Archive for the ‘Automotive’ Category

Lead Exchange: The Future of Lead Generation?

Monday, March 9th, 2009

Our CEO, Marc Diana, participated in a discussion on the future of Lead Exchanges moderated by James Cham of Bessemer Venture Partners. Additional panelist included Anik Gagnuly, Board Member of Detroit Trading, Payam Zamani, CEO of Reply! Inc., and Keith Moore, Senior Vice President of Tree.com.

In starting off the panel, James asked each panelist to explain their company’s business model and the verticals they worked in. LendingTree replied that they were mostly mortgage but given the state of the mortgage industry they were branching out into areas such as loan modification. Reply and Detroit both said that they did the majority of their business in the auto sector. Marc explained that while LeadPoint began in mortgage, it has increasingly become a technology platform serving multiple verticals including Credit Card Debt, Education and Tax Debt. As a platform, the company is able to quickly support new emerging verticals.

Additional questions raised by the moderator included the following:

  1. How do Lead Exchanges differ from Lead Aggregators?
  2. What are the factors critical to the success of a Lead Exchange and what factors do you want to avoid?
  3. What are the factors that may be preventing lead buyers from working with your exchange?
  4. Is your exchange currently growing and what are your growth projections for 2009?

How do Lead Exchanges differ from Lead Aggregators?

In explaining LeadPoint’s business model, Marc explained that to succeed as a true exchange a company must earn the trust of both its buyers and sellers. To do this, it must act as an impartial intermediary between the buyer and seller, not favoring one over the other. It is important that both sides receive equal value for their efforts in a sales transaction. Reply CEO, Payam, added to this that exchanges provide dynamic pricing that enables every lead to sell. This liquidity ultimately helps provide sellers with greater overall payouts and provides buyers with greater value in pricing. Anik with Detroit Trading also noted that exchanges helped sellers by providing a single outlet for their leads and eliminated the hassles of having to collect monthly payments from numerous sources.

What are the factors critical to the success of a Lead Exchange and what factors do you want to avoid?

Marc discussed that quality and impartiality was critical to LeadPoint’s success. He discussed the company’s recent launch of the LeadClass Quality System which benefits buyers by enabling them to optimize their marketing spend by selecting the quality and price that best suits their operational needs and rewards top direct marketers with the true market value of their leads. The one thing Marc wanted to avoid was competing against sellers by having LeadPoint generate its own leads. Marc explained that if LeadPoint were to generate its own leads, it would no longer be a nonpartisan company and would go in direct competition with its sellers. Marc referenced his experience with LowerMyBills where he was one of the original employees who helped found the company. He explained that when a company generates its own leads it has an incentive to monetize the investment. This may lead to a preference of its leads over those of their sellers. Additionally, it may also adversely impact buyers as the company may push their internally generated leads on to buyers when it is not necessarily in their best interest.

Payam said that their success was derived from market liquidity and disagreed with Marc’s assertions (Reply generates their own leads). According to Payam, when a company generates its own leads within a vertical they have a more vested interest in the success of the vertical and are thus able to get it to a point of critical mass.

Keith with LendingTree said that their biggest success was building a brand with consumers. By delivering on the consumer expectation, consumers trust LendingTree and this enables them to deliver interested leads to their buyers. Keith stated that their biggest obstacle was predicting demand (Tree.com like Reply generates their own leads).

Anik with Detroit agreed with Marc that it was critical for an exchange to be a neutral third-party. As part of the duties of being a neutral party, Anik said it was critical for an exchange to provide transparency to both buyers and sellers.

What are the factors that may be preventing lead buyers from working with your exchange?

Keith said that non-Internet generated leads were their biggest competitor and that there was some understanding of how to work an Internet lead that prevented some customers from using their services. Overall, the strength of the LendingTree brand helped as many people are aware of how they generate leads.

Anik with Detroit said that sellers have the greatest reason to want to use exchanges as it allows them to reach many customers. More customers lead to greater demand and greater demand leads to higher overall prices for leads. Anik said that buyers have some skepticism of exchanges as they perceive they have less control in ruling out fraudulent leads. In fact, Anik says that fraud is something exchanges must pay close attention to as it has the potential to collapse a market. Overall, Anik feels that Lead Exchanges provide the greatest opportunity to provide buyers with exactly what they want as the diversity of sellers provides greater diversity in leads.

Payam commented that he agreed with Anik that an underlying buyer objection to Internet leads was that they did not trusting the quality of lead traffic.

Marc also agreed with Anik’s comment over buyers concern with quality and pointed out that this was the impetus for creating LeadClass. With a market blend of leads, buyers could not control the quality they received. However, with LeadClass now they are able to specifically purchase by quality. Marc also mentioned that there is confusion over the exchange term in lead generation. He believes that exchange by its very nature should mean an impartial entity. He does not believe a company can be impartial when it generates its own leads and thus should not be termed an exchange.

Are you currently growing and what are your growth projections for 2009?

Both Keith and Anik mentioned that the current market conditions were negatively affecting their companies. Lendingtree noted that the decline in the mortgage industry had impacted them and led to them branching out in other products such as loan modification. Anik said that Detroit Exchange (like the city it is named after) is suffering from the devastating slow down in automobile sales. He noted that business is cyclical and they are doing their best to weather a down cycle at the moment.

Marc, on the other hand, noted that LeadPoint is growing. LeadPoint’s growth is fueled by growth in Credit Card Debt, Tax Debt, Education, Voice products, and growth in their UK division. Payam noted that Reply was also growing but was less clear on what sectors were fueling this growth.

A difference of opinion occurred between Marc and Payam who both argued that each of their companies was the biggest leads exchange. Both companies are private companies and neither discloses their revenue figures. However, as LeadPoint is the top Lead Exchange in the mortgage business, the leading exchange in credit card, tax debt, education and voice it is hard to see how Reply is of equal or greater size than LeadPoint, especially given that by their own account their largest vertical is auto. However, arguing oversize is not of great importance, as size doesn’t really matter. What buyers and sellers care about is their return on investment. With the launch of LeadClass, LeadPoint has set itself apart from any other exchange for the foreseeable future in delivering value to both its buyers and sellers.

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Zen and the Art of Lead Gen

Wednesday, January 7th, 2009

For those of you unfamiliar with Kaizen 改善, it’s a Japanese philosophy focused on continuous improvement. It’s a philosophy that LeadPoint embraces as part of a continued effort to enhance the quality of leads that flow through our market. In keeping with this philosophy, over the last few months we have been improving the measurement protocols used to evaluate each lead that lead sellers submit to each LeadPoint market.  Our efforts were rewarded with some eye opening results.

Online lead generation is inherently a numbers game. Visitors click on an ad. Some of them fill out the form. Others leave. Some visitors convert to actual sales and others don’t provide their real phone numbers. This disparity is the backbone of lead gen.

Some sources have always provided better results than others. We’ve worked diligently to improve our ability to grade leads and sellers effectively.  We’ve learned a lot, some of which we suspected all along and some of which surprised us greatly.  The most shocking discovery was the level of energy some companies will exert to commit what is best described as nothing other than egregious fraud. Our new market monitoring processes have allowed us to quickly identify and remove these bad actors and to refund affected lead buyer funds in a timely fashion.

As a by-product of our efforts and innovations, we have been able to ensure that both valued constituents of our marketplaces can continue to thrive. Our lead buyers can buy with the assurance that they are purchasing a “top shelf” product that yields industry leading conversion metrics. This renewal of confidence in the market resulted in our trusted, quality marketing partners once again capturing top returns on their marketing dollars.

Standing at the doorstep of an exciting 2009, LeadPoint reaffirms its pledge to practice a quality focused Kaizen in our pursuit of attaining market Nirvana, a trading platform where both sides of the model achieve a state of blissful return on investment.

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Lead Gen 2.0 is here!

Tuesday, January 30th, 2007

LeadPoint believes there is a transition occurring within lead generation.   This transition is similar to the transition of large media conglomerates generating most web content to regular citizens using wiki, blogs, videos and other tools to generate web content. Today what is termed “Lead Gen 1.0” is characterized by large, single-vertical aggregators who take the lion’s share of the profits that a lead generates as it travels from consumer to end user.  Examples of “bigger/older” companies are particularly visible in the Auto Purchase and Mortgage leads categories.

Another characteristic of “Lead Gen 1.0″ is lack of transparency around the disposition of the lead. Very little information is shared back to the actual lead generator about what leads were valid, how many were sold, how much they were sold for, etc. Often, all a lead seller gets is a check 30-45 days after leads are sold.

Fixed pricing also characterizes “Lead Gen 1.0″ companies. Pricing of leads to the end user is typically flat, based on the last Sales Rep negotiated contract with pricing to the Seller fixed.  Quality and lead types having no impact in the equation.

Finally, “Lead Gen 1.0″ is plagued by quality issues. Many “Lead Gen 1.0″ companies simply do not have state-of-the-art automated systems to track, rate and discipline the hundreds of affiliates that pass leads through their system. These companies’ primary source of lead quality feedback is from angry customer phone calls.

Because of these and other issues, understandably a transition is occurring to what LeadPoint terms “Lead Gen 2.0.” As opposed to “Lead Gen 1.0″, a smaller, more efficient lead marketplaces that serve multiple verticals is emerging. No longer do sellers who want to sell mortgage leads, auto leads and debt leads have to go to 3 different vendors, sign 3 different contracts, and deal with 3 different account managers. Another benefit of serving multiple verticals is the economies of scale these exchanges can reach. As a result, they can often charge much lower transaction costs to buyers and sellers than “Lead Gen 1.0″ companies.

Another benefit of “Lead Gen 2.0″ is greater transparency.  Any seller or buyer can see exactly what they sold or bought, when they did it, how much it sold for, plus, in LeadPoint’s case, hundreds of other metrics to help them refine their marketing strategies. Market forces of demand and supply, powered by bidding (think ebay), drive pricing, not negotiated contracts and fixed pricing.  This enables buyers pay more for more valuable leads and sellers who generate those leads to get a true market value for their effort.

Finally, Lead Gen 2.0 resolves many of the quality issues associated with its predecessor.  By only allowing the most high quality sellers into the marketplace and working with buyers to provide feedback, companies like LeadPoint are able to track the quality of every seller in real time, often allowing us to address quality issues before receiving buyer complaints.

At the Affiliate Summit last week, many lead sellers were interested in understanding some of the best practices that LeadPoint sees around generating leads. While not an exhaustive list, below are a few things we have observed our most sophisticated sellers doing:

  1. Pick an aggregator that gives you the tools and reporting that enable you to understand exactly what is happening. You need to measure your ROI and adjust your marketing plans accordingly. To do that, you need real-time, 24X7 reporting tools, that give you insight into what is really going on.
  2. Pick a partner that can help you leverage your strengths across multiple verticals. If you are good at Paid Search in Mortgage, why not use those same skills in the Autos or Student Loan Consolidation verticals? You’ll make more money plus you will diversify your risk if one of the verticals you’re in suffers from seasonality or enters a soft period.
  3. Pick a partner that helps leverage your customer. Every lead generator should be cross selling other relevant products to their customers after they have submitted a request for a quote on your site. If a consumer requests a quote for refinancing their mortgage, maybe they also need help with credit card debt or student loan consolidation? Build and nurture your database of these consumers. It’s an asset. Send a consumer an email promoting extended auto warranties 3 months after they submit an auto purchase lead. Pick a partner where you keep the consumer data and the consumer is not forced to leave your site after hitting “submit”.
  4. Pick a partner with low transaction costs. You are generating almost all the value. Some aggregators take anywhere from a 40% to 70% cut of the total lead value. In a world of ever increasing media costs, that kind of tax makes it tough to be competitive. There are lower cost options out there; try and leverage them.

With the emergence of “Lead Gen 2.0″, lead gen has improved for everyone.  Buyers are getting more of what they want for the price they want.  Sellers are getting better insight into what is happening and are selling leads at prices traditionally only lead generators with their own direct networks of buyers were getting.  Just like Youtube is rocking the world of traditional video, “Lead Gen 2.0″ is rocking the world of Lead Gen providing significant profit opportunities.

Excerpt: LeadPoint answers the question of “how to protect customers from fraud” by taking the unheard of action of indemnifying buyers against potential exposure from leads purchased through our market.

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