some academics maintain that because the products are not priced by an open market, the risk associated with the securities is not priced into its cost and is not indicative of the extent of the risk to potential purchasers.[1] As many CDO products are held on a mark to market basis, the paralysis in the credit markets and the collapse of liquidity in these products led to substantial write-downs in 2007. Major loss of confidence occurred in the validity of the process used by ratings agencies to assign credit ratings to CDO tranches and this loss of confidence persists into 2008.
3Leadio | Oct 9, 2008 | Reply
I think what we may need is a Lead Department Store and not an exchange necessarily.
When I bought my TV at the department store, I knew it was made by Samsung (Transparency). If it didn’t work, I could return it to the department store, but if I needed service or support for my TV, I would have to call the manufacturer or a authorized repair shop. I can buy accessories for my TV like a DVR or a universal remote at the department store, which doesn’t really change the TV, but just enhances my experience with it (lead validation, appending data, de-duplication). I just love the department store because I can buy almost everything I need like Electronics, Clothing, Furniture, Jewelry, etc (Verticals), all in one place. Sure I can go to other department stores and find the same brands and sometimes the same goods, but I buy enough from the one place that I get customer rewards every once in a while (Volume Discounts). I can even go into my department store and register for my wedding next month (Setting up Universal Filters) for the different things we want, and when someone buys the item I registered for, it is immediately shipped to our local UPS and then it distributed to our home location (Integrated LMS). I also love my department store because I don’t have to drive around town to the different brand boutique shops. Driving around (negotiating with each lead provider) is a pain in my arse, and I just don’t have time for it.
Silence Dogood | Oct 10, 2008 | Reply
Booty,
If only you were more comfortable expressing your opinions… I love the fact that in your attempt to discredit one of my ideas, you actually made my point for me. You site, “Schwab charges [less than $16] to execute an equity trade – doesn’t look to me like Schwab is about to bite the dust.” Two things.
Firstly, Schwab is a broker, not an exchange. Since you are familiar with the term fungibles, I’ll assume you know the difference between a broker and an exchange, so I won’t explain it to you. That said, if Schwab WERE an exchange, they are earning commissions on millions of transactions per day. There is not an exchange in this industry that is anywhere remotely close to that volume and THAT is why the thin margins are an issue. If there were an exchange with a trading volume equivalent to Schwab, then the $16 margins would be extremely profitable, but clearly that is not the case.
As for your second point… I really couldn’t’ find one, I am afraid. I didn’t find your analogy to the NYMEX relevant. Ultimately I see your point, which is that leads are a commodity so it shouldn’t matter where you buy it. But I think that sophisticated buyers have proven that that is not the case. Where I buy a share of Google IS irrelevant because its performance is going to be based on the market. Ultimately, (unless I have the buying power of a hedge fund or Warren Buffet), I have no control of the performance of my Google stock. But I do have control over the performance of my lead, and leads bought from some providers definitively outperform, from an ROI standpoint, leads bought from other companies. So leads are NOT a commodity.
Noel Collins | Oct 10, 2008 | Reply
Great discussion and welcome back Silence. I have an additional theory of why the exchange model has trouble gaining traction. LOGISTICS…
First get Root out of the conversation, ROOT lost all credibility when it tried to generate its own leads in direct competition with the lead partners it joined with. That coupled with poor guidance and the lack of lead generation understanding killed that entity.
As for LP, most buyers didn’t go with LP initially because of the transparency issue. Best Practices dictates you know where the leads come from so you can effectively manage ROI and ID which lead source, filter set, etc. works best for your organization.
Add to that pain points like fluctuating vs. steady price points (making LMS reports inaccurate) and the need to interact with another web interface all reasons to pass when times were good.
I think our current market condition is the only reason LP is still around. If lead providers had more clients and didn’t suffer the loss of client base, they wouldn’t need someone to find their 3rd, 4th or 5th customer per lead.
Nonameleadguru | Oct 10, 2008 | Reply
Noel,
What in your opinion is wrong with an exchange generating it’s own leads? Why in your opinion is that a bad thing, or a credibility killer?
