The lead generation industry is changing. I believe that lead generation companies that ignore this fact or are too arrogant to accept it will either lose market share or simply go out of business within the next two years.
Ever since I first saw Zillow’s Mortgage Marketplace I realized that there was a new breed of lead generator emerging that would turn the industry on its head. Why? Because consumers are just a lot more savvy than they were five years ago. I think they are too suspicious of lead generators. I watched a LendingTree consumer focus group about a year ago where just about everyone on it had had bad experiences with lead providers. They all seemed to recognize that entering their information online could and probably would lead to a barrage of phone calls that they didn’t really want. They wanted answers, quickly, reliably and without having a conversation with anyone but that is the opposite of what they got. That’s what I call a broken model. A model where the consumer knows what they want but can’t get it. Models like this have a habit of imploding messily, ask any executive at a music company..
Zillow answers the fundamental consumer pain point with the lead generation model neatly. With Zillow Mortgage Marketplace consumers enter information about the mortgage they need and the home they are trying to finance just like other mortgage lead generators usually do. However, they do not allow the consumer to enter their personal information like name, email address and telephone number before the lead is submitted. Leads arrive with the lender without any information that allows them to contact the lead. Instead, the lead provider needs to submit back a quote to the consumer for the mortgage that they are looking for. The consumer then typically sifts through several quotes and a short description of each lender before deciding if they want to contact any of them.
This might sound like a cumbersome process for the lender and that was one of my concerns when I first saw the model. However, I quickly realized that the process could actually be easily streamlined by connecting Zillow up with a lead management system and a pricing engines so that a quote could automatically be generated and sent back to the consumer by each lender based on the rates only available to that particular lender. It is a testament to an innovative company that when I emailed this idea to one of Zillow’s product managers I had a team of Zillow folks take a conference call with me a few days later and within a few months they had made the idea a reality. Now when a consumer enters a loan request into Zillow, within a few seconds they receive back several quotes to chose from. I received 22 when I tried it for my own mortgage. From a consumer’s perspective it is a way superior experience than with a normal lead generator.
Something else that stands out about Zillow’s model is that it is free to participate in for both consumer and lender. What I mean by that is that leads are completely free. If I were a lender I would be all over this opportunity because it is clearly unsustainable; no lead provider can provide leads for free forever. However, during the past year Zillow Mortgage Marketplace has generated 373,531 free leads and has 4,855 participating lenders according to the statistics on their website. All of these have been free and I know for sure that at least one (mine) will have turned into a converted loan. In fact, I happen to know that Zillow leads actually convert fairly well across the board especially if you compare the percentage of leads that are contacted that close with other lead providers.
Given that the consumer experience is great, the leads are free and that they actually convert, it is a reasonable question to ask why Zillow has not been more successful than it has been. 373,531 leads is a lot of leads but is dwarfed by the number of leads that the behemoths in the industry like lowermybills and LendingTree produce in a year. I believe there are several answers that include the fact that people tend to be scared of what they don’t know and are confused by the Zillow model as well as the fact that Zillow doesn’t charge anything for leads in my opinion perversely makes potential buyers think that they are not worth bothering with. However, I think the main reason is that Zillow has singularly failed to put their weight into promoting their marketplace. Just about every lender I tell about Zillow leads has never heard of them before. If I were Zillow I would be charging a small amount of money for leads that contact the consumer and using that money to promote the product better among the lending community. I think doing so will make Zillow a force to be reckoned with in the industry.
So if the Zillow model does succeed in the mortgage lead generation industry, does the concept also have the breadth to succeed in other verticals? That would have to be the case if it was truly a concept that had the potential to change the industry. I think the answer is a complicated one. I can think of industries in which the concept is just about perfect and I can think of others where it is considerably less appropriate. For instance, I can imagine that the Zillow model would be perfect for the insurance industry where people are essentially price and feature shopping. However, for the model to work in an industry like education you would have to believe that prospective students are looking to compare colleges on the basis of price and a measurable set of features. To an extent I think they are; you can compare tuition fees, statistics on the percentage of students find work after degree completion and a variety of other metrics; however, in an industry like education I don’t think any of these factors are as important as the subjective selection criteria such as culture and fit. I think lead generation in education will be informed by the Zillow model but not fundamentally transformed. Nevertheless if I am right then the next couple of years will be way more eventful for most lead generators than I think many of them are expecting.
6 comments: