JayWeintraub.com - Internet Advertising Analysis and Commentary

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.

Mortage Advertising Is Saved...Sort of

Have we found the magic pill that will bolster the ever declining internet advertising spend?

Mortgage marketers, long a staple of the internet advertising landscape, have in the past year had a much more subdued presence online, especially on display. As an inescapable piece of text link advertising on content websites, through providers such as MSN, mortgage markets have not fallen completely from view, but they sure haven't dominated the mind share and market share the way they did from 2002 into 2007. Outside of Bankrate, which most know as the publicly traded, internet ad supported company that has almost miraculously avoided stock market disaster, you will struggle to find other signs of the mortgage market advertising online.

With hundreds of billions recently injected into the financial system, and into the banks themselves, you might start to expect a bigger presence. And, while it took longer than expected, the impacts of the capital infusion have made there way online. And not surprisingly, one of the pioneers in the online space, LowerMyBills, has ads to this extent. Below you fill a recent banner touting the passage of the housing bill and the corresponding landing page that reiterates the theme. The banner uses their familiar "Calculate" call to action, but the landing page focuses on the doubts many people have over the financial meltdown, stressing "Refinance with More Confidence."

Despite the often overly optimistic nature of many mortgage related campaigns, such as those still touting rates at historic lows, this one has some truth to it, especially the last part of the of landing page's headline, which reads "Rates Dropping Sharply." Give them credit for finding yet another powerful headline. While we can't vouch for the quantity of the infusion or when this ad began, we do know that about two weeks ago, just before Thanksgiving, the Federal Reserve said that it would buy $500 billion in mortgage-backed securities currently guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae. Rates had dropped some at the announcement of the bailout, but that specific announcement caused a truly dramatic in mortgage activity. And, it's not just marketers saying truly dramatic, with indices tracking activity seeing three to four times the normal mortgage activity. Is it enough, though> So far, the answer seems mixed. The number of refinances expected this year will amount to not much more than 1/4 of the total seen in 2003 during the height of the housing boom. Then again, that doesn't take into consideration the recent uptick.

For those of us that worked in the internet ad space during the bursting of the tech bubble, signs of rates dropping and mortgage activity rising remind us the foundation for great times. As rates drop, it should mean that a greater number of people become eligible to refinance, but unlike a few years ago, of those who technically qualify, i.e. their current mortgage rate is higher than what mortgages could be had for today, only a small number will actually get the lower rates. Whereas almost anyone mammal could get not just a new loan but one at a low rate, now only those with pristine credit and significant equity in the house can, limiting the overall impact of the lower rates. Subprime lending has virtually come to a halt, and current lending rules also make it tougher for those seeking larger loans or small-business owners and other self-employed individuals. The demand is still there, but the supply just hasn't caught up.

Companies like Lending Tree and LowerMyBills could prosper because they had enormous quantities of both supply and demand. A huge percentage of the population qualified for a loan, and an equally liquid market existed for them to receive them. Here we have the same depressed online ad inventory, and a slighly reduced demand from home owners, but again, there is a liquidity problem. Compounding the disctinction between now and then are the percentage who now owe more money on their house than it is worth along with overall unemployment. These two make for powerful forces against a mortgage ad recovery. Focusing on the former, underwater home owners, they have had limited options to date. Like debt settlement they can attempt to get a modified loan from their bank, but most report limit success in doing so as the banks have not the motivation or process for handling this in scale. Enter the FDIC who announced their plan for to prevent an estimated 1.5 million foreclosures by the end of 2009 by creating guidelines that will modify more than two million loans. It seems so promising, as it would create liquidity for financial leads. But, according to the Journal, "This may be wonderful politics, but the real-world evidence suggests it will be far more difficult and expensive." Making sense of the math for the various options for modifying is also difficult. It's tempting to root for the plan because selfishly it would result in an amazing resurgence in mortgage spending online. 