BootyJuice | Oct 10, 2008 | Reply
Silence,
glad we appear to be in agreement. I guess regarding the first point, my opinion is that thicker margins are not the answer, volume is. But either way we appear to be in agreement.
The second point is that a good exchange WOULD MAKE leads commodities by providing the facilities that a respectable commodities exchange would - liquidity, grading (”quality scoring”), fair pricing, and an even distribution of information about how well leads performed over time (feedback). Since it appears you want to get on a high horse, let me step down onto my shetland pony and quote from Harris’ Trading and Exchanges :
“The public benefits of having well-functioning markets fall into two classes: those which come from having markets that produce informative prices and those which come from having liquid markets.”
Class dismissed.
ps. office hours are cancelled this week
Noel Collins | Oct 10, 2008 | Reply
It was only a problem when presented as a “Neutral” platform to bring clients to a lead provider and it became non-neutral and competitive. To me it all depends on how it is presented upon start up. Other than that I have no problem with that model.
Lead Critic | Oct 10, 2008 | Reply
NoName,
my two cents is that an exchange generating their own leads opens question to the actual diversity of the exchange and puts into question whether they are actually an exchange at all.
It also leaves open the speculation from lead providers sending volume into the exchange whether or not they are getting a fair shake on the deal and the possibilities of unfair distributions or commissions etc.
BootyJuice | Oct 10, 2008 | Reply
I don’t think an exchange should generate its own leads, for the same reasons it stunk up the air when it became clear what LendingTree was doing in terms of competing with their buyers … its hard to be viewed as an independent third-party when you are competing with your clientele.
Silence Dogood | Oct 13, 2008 | Reply
Booty,
I can’t let you have the last word, mainly because your last comment was funnier than mine. While the view up here on my Clydesdale is grand, it does appear that we tend to agree far more than we disagree. I certainly can see that a well run and efficient exchange in this industry could commoditize leads, my original point however was that it would be impossible for there to be a well run, efficient exchange in this industry.
There are not enough quality affiliates to assimilate to genuinely compete against the direct marketers that already exist. And there is no reason why the direct marketers would ever choose to sell their goods via an exchange now that they are already established as direct marketers (why would they give up some of their own margin since they don’t have too?). So there is simply not a genuine opportunity for an exchange to be relevant.
I won’t argue that the management in place, from Silence Dogood’s humble opinion, has not appeared to be overly impressive in the exchanges that exist or have existed. But they could have had a corporate dream team and I still think they would be in the same position as they are right now – dire – due to the conditions of the market. If you want to be generous, you could call it a concept ahead of its time for this industry, but either way you slice it, it is not going to work.
leadmuncher | Oct 13, 2008 | Reply
Rightmedia.com anyone? If the display exchange model can work, so can the lead exchange model. The lead exchanges need to give lead sellers additional tools to make it easier to sell directly into the exchange (thus making the the exchange very relevant) instead of negotiating and selling directly to buyers…Also, pricing/comm. needs to be dramatically adjusted. If these 2 things are in place along w/ a viable, completely autonomous 3rd party lead quality index/score we have something. The lead exchange/marketplace *CAN work.
BootyJuice | Oct 13, 2008 | Reply
Silence,
good points. I do agree that even with good management the exchanges would probably be struggling right now, largely due to the impact from the greater economic issues. It seems that many software companies beat out the competition simply by outlasting the competition, partially because it takes so much longer to create value (think 10 years for products to mature) than most people expect (or are willing to stomach) when starting out. There is a reason the “4 guys in a garage” paradigm has become such a classic tale of the silicon valley, and part of it has to do with not rushing things because costs are spiraling out of control.
However, there are some interesting points to note. For one, Google is kinda getting into this game with PPA, although I think they have been downplaying PPA a bit since they do so well with CPA (they’d rather have you lose your money on clicks then speculate with their impression inventory - better you learn on your dime then they learn on theirs). Just seems to be my not-very-well-researched opinion, but I haven’t been hearing anything about Google PPA lately, perhaps other LC readers care to comment ?
