Come along on a trip to the cutting edge, where we join some of the smartest folks in Internet marketing as they work to realize a very far-out (to use San Francisco lingo) vision of online lead generation's future.
First, some background. In today's Internet world, a lead is created in any number of ways. A consumer goes to a LendingTree.com or a LowerMyBills.com and fills out a form providing personal information and consenting to let advertisers get in touch. Alternatively, a consumer, perhaps while registering at a site or signing up for a free iPod sweepstakes, checks a box (or fails to uncheck one) expressing interest in a mortgage, a test drive for a car, or any number of things. At its most basic level, that lead consists of a simple email address. But it could also include much deeper information, including a Social Security number and authorization to do a credit check. Depending on how the lead is collected, its value can vary dramatically.
That lead often travels through a middleman, an affiliate network or arbitrageur like AzoogleAds, Adteractive, or Vendare Media, which then hands it over to advertisers that have agreed to pay a certain amount.
Advertisers have little sense of what publishers are compensated. Publishers don't know what the leads they're generating are truly worth to advertisers. Meanwhile, consumers aren't always clear on what's happening to their precious data after it leaves their computer screens. (Of course, if they knew what was happening to their data, they'd be more likely to respond positively to the advertiser when it gets in touch.) The middlemen seem to be doing quite well, thank you very much.
Lead generation is a growing market. The Interactive Advertising Bureau (IAB) says referrals and lead generation accounted for 6 percent of revenues in the first half of 2005, up from 2 percent in 2004. (The stat may be skewed by the fact the category name was changed from "referrals" to "lead generation/referrals.") Still, many believe the system is broken because of the lack of transparency. Just this week, a group of industry folks formed OLGA, the Online Lead Generation Association (the site currently broken but supposed to be fixed soon), to address some of these issues.
"Our focus is going to be, 'how was that lead generated online?'," Opt-Intelligence CEO Dan Felter, who helped found the new group, told me. "This co-registration, online lead-gen space has just mushroomed lately. It's a bit of a Wild Wild West out there."
A company I want to tell you about is going about things in an entirely different -- and somewhat audacious -- manner. Root Markets, founded at the beginning of this year, wants to do nothing less than marry the financial market with the Internet advertising market. It also hopes to help revolutionize the way consumer data are stored and handled via a relationship with nonprofit AttentionTrust.
Ordinarily, I'd chalk up ambitions like these to dot-com bubble thinking, but consider who's involved here. You've got CEO Seth Goldstein, who founded one of the first Internet advertising agencies, SiteSpecific, in 1995. Heading sales for the new outfit is Matthew Prohaska, who most recently made deals based on behavioral data as sales director at Claria. The advisory board includes Andreas Weigend, the former chief scientist at Amazon.com who helped develop the site's recommendation engine. Executive chairman of the new entity is Lew Ranieri, the legendary former head of mortgage trading at Solomon Brothers credited for creating the multi-trillion dollar mortgage-backed securities market.
"Our goal is to be a neutral, independent exchange where we try to get out of the way of the market participants," Seth told me. "We want to provide some open market data and an environment in which people can compete and trade and do business under a level playing field. There's no black box where we're hiding performance data."
To work, the idea requires the participation of four different parties: publishers, advertisers, consumers, and investors. Publishers would be able to bring their leads to market and sell them at a set price, so long as someone's willing to buy at that rate. Advertisers could place orders for leads, saying what they're willing to pay. And investors could play the middle -- taking risks on leads and making money on the spread. Root Markets creates the marketplace.
The consumer piece of the puzzle is especially intriguing. Root Markets plans to tap into the AttentionTrust concept, which believes consumers own their own data -- be it click-stream data, del.icio.us tags, credit reports, or something as fundamental as name and address. In the ideal Root Markets world, consumers who want a chance to win a free iPod or want a mortgage quote would simply allow a selective peek into his Root Vault -- a central, individually managed repository for consumer data.
Currently, users can begin collecting data (click-stream data only, for now) for their Root Vault via a Firefox plug-in. Eventually, Seth envisions a multitude of ways data will enter the vault. It will only be shared when consumers explicitly allow it and accept the value exchange; my credit report in exchange for a lower interest rate on a loan, for example. Helping Root Markets make that data valuable is former Amazon Chief Scientist Andreas Weigend, who told me his mission is to "understand the data, interpret the data, and, more importantly, create products of the data that create value."
The company hopes to get a head start via its acquisition of Lead Filter, an exchange for mortgage leads headed up by Robert Wilson, one of the founders and first CEO at LendingTree.com. (Terms of the deal weren't disclosed.) That's why Root is starting out with, and already working with, mortgage leads.
"We work with several dozen individual banks that are buying a certain type of lead for a certain type of loan," Matt Prohaska told me. "Right now we're matching and packaging the lead."
With all these moving parts, Root Markets won't realize its vision overnight. "It's going to be an evolution," says Seth. "How do we go from a market where there are all these fractured inefficiencies where no one is really sharing data? No one other than the brokers are benefiting. It will be much bigger, much broader, much more transparent where consumers have a say. Maybe the spreads for brokers are smaller, but there's more liquidity."
The last time I heard about marrying Internet advertising with financial concepts was from Ellen Siminoff, CEO of SEM technology firm Efficient Frontier and former SVP at Yahoo She believes Root Markets is on to something.
"I think that marketers are going to do a number of things. They're going to work directly with marketplaces. They're going to use affiliates," she told me. "At the end of the day, marketers want more volume at the right price and anyone who can fulfill at the right price will be successful."
Will it work? I'm extremely skeptical. I'm no financial expert, but it seems as if creating the kind of liquidity present in a market like eBay, for example, requires serious critical mass. Root Markets would need consumers, publishers, advertisers, and investors to come on board in fairly substantial numbers to make its vision come to life. However, these are some very smart cookies hatching these plans, and they have very impressive backgrounds and skill sets. Root Markets is worth watching and experimenting with, as a publisher, advertiser, or a consumer.
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Pamela Parker is a former managing editor of ClickZ News, Features, and Experts. She's been covering interactive advertising and marketing since the boom days of 1999, chronicling the dot-com crash and the subsequent rise of the medium. Before working at ClickZ, Parker was associate editor at @NY, a pioneering Web site and e-mail newsletter covering New York new media start-ups. Parker received a master's degree in journalism, with a concentration in new media, from Columbia University's Graduate School of Journalism.
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