Returning to the second point, unemployment, for the past four to five years, the housing market has acted like the economic center of the universe. In good times it can do to the economy what no other industry can, and, it can pull the economy down in a similar fashion. In good times, it provided the consumers liquidity for everything else. In bad times though when the whole economy has faltered, fixing housing won't fix it. Only jobs will. Now, instead of fixing housing, we must fix the owners of the homes. And not to sound to stumpish, but fixing the home owners means a growing economy and job creation. Then and only then can people afford their homes, regardless if they need a loan modification or were caught up in the frenzy and made poor decsions. We all make poor decisions and get caught up in the frenzy of a good deal. The latest Wall Street fiasco only shows that. That said, this holiday, I don't want to look a low rate gift horse in the mouth. Quicken economist Bob Walters summarizes the upside best, saying  "...the unique combination of falling home prices and falling rates are bringing home affordability back to 'normal' or 'better than normal' levels, making it a great time to buy a home."

The Other Subprime Fallout

The payday loan market has long, if not always, catered to the subprime market. The mortgage market on the other hand accommodated the subprime market because they could. Only recently has the mortgage lead generation market had to deal with that which the payday loan lead generation market has long struggled, ineligible borrowers. Mortgage lead generators might think how unfair it is that fewer and fewer of their leads can qualify as sold leads, but almost all other major verticals have to contend with not only a decent percentage of un-sellable leads, they typically can sell a lead only once. Instead of setting back subprime focused verticals such as payday loans, the combination of not converting all leads into a sold lead and any sold lead being bought only one time has led to innovation, i.e., ways to maximize the value of the data they do capture. This innovation and desire to make the most of an interested consumer brings us to the heart of a recent shift that, like mortgage, has impacted those attracting subprime borrowers, one that didn’t start out directly related to payday loans but whose rise and fall can be best explained through the lens of the payday loan vertical. We’re talking about none other than the credit card industry, but not the cards that you probably have in your wallet. Some of these cards might carry the same Visa and MasterCard logos, but they act anything like the "priceless" promotions. These cards, targeted towards with poor credit or no credit at all, carry a definite price, both to set up and in terms of what they can do.

The marketing of subprime credit cards has gone on in scale, albeit rather quietly for years. My first recollection of these cards comes in 2002 not long after the collapse of Providian and their NextCard division which made, and lost, a fortune doing, of all things, the same thing that the current mortgage market has done, extending credit to high risk customers with little or no stated income. Unlike that ambitious, and now defunct, venture these cards didn’t take the same level of risk; their customers had to pay often heavy fees in order to obtain the cards. Their growth, while ongoing for years, certainly shot up in conjunction to the ever increasing number of subprime mortgage borrowers who needed additional funds to cover their credit driven, and now debt ridden, lifestyles. These consumers who found themselves in ever need for money didn’t turn at first to these credit cards, they turned first to the more obvious choice, payday loans.

As mentioned, not everyone who applies for a payday loan will get one. In fact, often only two-thirds of those applying will turn into a sold lead / funded loan. In the mortgage market, they call this 15% to 30% unsold; companies in the mortgage space have done so well that they didn’t focus heavily on the unsold, they didn’t need to. Not so in the payday space, where they call them declines. Instead of going to a trash bin like they often do in mortgage for other companies to mine, in payday loans, they aggressively try to monetize these declines (as some have already paid the affiliates). That they do so, and quite effectively, sets them apart from many other offers. As we look to understand how credit cards came to play a large role in this, it first helps to understand the difference between a payday loan offer and almost any other type of lead. With a payday loan applicant you, more often than not, have an incredibly motivated consumer. They didn’t click on some dancing alien suggesting they click to calculate a new rate. They came to the site because they needed a specific amount of money, and they need it right now. This means they will fill out a form that resembles what they call in the mortgage space a full ten-oh-three. Payday loan providers don’t collect just basic demographic information and property details; they collect the most personal of information, social security numbers and banking information. Even if a consumer won’t qualify for a payday loan, they fill out this information, and that sets the stage for what some have called the dirty little secret in payday loans. To understand, think of the incentive promotion space.

In the incentive promotion space, users first come to a site in anticipation that they will receive an item of value, from a restaurant gift card to high end electronics, or even a lawn tractor. The first step of the process asks the user to enter their email address with the next page asking for the shipping address, only the shipping details apply for a limited number of people, namely the miniscule fraction that will complete the process successfully. The postal information plays less a role in the original product fulfillment and almost everything to do with the various offers shown during the survey portion. By already having the postal information, the incentive promotion people can make it that much easier for a user to accidentally or otherwise sign up for an auto loan among other things. And, it’s the same thing that happens with payday loan providers, but in a more significant fashion. When a user fills out all of their information to try and receive a payday loan, they hit submit expecting the next screen to show their match. The vast majority don’t realize that after completing the form the next step occurs, behind the scene, with the lead generation taking their data to various buyers, seeing which if any will want the lead.