My own biased opinion, unfortunately, is that the Root Markets/LeadROI tie-up presented the best opportunity for an exchange to provide some of the things we expect from an exchange - namely, a trusted third party that can do end-to-end reporting (quality scoring) that feeds back into the pricing loop. Kaleidico is kinda doing this with their app-rate widget. However, this is really only step one. And, after giving it some serious thought, most of steps 2 through 33 are vertical-specific, which presents a fair amount of technical complexity to solve (not to mention domain expertise).
In any event, I’m not sold on leadmuncher’s comparison to Right Media / DMX (partially because I’m a DMX user and a bit underwhelmed by the service… but it does kinda do what you expect). The reason is as follows : in the CPM/CPC/CPA continuum, there are “apples-to-apples” comparisons that just don’t pop up in the lead world. For example, your CPM rate times your CTR should approximate your CPC bid, and while there are differences in traffic source quality (a bit of which is properly decried as monday-morning quarterbacking) this is a fairly simple numbers based approach that anybody can figure out and optimize.
With leads, the landscape is always shifting. Affiliate partners are combining and sharing leads. As you point out - big players control too much of the volume and their sourcing is very opaque. Differing levels of competence on the part of LOs or call-center operators lead to wildly different application rates. There are very seasonal considerations for each vertical.
Still, nobody has done what I can do on Schwab… integrated with an LMS so that I can see the characteristics of a lead as it comes in (such as age, loan amount, LTV, state, etc for mortgage leads) and bid in real-time for the lead in an LMS system.
I don’t know if LP is actually real-time in that sense, or much at all about reply.com, but I still think that would be cool and probably a nice first-mover advantage for a lead exchange (or Tree or LMB)
BootyJuice | Oct 13, 2008 | Reply
Ok, that’s hard to understand because of a typo - I meant to say Google has been downplaying PPA since they do so well with CPC (what most people call CPA == PPA in Google terms).
nonameleadguru | Oct 14, 2008 | Reply
Booty,
Who is going to spend the whole day watching their LMS for leads they want to bid on, do you think that can be managed on a large scale?
Unless i’m not understanding the model you are proposing, I do not feel that is a scalable enterprise.
Lead Critic | Oct 14, 2008 | Reply
It sounds like a good idea, but I too agree that it is not scalable and the acceptance amongst the larger buyers would be very low. However, scoring, segmenting and analytics can be combined in a way that could suggest lead prices. From there the buyer could back a negotiate on their own.
BootyJuice | Oct 14, 2008 | Reply
For example, in icoSales there is a big (yellow ?) button that says “get my next lead” — now where does that lead come from ? Is it fresh, or has it been lying around in a pipeline somewhere getting stale ? Why can’t it be a lead that is unpurchased, ready for delivery at that exact moment ?
My point is that the LOs are already watching their LMS all day, they are just pulling from a tank of aging leads, not the fresh stream.
Scalability has nothing to do with it, I assure you it could be made to scale - there are many markets like this now, from event tickets to Priceline. Perhaps the process is a bit more complex, like a countdown that says “you have 20,19,18… seconds to bid on this lead” but ultimately it is possible to enable real-time bidding for leads in 3rd party LMS systems.
Noel Collins | Oct 14, 2008 | Reply
Booty, don’t you work during the day designing the next Iron Man suit, since when do you have time to work leads and exchanges…..Crazy mad scientists.
nonameleadguru | Oct 14, 2008 | Reply
Booty,
I know you want this to make sense, and maybe it does on a small scale. But to play devils advocate I would say the problem is because marketing people shouldn’t allow their salespeople to make purchasing decisions, that is what there job is. I suppose they could allow it as long as they set a cap for each rep and general guidelines for the filters.
Two things to add to that. #1 I believe you are referring to the push/pull methodology (And simply making it a purchase instead of the rep pulling an existing lead out of the database or making themselves open to receive the next one that enters it) but again that would only be optimal if the core filters have been pre-defined by the Marketing team.
#2 LMS/CRM systems like Kaleidico are already designed to send lead to reps that have the higher probability to close the lead (so this sort of handles this issue already, and the ultimate goal is for the marketing head along with their team of analysts to perform the analytics to keep their purchasing on the highest converting filters and traffic.
So why would you place that in the hand of a salesrep when a marketing head eat sleeps and Sh#@$ conversion metrics.
Lead Critic | Oct 14, 2008 | Reply
This string has compared leads to tickets, equities and clothes, but I don’t think what works for other products can necessarily work for leads.
In the highly competitive world of leads, time to call is critical. It is possible to have enough liquidity on an exchange to efficiently sell leads, via a cherry picking system and keep the delivery in near real time.
Icosales and many other LMS require the buyer to buy the correct amount of leads per day. Anything over what can be efficiently consumed will lead to uncontacted leads. Even if lead amounts are inline with consumption there will still be leads that are not contacted in real time or even on the same day. Now magnify that by 1000 times and you have a huge amount of leads that are not being called in real time and lowering the rate of success for people buying those leads.
I don’t think there is a way around it, even if you implement a counter. Along with the time counting down would also be the value of the lead declining. What happens to the lead if it does not sell in time? The lost a ton of value and is now aged.
I would think of way to properly value the leads based historical data and then allow it to automatically adjust bids based on performance and value in real time. Then the exchange would send to the highest bidder, as most do now. I think that is doable and useful.
BootyJuice | Oct 14, 2008 | Reply
noname,
I’m in agreement with Critic (I think) — the underlying value of not overbuying and also absolutely minimizing time-to-call must outweigh the “pipeline setting” value of the marketing head or this will never work. The LMS system could still set restrictions on purchase caps, who can purchase, and filters, so the marketing head isn’t necessarily out of a job, but perhaps is slightly less important.
Noel,
I work on the Iron Man suite at night. During the day I’m coding apps for mobile phones. Now if I was actually working on software for the lead industry, well then I wouldn’t have time to post on this blog.
Noel Collins | Oct 14, 2008 | Reply
Booty, I like rockets, red glare, explosions, etc. lol
happyman | Oct 14, 2008 | Reply
Booty,
i’m interested in mobile apps. Are you available to chat about a project? Please let me know and i’ll pass on my contact info.
BootyJuice | Oct 14, 2008 | Reply
Always available to chat…
leadmuncher | Oct 15, 2008 | Reply
you would simply put pre-defined bids in per criteria. Ideally each criteria or lead would have a different pre-defined bid/strike price
leadmuncher | Oct 15, 2008 | Reply
above comment to nonameleadguru
Lead Critic | Oct 15, 2008 | Reply
leadmuncher,
That is no different then what can be done in LeadPoint or any other exchange.
MakeLoveNotLeads | Oct 16, 2008 | Reply
Lead criteria like ltv and loan amount are helpful, but that’s like the color, smell and weight of the steak. That alone does not determine whether a steak is grade a or choice. Withiut the ability to grade intent, leads can not be commoditized like steak without.
One 82pct ltv, $500k
Loan amt, florida 712 fico lead is simply just not substitutable for another in the way any other commodity on the planet is (gold, oil, steak, eggs, or, say, a yahoo homepage banner run of site banner ad)
My opinion
BootyJuice | Oct 16, 2008 | Reply
MakeLove has the right idea. However, the intent issue is sort of the penultimate problem, and what I was hinting at in my first post. The exchanges could get a LOT better at all the other parts. And there is a specific thing, that nobody seems to be doing a good job of, that SHOULD and COULD be done RIGHT NOW by all exchanges (or lead providers), which is properly disclose the AGE of the lead. As Noel pointed out a couple of weeks back, this is a field that used to be captured but is no longer disclosed by the lead providers, but the exchanges should be doing this. Furthermore, the exchanges could be providing the market with better information about what people are paying for leads with given attributes - this would be a benefit to the market and FORCE lead providers to compete on leads with “better intent.”
