Monday, May 25, 2009

2. Advertising and Promotion: Where do Internet lead providers find customers?

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A lead’s quality is almost entirely dependent upon the method in which the generator lured a consumer to provide their information with in the first place. Simply put, if you want to know how good a lead is, you need to know it’s original source. Did someone who was searching specifically for your product on Google fill in the lead form or was it completed by someone who was told they could win a free iPod if they filled out their information? Clearly the Google lead represents a much more interested consumer.

Unfortunately it’s not quite as simple to figure out the source of a lead as the example above suggests. With a few exceptions, the only true way to figure out where a lead came from is to generate the lead yourself. The reason for this is that just about every lead generator prefers to keep the source of the lead you are buying secret. This is for several quite good reasons:

  1. If the lead provider told you the source of your lead you might choose to go around them and generate the lead yourself using the same advertising
  2. A basket of leads is usually a blend of leads from good, bad and ugly sources. If the lead provider told you the source of each lead, you would probably want to cherry pick the leads. This could quickly make it uneconomical to generate the lead
  3. There is often a great deal of science behind when, where and how lead providers advertise. Merely telling you the source of the lead may not do justice to the decision that the provider has made to advertise there.
  4. This is one of the dirtiest secrets in the lead industry. More often than not, the lead provider will not know where the lead was generated because they have bought the lead from another lead provider at a wholesale price. Trading of leads is rife in the industry.

Despite the fact that you may never know where a particular lead was generated, it is useful to know what the different options are. If nothing else, you may shock your lead provider with your knowledge.

Regular “above-the-line” media

Radio, TV, print and outdoor is used to generate consumers to complete lead forms as it is fairly uneconomical to do so. Where it is, the user tends to be of high quality. Probably the largest user of conventional mass media among lead providers is LendingTree. More and more lead providers who have a proclivity for TV or radio use their advertising to generate calls which they then qualify and pass through to buyers as voice transfers, also known as hot transfers.

Organic

Organic is an overused term in the lead industry. Literally it means leads that are generated by someone who has gone directly to a particular site looking to fill out a form because they know that that site is where they can find out information. Often, however, people use it to mean leads that are generated by people who search for something and then find a lead provider’s site because it appears in the unpaid search results. This in my mind is not really organic, but Search Engine Optimization (SEO) driven advertising.

While many lead providers will tell you that their leads are “70% organic” or some such statistic it is rarely, if ever, actually true. Of course the reason that people say this is because organically produced leads are usually very high quality.

Search

Ever since Google invented AdWords search has been a battleground like none other among lead providers. Although there are other search engines, most notably Yahoo!, MSN and AOL, Google has such market dominance that it is worth concentrating the explanation of this medium upon this one company.

Search-generated leads tend to be high quality. Since Search Engine Marketing is hard, like trading derivatives or advanced calculus is hard and traditionally this is one place that very successful lead providers have differentiated themselves. Bidding on keywords is such a complex science that many of the larger lead providers have teams of people figuring out ways in which to optimize their buying formulae. Indeed it is not uncommon for a sophisticated lead providers to have campaigns in place that are bidding upon 10’s of millions of keywords and phrases at one time, many of which will generate one or less clicks per day.

Online Advertising

This is a broad term for lots of different types of advertising but here I really mean banner advertising. Successfully buying banner ads on sites is just about as complicated; if not more so, than search optimization. It consists of figuring out both the best location and time for an advertisement as well as the most appropriate or effective creative work to put in that spot. This is rarely a manual process. Large lead providers can spend several million dollars a month on banner advertising, they treat the buying of online media as a search for arbitrage opportunities just as an options trader in Wall Street would. In other words optimization technology and complex statistical models usually come in to play in the search for profit.

Email

Email is one of the advertising/promotion media most used by lead providers. Why? Because it’s both cheap and highly effective. Although I am yet to find someone who willingly admits to opening unsolicited or semi-unsolicited emails, a stunning number of people do open these things and follow the links provided.

Affiliates

Affiliate marketing is essential for any large scale lead provider and describes the practice of paying another company for directing online customers from their websites to the lead provider’s website. There is a huge variety of ways that affiliates get paid however the predominant model is per lead. Indeed just over 80% of affiliate deals are structured as a cut of revenue in some form or another. From a lead provider’s point of view affiliate management takes a lot of time and effort since without a great deal of scrutiny of the quality of the leads being delivered by the affiliates it is easy for rogue practices such as false advertising and incentive marketing to occur.

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