Wanna Buy Some Leads?
Photo by Dave van Hulsteyn
Buying leads always seemed to be one of those murky areas of marketing for me.
Full disclosure: I have never bought a lead, know very little about the process and would probably try and build my business an online business through SEO, blogging, a laser-focused PPC campaign and building a kick ass web site before I ever bought a lead.
But, that said some people have had a lot of success buying leads so I can’t really discount it as a tactic.
And it looks like despite all the pronouncements of the death of lead generation there are definitely some new twists on this old concept - most clearly with the recent launch of Zillow’s Mortgage Marketplace (see Questions About New Zillow Mortgage Marketplace).
Marketplace definitely seems to be the hot buzzword right now since Reply.com has recently relaunched itself as a leads marketplace too.
Now I know I’ve given these guys a hard time in the past (see Reply Needs to Pull Its Head Out) but I actually kind of like this idea.
If I’m looking to find leads I can just go in and bid for them. If I have too many (a problem most would love to have….) I can go and sell them on to others. Right now they are trading leads in the real estate and mortgage sectors, as well as in insurance and automotive too.
The idea that I could potentially monetize any excess leads (generated off this blog for example) to others is especially fascinating.
The one thing I didn’t like about the experience is that, as a buyer, Reply asks for your credit card right up front before you’ve even dived in to the site. I think this is short-sighted quite frankly - I would have loved to go in and at least gotten a snapshot of what I was bidding on before having to input my personal details (and be referred to as a “lead” myself - ugh).
The normal caveats on leads apply here too - I want to see the quality, the freshness and the quantity of the leads before I bite.
Nevertheless, I think the marketplace is an interesting concept and a good direction for Reply to take.
And if they can fix that initial sign-up process, I might even consider buying a lead.
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Brian Requarth | May 21, 2008 | Reply
Joel, I must first disclose that I have never bought or sold leads before so I too do not have much experience with this. About two years ago I was contacted by LeadPoint.com which basically does the same thing. The overall concept makes sense, but how many real estate professionals are just falling over themselves with leads. If a really successful agent has tons of EXTRA leads wouldn’t it make more sense to send those to other professionals as a way to help build relationships or maybe get referral fees? Using them to build relationship might take too much time and I guess cashing in quickly makes sense and could be a nice source of income, but I would be curious to know how many professionals have extra leads coming out of their ears. This marketplace seems like it is more of an incentive for crafty online marketers to set up a website, run a really tight PPC/SEO campaign and resell the leads back to real estate professionals on the marketplace. Agents are also capable of setting up a really solid campaign, but if they are depending on using PPC, most likely they will just scale their campaigns back by dropping their budget. In most markets the CPC (Cost Per Click) is already really high so I don’t know how effective this would be. If they are dominating the SERPS w/ their website or blog they would be in the market for selling leads. I wonder how much Reply.com pays for leads. Overall, marketplaces work on the Internet, but I would say that it is a gamble to buy leads. It could be something to try and see the ROI. Maybe if they pre-qualified the leads first it would be more interesting to real estate professionals, but this would be expensive. From what I see this is definitely a step up from their other disaster.
Spencer Rascoff | May 21, 2008 | Reply
Spencer from Zillow here,
Also, Reply.com is a partner of Zillow's, through their http://www.connectwithlife.com website, where we power their home valuations.]
[Disclosure: Zillow (as noted above) runs the Zillow Mortgage Marketplace, which provides free leads to mortgage lenders. Since they're already free, I don't think there's much of an aftermarket for them.
I just want to chime in to provide the consumer’s perspective. I doubt that when consumers fill out a form on the web realize that they have just become a “lead” and I doubt even further that they realize that their information might be auctioned in a marketplace, and end up in a third party’s hands, totally unrelated to the website where they filled out the form in the first place. Seems a bit counter to the prevailing internet trend of putting consumers first and letting them be in control.
LeadCritic | May 21, 2008 | Reply
Joel,
As Brian mentioned the lead exchange is nothing new, but in my opinion is a good and efficient way to buy and sell leads. I am not convinced that Reply.com will be able to gain enough market share to be successful. LeadPoint who has been around many years has cornered the mortgage market and others, Root Exchange has proven that simply creating an exchange will not lead to success. Detroit trading exchange has a corner on the Auto market. I have also hear that there will be other exchanges released later this year. Is there a need for more then one or two exchanges?
Regarding buying leads, there is a science to working leads and of course there is risk any time you put capital into marketing. Leads can work and work very well, but you definitely need to learn how to swim before you dive into the deep end.
retrove | May 21, 2008 | Reply
As Brian indicated above, Leadpoint has been doing this for some time and since the mortgage market blew up, many of these lead companies are looking to reinvent themselves (I think Lendingtree may also do the same soon) as they no longer have the deep pockets of the subprime lenders buying leads.
I think the bigger trend of the future is a marketplace going directly to consumers as Zillow as done. Users are getting more savvy as can be found by the length of queries being reported by the search engines and this will translate to them being less willing to become a “lead”.
Graeme K. Brown | May 21, 2008 | Reply
As someone who has used Leadpoint, LMB, Zillow marketplace, Really Great Rates, MLeads, and about 15 others(!), I can say with some authority that Leadpoint and Zillow are the two best. Here’s why: 1)Zillow is free, and by rating the transaction, creates an “honest” marketplace (in theory) 2) Leadpoint is amazing b/c you can turn on/off your leads at any time. If you want to log in and buy 4 leads, you can. Most other sites require a commitment much greater.
Joel Burslem | May 21, 2008 | Reply
@Brian - I have heard anecdotally from a few professional who are generating too many leads from their sites and looking for ways to pass them on. They’re probably in the minority and I think you’re right, the more likely result will be folks building ’stealth’ sites and want to sell them on.
@Spencer - I hear you brother!
I don’t like the idea of this contact information being traded and sold. I think if more people knew that’s what was happening they would be upset.
@LeadCritic - Want to do an interview for FOREM readers and enlighten us on the science of buying leads?
@Retrove - Interesting tip on LendingTree…care to elaborate?
LeadCritic | May 21, 2008 | Reply
I wonder if people really care…or if they really truly do not realize that when they (Lendingtree) say your information will be given to 4 or 5 lenders what is going to happen. I think there is probably a mix between the two.
I am still not convinced that zillow is the answer even though it is free. I think time will tell, but I think there are plenty of solutions that have yet to be tapped into that will eliminate consumer heart burn and at the same time generate business leads with a high level of intent. I think an open market place or exchange is the way to go, though.
@Joel - Sure, I would love to help…email me
Overland Park Real Estate | May 21, 2008 | Reply
I am with you on the whole buying leads thing Joel. It may work for others but it is not for me. I would rather concentrate my time on other activities that generate leads for myself.
As Conor Oberst sings: “I’d rather be working for a paycheck, than waiting to win the lottery.”
retrove | May 21, 2008 | Reply
@Joel - regarding LT, it’s more of an observation / hunch than a real tip. My reasoning is that LT profits are hurting big time (Q1 losses of 24 million) as the big bulk lead buyers are gone and the profits have evaporated with subprime mortgages. They have already tried to monetize leads by purchasing an in-house mortgage co. and doing loans but that does not seem to work for them and against the initial value proposition that LT offered in the first place.
They have tried to monetize the RE transaction with the purchase of realestate.com and the 14 brokerage offices and 1000 or so agents but that is still generating losses of 3.9 mil in Q1.
With all of these different directions most lead buyers would be apprehensive to buy LT leads because they are competing directly against LT on both the mortgage / real estate transaction and it seems to create a sense of conflict of interest.
Therefore, I would suspect they would make a public market place as it seems the easiest way to use the brand and its unique value proposition to continue to generate massive amounts of leads for their in-house offerings and hopefully grow profits.
marc | May 21, 2008 | Reply
Doesn’t it simply boil down to “build versus buy”? If your custom-built lead generation effort has a lower ROI than buying leads and you refuse to switch, that’s a poor business decision, IMO.
Bill Rice | May 21, 2008 | Reply
@Joel - it is interesting that you described some of the key techniques lead providers use to generate leads for purchase. Really, the concept is to outsource your marketing department, in some sense, so you can get back to work selling (Real Estate, Mortgage, Auto). The average mortgage broker, Realtor, or sales person on the showroom floor has no idea what language you were speaking when you rattled off:
“build my business an online business through SEO, blogging, a laser-focused PPC campaign and building a kick ass web site before I ever bought a lead.”
So, creative solutions like Zillow Marketplace, LeadPoint, and Reply! give great sales people options for how they acquire prospects–especially as more customers move online (a confusing place even for marketing people to generate quality leads often times).
The other funny thing is that most of the “buying lead is a bad idea” discussion typically comes from people that have never bought leads or run/supported a sizeable mortgage or real estate operation. At a certain scale it becomes even more difficult to go it alone with your blog, PPC, and killer website.