Nonameleadguru | Oct 16, 2008 | Reply
Booty, this is already being done. Did you know most exchanges have aged markets with the age identified. Everything else is real-time.
BootyJuice | Oct 16, 2008 | Reply
Perhaps an exchange is not what’s required, but instead a “lead buyer’s club” which is kind of like collective bargaining for lead consumers. Lead consumers join the club and basically say, we won’t buy leads unless the provider meets the “lead buyer’s club” requirements, and the requirements are set by the club members. Kind of like Costco for leads.
Some of the things I think such a club would require are :
1. Provide lead capture date on ALL leads
2. Provide web property or description of lead capture type on all leads (so this could either be a URL (lowratesource.com), or “I wrote the guys information down on a napkin and entered into Excel before selling to you”, whatever).
3. Provide information on how many sales have ALREADY been made by the provider at the time of purchase.
4. Provide information on how many sales the provider intends or will ultimately allow at time of purchase (so if you are the first buyer, but the provider intents to sell 5 more times, you should know that).
Furthermore, the buyer’s club could collaborate to determine which lead providers were selling their own product, which were sharing product, which appeared to be recycling, etc. I would think such a club could also have the equivalent of what every self-respecting fraternity has - the midterm and final tests for all classes by previous members… in other words : a queryable repository to keep the lead providers honest. If your provider tells you that they will only sell a lead 4 times, but you query the repository on your dead leads and find out that there are more than 3 other club members that purchase the same leads as you on average, then you have more information on your hands next time you talk price with that lead provider.
If people are interested in such an idea, let me know.
BootyJuice | Oct 16, 2008 | Reply
I disagree– everything else is NOT real-time. Personal experience tells me that providers simply do not send all leads through in real-time. Does anyone else believe that providers that don’t provide capture date are all sending leads through in real-time ?
Noel Collins | Oct 16, 2008 | Reply
There is a reaons the field was removed. I helped Adteractive and Yung Trang find out on 4 different occasions, that one or two of their servers were down.
Mistakes like that cost buyers and sellers alike thousands of dollars. At the time Yung just smiled and said “Thanks Noel”. We also found NexTag selling bogus telemarketed leads on the 1st day of a trial contract based on the server capture time field.
Aged data leads do not need the capture date as much as the so called “Real time lead” that everyone now sells.
Lead Critic | Oct 17, 2008 | Reply
Booty,
I believe leads sold from top sources are sold in real time. I am sure there are questionable sources that do not, but I believe most all leads are in real time, whether or not there is a time stamp.
I would be curious what companies had the time stamp and then removed them?
Booty,
Also your lead buyer club sounds very similar to Atul Patel’s LeadIdentity. Is it??
BootyJuice | Oct 17, 2008 | Reply
Critic,
I don’t know anything about Lead Identity, but am interested to hear about it. Lots of people have discussed similar ideas with me, clearly there is plenty of room left in this market for innovation. Tell me more.
Noel,
I agree that real-time leads should have a time stamp. If the leads are so “real-time” whats to fear in putting the time stamp on it ? Even for real-time leads, I imagine that some buyers get the lead an hour or more from when the first buyer gets it. Plus, having the time stamp from the provider gives the consumer the ability to track conversion based on the amount of time from the provider time stamp to the first call… an important metric that might reveal optimizations that can be made in the LMS, or on the call center pipeline manager’s part, etc.
Noel Collins | Oct 18, 2008 | Reply
I agree, I found at least 6 times when a server was down and the posting was not within the 9-15 minutes most lead providers produced back then. Most of the time the lead provider did not realize their servers were down and it saved them time and money. It doesn’t make sense to not post the time the lead was received.
jb | Oct 18, 2008 | Reply
Is this an article copied and pasted from 2 years ago?
The model was flawed from day one because of margins and quality control.
Was hoping to see something new in this articles instead of old opinions that have been written countless times in the past few years.