The submission of a payday loan brings us to the pros and cons of this business. Those filling out the form tend not to fall into the window shopping category that plagues other verticals where people often have a minor interest and just want more information, not to take action. The downside with such motivated, or as one company appropriately calls "desperate" consumers comes from the fact that your form is too commonly not the first form. These users, especially in search, will have filled out site after site to, in their eyes, increase the likelihood of obtaining the loan. An aside here comes from how this behavior negatively impacts their chances. Unlike mortage or education where filling out more than one form happens often, but tends to mean just more phone calls for the form-fillerouter, in the payday space, each successfull completion of a form results in a credit inquiry. In this case, the credit inquiry happens at one of two specialized agencies that do not report up to the Experian, TransUnion, and Equifaxes thus impacting their FICO score, namely Teletracks, owned by LeadClick parent and DPburea.

If a potential lender sees that a person has had their credit pulled quite frequently, they will often shy away from them as their algorithms will believe that person at higher risk for paying back the loan. Additionally, lenders will reject a lead when the user does not receive their paycheck via direct deposit. The terms of a payday loan allow the lender to initiate a transfer out of the recipient’s account, but without direct deposit, they do not have a good gauge of whether that check went to the person’s account, hence they can get their $550 on the $500 five days later, or if the person simply cashed their check and went to the track. Additionally, a buyer will decline a lead if the user has too many payday loans ongoing. They don’t mind lending to those with poor credit, but they don’t want to lose all their money doing it. For the estimated 15% to 30% of declines, people who really want money, almost no offer works better than a card offering them the chance to charge stuff. And, given that the payday loan providers already have collected so much personal information, the exact information excluding perhaps one field needed for a subprime card product, you can see how payday loan lead generators began to promote credit cards for subprime users to their declines.

When it comes to credit cards aimed at subprime consumers, three main types exist. The first are very similar to cards issued to prime consumers in that they too are unsecured credit cards, i.e. you don’t have to put anything down. Unsecured cards targeted at subprime consumers do require a set up fee and have low limits, generally no more than $300. They look, feel, and act like a standard Visa / MC and are backed by a bank. One of the biggest is Imagine Gold Card run by publicly traded Compucredit and distributed online via MediaWhiz’s Monetizeit division. The second type are secured cards or pre-paid credit cards. These too have set up fees and they offer no credit limit. Like a pre-paid phone card, you get to spend only what you put in there. It’s no different than buying a pre-paid Visa card, except that these cards find you at the right time. For better or worse, life often requires having some form of credit card, e.g. booking something online. One of the more successful ones was Everprivatecard.com. Third we have merchant cards. These can come in both unsecured and pre-paid, but they are not credit cards. They allow you to spend money at a limited number of stores. Several companies offer these including Edebitpay.

Each of the three types, while different, all play a role in helping payday loan lead generators monetize their declines. As important, they make up a fairly significant piece of the entire subprime consumer monetization. It’s not a secret that card offers exist in the flow, but it’s not wildly publicized either, until recently that is. An almost perfect storm hit the marketing of subprime credit cards. Two of the top performing offers were pulled at roughly the same time, the unsecured Imagine Gold Card and the extremely well-marketed, debatable in value, Everprivatecard, which unlike other credit card offers allowed for it to be almost an opt-out, not opt-in. As for the Imagine Gold Card, they did nothing wrong, but looking into their SEC Filings it seems as though they couldn’t raise as much as they planned, given the current lending environment so they had to cut back on new acquisitions.The third company mentioned above, Edebitpay also ran into some issues but of the more severe variety. They found themselves the subject of an FTC investigation and had their offices raided and business shut down at the beginning of the August (back up now). A check of their better business bureau ranking sheds additional light. The company currently has an F rating, not an easy task considering the BBB has 11 gradients starting at AAA going to F. Just check out a recent review corrected for spelling and languague, "fraudulent lying pieces of s***, poor excuse for human being, that's what I think of this company and all their lying employees, with their crappy customer services."

