Google Entering Lead Gen – QuinStreet IPODecember 2nd, 2009 by Lead Point
If recent activity is any indicator, the lead generation industry, which did particularly well in comparisons to most other industries during the economic downturn, looks primed for strong growth in 2010.
First there was news that “goliath” Google may be entering the lead gen space with its mortgage comparison engine called AdWords Comparison Ads. Next, there was the announcement that lead provider QuinStreet had filed for an initial public offering. Each of these events on its own is reasonably considerable. Together, not only do they suggest that the lead generation space is thriving, but that it is also growing in credibility.
Google’s entry into lead gen comes with potential pros and cons. With over 60 percent market share of all U.S. search queries, a potential con is that as the dominant search engine, Google has an unfair advantage in generating leads from both paid and organic search. With their “black box” of search, Google has the ability to simply place its mortgage comparison engine at the top of its search results, which in effect immediately handicaps all those who pay to raise their visibility within its search engine results.
In addition to this ability, Google also has vast knowledge of the search habits of all those who uses its search engine. With this knowledge and their ability to give themselves preferential treatment, Google should have the ability to generate higher quality leads at lower costs than many other companies. Google also benefits from strong brand recognition among the public and will certainly be able to leverage this to their advantage. By either undercutting competitors’ prices or just providing greater quality, Google could quickly grow market share and drive competitors out of business similar to what it did to Yahoo’s search business.
A benefit of Google’s involvement is that its entry into lead gen helps to further legitimize the sector to the outside world. A Wall Street darling for having dominated the search engine sector and in the process becoming one of the most successful businesses over the past decade, Google’s decision to target lead generation for future growth demonstrates that it sees the industry as still having tremendous upside. This has the potential to drive new growth within the industry by bringing in additional investor money and business interest from the outside.
Additionally, with Google as a competitor, all players within the lead gen space will feel greater pressure to deliver an improved customer experience to strengthen customer loyalty. Companies who currently don’t care about providing a strong customer experience will be driven out of business, leaving only trustworthy companies to compete in the space. An overall improved customer experience could further fuel growth for those players left as those who consistently provide the strongest customer experience will attract more companies to try out lead gen for their marketing needs.
QuinStreet’s $250 million IPO announcement is a nod for lead gen and a further sign that the economy is on the road to recovery. In Q1 of 2009 there were zero IPO filings. Since then there have been 95 filings with 20 of these occurring in the month of November alone. Registering for an IPO doesn’t mean that QuinStreet will actually go through with it, a great deal depends on the investment community’s appetite for the company’s management, business plan and continued growth momentum. The filing does, however, show that QuinStreet management feels that they will be able to make a strong case for a public offering. There are many reasons for going public. One of the leading reasons is to take advantage of growth opportunities, such as acquisitions or increased financing of one’s business plan, which requires capitalization to act upon.
By going public at this time, one might conclude that QuinStreet management is looking to take advantage of increased capitalization at a time when they feel they can best capitalize on it. By “sizing up” their business now, they may believe they will be better situated to take advantage of growth opportunities over the next 12-18 months. Possibly even Google’s entry into the lead gen space is a contributing factor as QuinStreet could feel that in order to more effectively compete with Google they will need to be better capitalized.
The two above events suggest a blistering start for the lead gen industry in 2010. At the same time, neither event may have a sizeable impact at the end of 2010 or beyond. Google has yet to prove successful in a product outside its core area of competence (i.e. search). There is a laundry list of product offerings that Google has entered where it is only doing just so-so.
Ultimately, it only makes sense for Google to compete directly in the lead gen space if the company will make more by generating leads and selling them than it does to just run an advertising platform where others pay you money to run ads. By competing directly with its customers, Google could drive customers away or out of business and potentially make less money than it did before it entered the space. Additionally, running a successful lead generation company comes with new overhead that Google didn’t have before when all it did was just take money from advertisers.
While QuinStreet’s IPO suggests that the company is buoyant about capitalizing on new lead gen growth opportunities, a cynical view is that the venture firms that financed the company as well as its management may just want to cash out on their investment and hard work. After a protracted downturn in the market dating back to 2007 for mortgage, this may just be the first real opportunity to do so.
Regardless of your interpretations of the above, watching how these events develop in 2010 and beyond should be highly interesting. At LeadPoint we look forward to both events helping to further drive growth in the lead gen industry and contributing to increased levels of innovation. As the leading technology company and lead exchange within lead gen, we believe increased competition only helps to drive companies to provide a better customer experience which in turn attracts more business to the lead gen sector. The companies who strive to provide the best possible customer experience and continue to innovate all benefit from this in the long run.
Related Tags: direct marketing, Google, lead exchange, lead generation, LeadPoint, QuinStreet
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