Noel Collins | Oct 18, 2008 | Reply
That’s funny jb, three of the top five most discussed posts on LeadCritic are posts on exchanges. I do not see a regurgitated post. You are an expert based on your sarcastics remarks, share your NEW opinion on exchanges and the various posted comments. Please, we all await.
jb | Oct 18, 2008 | Reply
New opinions?
Why would there be something new - it is a flawed model, and all the exchanges are proving the flaws by either closing their business, or taking round after round after roung of funding to keep their doors open for 6 more months.
Lead generation is not easy, and it is even more difficult if your goal is to build a great company and grow your business.
Quality control, dealing with a variety of customers with different needs, different levels of technology, different approaches to their business and different levels of their skill at their business, cause a great deal of need for flexibility and customer service.
A lead exchange doesn’t really address any of those issues.
So I have no “new” opinions, except that I do not know why the same article about lead exchanges are the most popular articles on any site!
BootyJuice | Oct 19, 2008 | Reply
Jeff,
hindsight is 20/20 — saying “it can’t work because nobody has made it work yet” isn’t very convincing. What does your company do when your web properties generate more leads than you have buyers for in a given timeframe — where do you find the additional liquidity ? Or what about when your order book outstrips your lead production ?
Booty
jb | Oct 19, 2008 | Reply
not really hindsight - i met with the origins of Root back in 2003 and shared my feelings on the holes in the business model, as well as some of the other trouble models in their first year.
I am not saying it 100% can’t work, just not in its current structure (In my opinion).
When we generate more leads, we find more buyers, if there is not more buyers, we buy less media and focus on other areas where there are buyers.
Depending on the state of the market, we may be able to pay less for media, and therefore not need to sell as much, or if there is a lot of demand, charge more.
Maybe the lead needs to change so the amount of information that is collected changes, or the integration with customers change.
Internet lead generation is so great because it can be so fluid and adaptive — getting stuck in 1 format and 1 approach will fail, eventually.
The companies that prosper are the ones that know that and ride the waves knowing the wave will end, not raise money 10 times even when the wave has already hit the beach.
I love this industry because of that, and the smartest and most nimble companies will grow and evolve.
PEK | Oct 20, 2008 | Reply
Great discussion. I’ve always been a big fan of the exchange idea, as both a seller and a buyer. It sounds to me like there is still room for someone to get it right.
Lead Critic | Oct 20, 2008 | Reply
JB,
You sure have a lot of opinions about an “old topic”.
Silence Dogood | Oct 20, 2008 | Reply
Jeff, LC stole my thunder a little on his last comment, but for someone critical of the timliness and content of this article, I am sure glad you still took the time to read the article, 40-some comments thereafter, and then make several posts yourself.
Next time I will try to come up with something that truly interests you.
jb | Oct 20, 2008 | Reply
Thank you - that would be great. Articles on what’s next and how the industry is changing always interests me.
I appreciate you thinking of me.
And yes, I have opinions on lots of topics — old and new. I thought the was the whole reason for blogs and commenting on articles, right?
BootyJuice | Oct 20, 2008 | Reply
JB,
I don’t want to get argumentative (*ha!) but I have some trouble believing that your systems and contracts allow you to adjust your media spend quickly enough to account for outstripping the order book, or that your customers like being told prices are going up today because you are short of leads. In other words, I think that the decay problem means that providers still benefit from tools to increase liquidity (otherwise they are selling stale leads or eating the loss on media spend).
However, you did say something very interesting — “Maybe the lead needs to change so the amount of information that is collected changes, or the integration with customers change”
I think you are right about that - a more radical disruption than any of the exchanges have provided thus far is what’s called for.
MakeLoveNotLeads | Oct 21, 2008 | Reply
If the problem that lead exchanges solve is a place for lead sellers to go when their lead supply outstrips buyers, how does a lead exchange solve that?
Feels like volume (lead supply) at lead exhanges could still outstrip buyer demand. In fact, because exchanges don’t control their marketing volume, it feels like.the problem (supply/demand imbalance) is MORE LIKELY to happen at an exchange than at a typical aggregator site.