As for the does it work? I don’t know maybe ask Quicken Loans. A great company that grew out of nowhere with a few loan officers in the late 80s (Rock Financial) into a top 20 lender and they are 100% Internet leads and seem to be still weathering rocky markets well.
[Since we are all disclosing--I worked for Quicken Loans, I founded and run Kaleidico, a lead management software company, and I am on the advisory board for SmartHippo, an unique and innovative community-based lead generation company]
You always spark a great discussion over here. Keep up the good work Joel!
Joel Burslem | May 21, 2008 | Reply
@Bill - I guess that’s my frame of mind, I’m a marketing guy not a sales guy. I’m not opposed to buying a lead I’d just have to have a clear sense of the ROI before I plunked down cold hard cash (or my credit card number). Philosophically, I have no qualms with buying leads as part of an overall strategy for acquiring new customers - I’d just want to know what I was getting up front.
Jay Thompson | May 21, 2008 | Reply
I generate more “leads” than I can handle. I cherry pick the prime ones for me and my agents, and refer out many others — some of which work out, many of which do not (then again, some of the “cherries” don’t work out either — such is the animal that is internet leads).
I’ve got disclosures on all my sites that say your email address and personal info will not be sold. I don’t want MY info sold, so I’m not about to do it to a site visitor.
Alex Majthenyi | May 21, 2008 | Reply
I agree with Jay on selling leads. I have never sold a prospect or client’s information and never will. I don’t compete with my salespeople so I give them all the leads in our area and refer out the rest.
Buying leads would depend on what you know about Internet marketing. Personally, I find it a challenge to stay on page one of Google, Yahoo and MSN with SEO. I enjoy the challenge. Years ago we were competing with other brokers. That was easy. Today we have to compete with Yahoo, Realtor. Com, etc. Our competitors are getting better; still we would rather fight than switch to buying leads. In addition, I feel that we are building up equity in the business. - Anyone can buy a lead.
LeadCritic | May 21, 2008 | Reply
Jay Thompson,
Did you say you refer out your unused leads or the lead that you cannot help?
Whether you are selling them or not you need to disclose on your site that their info maybe passed or referred to your partners or a third party.
Maybe I didn’t read that right.
Payam Zamani | May 21, 2008 | Reply
Joel,
Thanks for writing the piece on Reply.com. I certainly like the headline much more this time around, and enjoyed reading all of the comments.
It seems though that a few major points may have been lost in these discussions. We believe the initial approach taken by the major lead generation companies - including our own – has certain inherent flaws that signal the near term obsolescence of the current model. What is painfully missing for lead buyers is a lack of the fundamental controls required to provide a sustainable value proposition. Without value there are obviously no buyers and no business.
Our own first hand experience signing up tens of thousands of realtors over the years played a huge role in designing a marketplace that from our perspective can serve as a platform for creating real, sustainable and dynamic value for both sellers and buyers.
Here are some of the ways that we reengineered the offering for the lead buyers:
- We allow the lead buyers to have total control over their lead campaigns. They have all the necessary tools right there on Reply.com and can buy exactly what they want, when they want without ever committing to use the system for any minimum dollar amount or minimum term of use.
- The buyers are encouraged to customize their buys into many campaigns. This way they know what works and what doesn’t. So as they experience the leads they can buy more of what works and shut down the campaigns that result in leads with a low likelihood of generating acceptable ROI.
- We use a proprietary, patent pending technology/process to predict the propensity of each lead resulting in a transaction and communicate that in the form of a 5 start rating to our buyers. The buyers of leads can choose the quality level they are willing to accept.
- We decided to provide many filters so the buyers can buy leads exactly from areas that they are interested in and the types of leads they’d like to work with.
- Most importantly we decided that we will let the market determine the value of every lead. Our buyers get to set the price. They set the price for each of their campaigns and as long as they are the highest bidder for that lead they will be the recipient.
- The key here is that no buyer will any longer have a reason to cancel the lead buying relationship. You will always have campaigns that generate profitable results and a few that won’t. Even those campaigns that initially don’t work you have tools to modify them so they will generate a reasonable return on investment.
Here is the bottom-line: The local advertisers such as realtors and real estate brokers who have an interest in reaching out to the online consumers have two choices: 1) They can either become experts in search engine marketing, put in place the sophisticated analytics and the infrastructure designed to maximize the probability of conversion of a click to a lead and become experts in online localized marketing which by the way will more than likely result in an unpredictable volume of leads at cost prohibitive prices or 2) They can take advantage of a platform that gives them all the controls required to set up profitable campaigns. Campaigns that deliver leads customized to their unique business needs. Leads that they, the buyers decide how much they are worth vs. clicks that may or not convert into a lead.
