The bottom feeders in the lead-generation business may not be in business much longer if they don't clean up their act. The basic premise of lead-gen companies is that they risk that the media will perform and deliver a lead to the marketer. This lead could be exclusive or not, and could be as simple as an e-mail address or much more complex, depending on the lead buyer's needs. Marketers are drawn to lead gen because it leaves execution details to the service provider.
There's an intersection between lead gen and search because the best quality leads tend to come from search marketing, both PPC (define) and organic. Because lead buyers don't necessarily lock themselves into multiyear deals, most lead-generation firms focus on paid-placement search marketing. PPC search, however, is expensive and the scale of leads generated is limited, particularly if the vendor wants to keep profit margins high.
Many in the lead-gen space succumb to the temptation to use other media to drive leads as well. The banners, animations, and rich media ads around the education, credit card, and mortgage categories are often used to generate leads. If these media are well targeted and offers are in line with what the marketer is really looking to deliver, the quality of the leads from media may not be dramatically lower than that of search.
Problems arise when the lead-gen vendors don't identify lead sources on a case-by-case basis and use aggressive tactics to generate leads in which buyers possess a low level of interest and purchase intent. When these garbage leads supplement good quality leads from search and savvy media buying, the system becomes flawed and the marketer pays the price in the short term. Most marketers will wise up as quality and conversion rate slips, and complain or eventually cancel their contracts. However, in certain local markets and industry verticals, a lead buyer's inexperience may permit the dilution of lead quality to continue unabated for quite a long time.
Even some savvy marketers are lured into lead-gen deals that don't identify or classify lead sources. As with most things, if a deal seems too good to be true, it probably is. Lead-gen companies, which are in business to make money, must ensure they spend their capital effectively, efficiently, and profitably. They have a particular risk profile and generally keep within that profile. As a result, they experiment sufficiently to find low-hanging fruit within PPC search but rarely get aggressive unless they have nonexclusive lead deals and can amortize lead-generation costs across several clients. Instead, they water down the search leads with other media.
Still, the lead-generation world is evolving rapidly. Because there's a continuum of lead quality from pure coregistration leads (that work for only a specific segment of marketers) to requalified search leads, the upper end of the lead-gen market is starting to look more like an agency or even an in-house team. Data-sharing closed-loop systems are being established so the marketer knows where leads are being acquired (at a macro level), and marketers are sharing lead-quality information with suppliers. If this new face of lead gen is to survive, lead-gen companies must renew their focus on providing quality leads to marketers.
Similarly, if you are a marketer using a lead-gen supplier, insist on controlling the mix of leads by source once you've identified the highest-quality sources. Don't pay for leads from questionable sources just to spend your budget or boost volume. This runs counter to why you got excited about lead gen in the first place. Poor-quality leads risk your success.
Marketers must also consider where lead-gen providers belong in their ecosystem. If the lead-gen provider is highly integrated into your business and adds value without taking too much profit, then it deserves its fair share of your budget. If a good agency or in-house team could provide a better mix of quality and scale (lead volume), then you must develop alternate lead sources. In particular, understand that your willingness to invest in auction media marketplaces may be higher than that of a lead-gen player who's selling leads on an exclusive basis.
Lead gen will continue its transformation and evolution over the next year or two. Firms that don't take the high road will have a harder time surviving, while those that truly deliver not just leads but also value to lead buyers will thrive. Old-school lead gen is dead. Long live the new lead gen!
Want more search information? ClickZ SEM Archives contain all our search columns, organized by topic.
Kevin Lee, Didit cofounder and executive chairman, has been an acknowledged search engine marketing expert since 1995. His years of SEM expertise provide the foundation for Didit's proprietary Maestro search campaign technology. The company's unparalleled results, custom strategies, and client growth have earned it recognition not only among marketers but also as part of the 2007 Inc 500 (No. 137) as well as three-time Deloitte's Fast 500 placement. Kevin's latest book, "Search Engine Advertising" has been widely praised.
Industry leadership includes being a founding board member of SEMPO and its first elected chairman. "The Wall St. Journal," "BusinessWeek," "The New York Times," Bloomberg, CNET, "USA Today," "San Jose Mercury News," and other press quote Kevin regularly. Kevin lectures at leading industry conferences, plus New York, Columbia, Fordham, and Pace universities. Kevin earned his MBA from the Yale School of Management in 1992 and lives in Manhattan with his wife, a New York psychologist and children.
June 5, 2013
1:00pm ET / 10:00am PT