So what’s the solution to that? More exhanges?
What am I missing here?
BootyJuice | Oct 21, 2008 | Reply
MakeLove
A good exchange would solve that problem by providing information and liquidity. The only way to do this effectively is to provide a greater audience for lead sales. What I imagine happens now when a provider’s supply outstrips demand, is that they sell stale leads and hope nobody notices… because I know that you can’t tune your media spend down retroactively as JB suggested. Or they basically foist the overage onto a friendly buyer at a discount (almost certainly telling the buyer that they are privileged to be offered rare opportunity to purchase at a discount). Instead, an exchange would say, have buyers compete to determine what that discount should be.
This is all boilerplate, everyone knows this.
Until buyers can demand certain quality metrics, there won’t be much value in an exchange. What happens now is that the providers each treat themselves like mini-exchanges. They basically say, how can we maximize revenue by selling our nightly catch to buyers in the most advantageous way to us given our order book. And they are so far not buying the notion that an exchange helps them much.
I think the only possibility is to turn this whole thing on its head. Lets assume every LO (I’m going to use this term to mean “call center operator) has a cell phone. Buyers bid on calls to their LO phones. The LO can use the system to “turn on” or off their order (meaning, I’ll accept a call or not) or set hours. During “on” hours if the system routes a call to them, they have “purchased” a lead. Now on the display advertising side, the exchange is operating web properties that say - “don’t give them your number… the calls will never stop! Instead call the Loan Officer you want from whatever phone you want.” - the implication being that the borrower can get some anonymity if they so choose. All calls go to a call center and are then routed to the selected LO. The buyer shops can supply information to the exchange that is helpful in differentiating the choices that a customer makes - recent loan rates, the cost of a filling or botox injection, a pretty picture of the LO, whatever. Now you have a “lead exchange” that offers something new to the buyers and sellers - buyers can have choice and control, and sellers can bid only on hot calls, not potentially stale leads. The buyer info gets routed to the LO at the time of call by the system, so they can still have data in front of them when they talk to the customer.
How now, brown cows ?
Lead Critic | Oct 22, 2008 | Reply
Booty,
Where is the exchange in the proposal? The only source of the leads/calls is the exchange itself, according to what you stated.
Lets also get something straight, all lead providers distribute leads based on price/bids, that does not make them an exchange, however I agree that what many do with regards to aggregating leads does allow you to consider them a mini exchange, I guess.
I think your idea clearly comes from the technical point of view and not the marketing point of view. There are major flaws in allowing buyers turn on or off lead flow when ever they want, especially if you specifically are driving the marketing and incurring the marketing costs. DoublePositive allows their buyers, of hot transfers, to turn on and off leads when they want, because they don’t incur a cost until the lead is transferred. Of course they have overhead, etc, but very little, or no marketing is spent to generate the call. They rely on lead providers to send them unsold inventory and assume the risk.
Your model of generating the calls through your own marketing and giving the buyer full control is not a feasible one, in my opinion.
Respectfully, try again
BootyJuice | Oct 22, 2008 | Reply
LC, good points.
I suppose DoublePositive is not far off from what I was proposing.
Raj Parekh | Oct 22, 2008 | Reply
LC,
Time to make this a hot topic for LeadsCon. Call Jay and put it on the schedule.
Just Another Lead Generator | Oct 22, 2008 | Reply
LeadPoint makes a market for hot transfers as well, but I think DoublePositive’s edge is that they do the lead pre-qualification with live operators.
Lead Critic | Oct 22, 2008 | Reply
LeadPoint has voice leads and also transfers from calling on aged data.
BootyJuice | Oct 22, 2008 | Reply
Neither LP or DP sounds like they are giving the consumer more choice (than traditional lead gen).
As I see it, radically different models have to either give the consumer a better experience, or give the lead buyer a fundamental edge in closing sales. DoublePositive is trying for the latter. Things like MortgageMarvel are trying for the former. Nobody is attempting to do both.