Quality-Volume Divide

Understanding The Challenge of Capturing High Quality and High Volume

Ask almost any advertiser who has at least a modicum of experience in online advertising, and growing volume while maintaining quality will rank high among their challenges and frustrations. It is a problem old as time in the performance marketing sector, and the unfortunate truth is that after a certain point, quality starts to degrade. Let's use an auto insurance offer running on a cpa network in order to better illustrate the challenge. The offer looks to get users to enter their information to see if they could lower their auto insurance payments. When a user enters their information, the network receives credit and they then credit the appropriate publisher. The person buying the lead receives no money from the user filling out the form only from the percentage of users who then go on to purchase a policy. The higher that conversion rate from lead to policy, the higher the quality, with quality as defined here and price the buyer can be being highly correlated. If more people convert from lead to policy, the lead buyer can afford to pay more. If fewer people do, then they will have to lower the payout in order to continue covering the cost of buying the leads.

In the optimal scenario, conversion rates start out profitably and even increase over time as both sides optimize. At a point, though, especially in the optimal scenario where the advertiser sees good returns with good volume, they will want more. Two things start to happen at that point. The first is often counterintuitive for the advertiser, and I called it the price fallacy in lead generation, namely that more volume comes at a higher price per lead. What the price fallacy fails to capture, tough, is what more often than not happens to quality. Almost invariably, once buyers and sellers work on capturing incremental leads, they end up succeeding but at the expense of the initial quality. Here's an illustration of what happens:

As the above shows, the optimal phase sees volume growing with quality remaining above the break even for the lead buyer (where break even is an internally designated metric representing an acceptable spread between the desired cost per transaction and the actual cost per transaction). When the two parties switch into the forced growth phase, volume continues to increase (often at a slope higher than the initial growth), but quality starts to slip. More quickly than either expect it goes from the advertiser having a positive yield to a negative one.

Quite a few explanations exist for the quality-volume divide. One of the more straight forward revolves around intent. Only so many people have a given interest in a product. B2B marketers deal with this issue all the time. For some high dollar, super complex sales, e.g., a multi-million dollar database configuration, there just aren't that many people who could be buyers. With auto insurance, the number is fortunately much higher, but it's not infinite. Different traffic channels have different levels of intent - search is not surprisingly higher than co-registration. But for many verticals, there are only so many keywords available. To get in front of more users it means trying other avenues - longer tail terms, coreg, email, display, contextual ads, etc. Each one of those will have its equivalent of head users and tail users - sites / placements where users who click will have an interest as opposed to someone who places an ad on facebook saying, "Find out how much it is to insure a Ferrari." Each incremental step works in obtaining more traffic, but without without additional technology / processes comes at the expense of the intent of the person who views / clicks / converts on the ad. Here is what it looks like plotted.

Saturation too plays a role. At some point, an advertiser will simply have reached the vast majority of potential users for the product. That of course doesn't stop them from still wanting to grow. They don't want to settle for the same amount, and it pushes them to continuing trying even at the detriment of their quality. It's not that higher volume and good quality can't go together. It's all about the incremental lead in the growth phase. In the forced growth phase, instead of the next lead converting at or near the previous lead, it keeps slipping. Good leads still exist, but they get lost among the lower quality ones. It's a problem, if solved, will mean incredible gains, but it currently falls outside the skill set of both the lead buyer and lead seller. Each can get better - they can implement various levels of verification (quality, scoring, call centers), but to get really good means each getting away from what they do best. Buyers and sellers get closer, but they will never close the divide fully. It's too complex, too distracting, and not urgent enough for them. All of which means one of two things will happen. The divide will come and bite everyone in the behind and/or someone else will come along, solve it, and do very well. A note of warning though, there is another reason why no one has done so to date. It's anything but easy.

Comments

[Rick Falls]

Great stuff Jay, and you're right it's
a big mess out there right now.

Like you said it's going to be tough
to weed through it all enough to make
sense but when someone does (and they will)
more fortunes will be made.

It's all about solving problems when and
where they arise isn't it my friend?

We recommend asking your existing customers
"How can we serve you better?" and with that
feedback comes immense power to know which
direction to take to virtually guarantee higher
customer satisfaction and profit margins.

[John DeMayo]

Quality - volume chart makes sense if you first start buying search, branded terms first, and have an established brand. Many companies start their first purchase making a small co-reg purchase, and get the lowest possible quality with low volume to start. Your chart looks like as initially successful companies effort, but many companies efforts fail from the start.

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Once again, thank you for the input. Always valued.
Jay

[Todd Bairstow]

My mantra has always been to add to the quality of the lead as much as you can before it's turned over to the lead buyer. In return, I have always struggled with the "low quality/high volume" model, and feel that a lot of lead providers miss out on major opportunities. To use the auto insurance example, there are a myriad of ways that you can improve the quality of a lead, either by establishing phone contact with the prospect, doing a stronger job of branding a lead, attaching added prospect data from a database, etc.

At Leadscon, I heard one online education lead buyer say that none of her lead providers had ever approached her to see how well their leads were closing/converting. I was stunned by this. We make a much stronger case to our clients by showing them how closely our leads track to their eventual revenue. And if you can draw that direct line from your leads to their revenue at a reasonable cost, you've got a client for life.