My sense is that the web 1.0 approach to online lead generation is done with. Lead buyers are now exposed to the kind of controls they can and should expect from this new medium. Unless we give them the control and communicate the quality and let the market determine the price we will have a difficult time building a growing client base and act as a catalyst in moving a significant portion of the marketing $’s from off line to online.
Lastly I should mention that while other market places are included in some of the comments on this blog it’s important to point out that at this point Reply.com is the only lead exchange/marketplace offering real estate leads.
Below I have included a link to a piece that I wrote on “why we decided to launch a lead exchange/market place.”
http://blog.reply.com/?p=4
Best always,
Payam Zamani
CEO, Reply.com
Alex Majthenyi | May 21, 2008 | Reply
We refer a great number of prospects. I set up a rule in my office:
Call your prospect, tell them who you are referring them to and get their permission. All of my agents follow this rule.
Frank | May 30, 2008 | Reply
There is nothing wrong with selling or auctioning the information when the person knows.
Lending tree is just that where banks compete. Borrowers know this as they probably do at Zillow also. when they go to just one company they are limiting themselves so they go somewhere will they will competing offers. It is better. I did that with insurance and got some good offers.
would you rather have them apply with you then apply a week later at lender B, have them commit with you in the beginning. Choice is good it is a democratic nation to a degree.
Bulk leads pricing and exclusive leads work too.
Alexandra | Jun 26, 2008 | Reply
Thank you Spencer. The lead focused approach is a little baffling to me in this day and age.
I would appreciate a program that treated me like a human and not just a dollar sign. Have business relationships become obsolete? What ever happened to finding a mortgage broker understood my needs and worked to get me the best deal?
I actually got a completely unanticipated phone call from a stranger that mumbled something about ‘ziprealty’. Then I rememberd… Ohhh the website that made me input my phone number to see the pictures. It was like getting a call asking me when he could make money off of me. Offensive, and no… I don’t think that really helps anyones business in the long run.
Andrew Jacob; Founder, LeadPile | Aug 26, 2008 | Reply
Thank you your posting about Lead Exchanges (Or as we have been calling for years, a ?Lead Marketplace?)
When it comes to Internet Leads, LeadPile has heard it all before. Many time before! At LeadPile, we have been hearing it for six years! When it comes to Lead Exchanges, or Online Leads, I find it interesting that almost every poster says the same thing, every time, about Online Leads and Lead Exchanges.
What do they say? The obvious of course; ?We are the best, we are greatest, we are the kings of all leads, our leads rock, our leads convert best, our leads convert at the highest in the industry, our platform is the most robust and greatest platform in the universe, and our leads are better than your leads because I say so!
So let?s take a moment to really break this down (assuming I have your attention!) What do the following statements really mean?
? ?We are the best?
? ?Our leads are the greatest?
? ?We rule the world?
? ?Our leads are better than your leads?
? ?My leads can beat up your leads?
? ?Our leads are the Super Duper Leads?
? ?Your leads are garbage?
? ?These are the Glengarry Leads?
? ?Coffee and XYZ Lead Provider?s Leads are for phone closers only?
??And not only that, I have heard that your leads are terrible. How do I know? Well I just spoke to your competition at another leading Lead Exchange/Lead Provider who told me so. So obviously it must be true! Why would they say such a thing about your leads? I can?t imagine!?
And now for the comment about leads that I absolutely just love?(in this case a mortgage lead)? ?I heard from my Uncle?s Sister?s Brother?s Aunt?s, Half-Sister?s Brother?s Loan Officer (who cannot even close his own sister?s loan because another Loan Officer from another Company just outhustled him to get it done!), that the lead he just bought from XYZ Company (LeadPile/Reply/Root/Leadpoint/YZZ Exchange) was terrible because it was only a 70% LTV, FHA Rate and Term Refinance (and the customer?s current rate was 8.9% with a 27% back end ratio!)
In addition, the Loan Officer complained that he did not have enough equity to work with to close the deal. And not only that, he tried this Lead Company, or exchange out, by buying one lead.
And when he called that lead four hours after receiving it (because he was in a tanning salon), the customer told him that he just signed an application 15 minutes ago with a local lender that sent a friendly Loan Officer over to their home! The audacity of the customer to want to do business with another Loan Officer who out hustled him because he was in a tanning salon!
?Now that is a really bad Lead! The humanity! I was in a tanning bed, and some other Loan Officer out-hustled me for the deal. I am so mad that I am now going to give that lead provider a whopping 1.22113314451 stars for sending me a lead that I waited 4 hours to call (only to be told by the customer that they signed an application 15 minutes ago with a different Loan Officer who drove to their home!)
?These leads are pure garbage and I am going to let the world know by ripping this lead provider in every forum known to mankind?. ?How can they sell such garbage leads??
?In addition, I heard through the grapevine that my Uncle?s Sister?s Brother?s Aunt?s, Half-sister?s Brother?s Loan Officer knows another guy (who works part-time as a Net Branch Loan Officer out of his bungalow in Malibu) who just closed a loan by calling 10,000 random numbers from the White pages. And he says that the best leads are the leads you get from the phone book! I have to believe him because he lives in Malibu!
So now I will tell everyone about the Phone Book Leads because I want to screw that Company that just gave me that lead that I could not close because I was in the Tanning Salon! I will show the bad lead Company who is boss by giving the Phone Book Leads a rating of 97.78899655 (or maybe 12.55 stars) so that everyone will run out and get a phone book just to spite that Company who gave me that really bad lead! Let?s make sure that all the other Loan Officers in the world know that the phone book leads are the Holy Grail of Leads!? Now What?
Well, the Tanned Loan Officer spreading the good news about the good Phone Book leads is actually a Phone Book Rep on the side! How convenient!
So, spread the word! Who needs leads from any other lead provider besides the phone book? All you need is a phone book, and to prove it?just look at their 12.55 star rating! And by the way, since I am a part-time phone book salesman, I would be delighted to sell you some phone books!
Note: I have seen some amazing Loan Officers who could actually close more phone book leads than many Loan Officers who are busy complaining about real-time leads?but that is another post, and another story completely.
So let?s continue with the story about Leads?
Let?s say you are selling cars and I give you ten real time delivered auto leads. You do not close one lead. So what do you do next? You say the leads are garbage, right! Right! These Auto leads stink! I am going to tell everyone because I did not close a deal from the 10 leads!
Run for the hills?These leads are a joke. I will tell everyone that the Auto Leads I bought from you absolutely stink!
But wait! I sell the next three leads to another Auto Sales Person, and he/she closes two deals from the next three leads (Too bad sales person #1 did not by thirteen leads instead of 10! Or, maybe he just was not a very good closer)
So now the leads are the greatest thing since sliced bread right? Wrong.
All this really means is that 2 deals closed from 13 overall leads. What this also means is that the sales person who went zero for ten says the leads are garbage, and the sales person who closed two out of three says the leads are terrific!
Right? Wrong!
Why? Maybe the SuperCloser who closed two out of three leads is not going to tell anyone how good the leads are! I sure as heck would not publicize this very much! Would you? He will probably tell everyone he knows that the leads are crap (just like the first guy) to eliminate as many people as he can from buying the good leads!
So what does all this really mean? It means that without an Efficient Lead Marketplace, the Lead Business can be insane.
It means that the only way to get a pure, efficient Lead model is to do business in a Lead Marketplace that is can provide volume, and measurable metrics to its participants. In essence, a well-designed Lead Marketplace makes mince meat of all this aforementioned insanity.
Why?
If the leads are working for the buyers, they will continue to buy the leads from the provider through the exchange, and other Buyers will see the demand for a particular lead provider, and the increased bid price is driven by quality, need and ROI.
On the other hand, if the leads are not working, the reverse is true. Lead Buyers will stop buying the leads and/or lower their lead bid to make their metrics work.
Either way, a well-designed Lead Marketplace works very well for both the buyers and Sellers. If the leads are not working for the buyers, they can wait on the sidelines.
But what happens when the sideline players see the lead prices going up from certain Sellers?
It may be a clue that the leads do indeed close, and maybe they need to get themselves back in the game (maybe slowly at first, but that is up to them!)
This is the beauty of the Lead Marketplace or Lead Exchange. It levels the playing field for both small and large Publishers and Advertisers.
Bottom line: Lead Marketplaces work and they are in their still in their infancy. ?
With ramp-up in volume, Lead Exchange will become even more compelling. ?
To our fellow pioneers, I salute you. To new players to the game, we wish you the best.
Now for a quick note on which Exchange is the best/greatest/most efficient/and most technologically advanced? Good question! I know you would expect me to say that LeadPile is the greatest. I will not say that here. Here is what I will say however?Check them all out, and decide for yourself!
Andy Jacob; ?Founder,?LeadPile