The timing of the credit card pull out and its subsequent effect on pricing of payday loans (off by 15% to 20% at one point but coming back now in the end of September) might seem connected to the broader events as a whole. In the case of one major player that holds true, but for now, both the payday loan space and card space remain strong. If anything, this recent change highlights the interconnectedness between various offers – the benefits and the risks. As one online payday loan generator put it, "No one’s having a happy August," and joked, "Now, we actually have to work." There is some truth in those jokes, but as we spoke, what came through was not frustration but opportunity. Every offer, every vertical runs into bumps, and this one which has impacted just about every major online payday loan offer, means no one has a definitive advantage. It’s also a lesson about making money too easily and not offering value to the consumer, as was the case with Edebitpay. It’s one thing to simply collect data, but another completely when you bill customers money, often money they don’t have. The cards will rebound rather quickly, and payday loans will continue to thrive. In the interim, we can probably expect others who have now realized the value of squeezing out every last penny to do so more aggressively in other areas.

LeadsCon, April 2 - 4, 2008

I have a few posts I'm working on getting ready, one in particular that I like on the mortgage lead generation supply and demand where I would appreciate your thoughts. In the meantime, I thought I would answer the most common question I've received, namely, what will I be doing.

In a nutshell: Online Lead Generation has grown into a multi-billion dollar industry, but there is no show focusing on the needs of those in the space. That's what LeadsCon, the first conference and expo for the online lead generation industry, looks to change. On April 2 - 4, at The Palms in Las Vegas, LeadsCon will be bringing together some of the best minds in the lead generation space for learning, collaborating, networking, and having a good time.

It's worth noting that in the time that I've wanted to play a part in organizing an industry wide event (almost two years now), two other shows have gotten the ball rolling and shown why this one can be such a great success - the upcoming TargusInfo Online Lead Quality Summit and the just completed, intimate, primarily mortgage lead gen focused Leads2007.

Have ideas on what you'd like to see covered at the show? Want to sponsor and/or secure a booth? Would you like to be a part of the group that puts this on? Write to: jay (at) leadscon.com. The site will be up in two weeks or so, but I couldn't help but share in the meantime.

January 10, 2008 - It was a long two weeks, but please check out www.leadscon.com. I will post a separate update shortly.

Thanks for the warm welcome

My sincerest thanks to those who commented and/or wrote me regarding this blog's return. One comment in particular struck me. "Seosnafu" wrote, "Can you post any ideas for upcoming posts? Taking requests? :)
"

While it's fun to think of things to share, I enjoy most answering something that I know at least one person wants to read. I encourage anyone who thinks I might have something to add on a topic about which they'd like to read to send it my way. In other words, requests are more than welcome.

Over the past nine months or so that I have not publicly posted, I have written some pieces. I plan on updating the blog with some of them. Below is one discussing a deal announced earlier this month between Apollo Group and Aptimus, a deal that doesn't seem to solve any of Apollo's problems or cover for areas in which Advertising.com (the current exclusive distributor) lacked.

In February of 2006, University of Phoenix shook up the lead generation space by forming an exclusive partnership with Advertising.com.  This meant that any company that produced leads or wanted to produce leads for University of Phoenix had to go through Advertising.com. Most of us first learned of the deal a few days after its closure when parent company Apollo Group's President Brian Mueller announced it as part of a turn around strategy to lower their cost per enrollment. Phoenix wasn't the first for-profit education company to outsource its online marketing. Whole companies exist to offer this service, including Datamark, CUNet, along with agencies such as Avenue A / Razorfish who has for years managed all of Capella's lead buying. Few might have expected University of Phoenix to follow that route given their comfort and early leadership role in the space. Similarly, few would have predicted them to choose Advertising.com or that Advertising.com would even consider such a deal as it required them to stop doing business with all other education companies.

Those inside the lead generation space, namely those generating the leads for institutions such as University of Phoenix, found the deal even more surprising, if not alarming. Some of the larger ones had an idea that Phoenix wanted a unique partnership, but those making the best candidates didn't want to lose 60% to 80% of their existing revenue as Phoenix sought exclusivity; those that could drop everything for Phoenix generally didn't have the technology and expertise to add the value the number one education player wanted. As education wasn't core to Advertising.com's business, they were in a position to make that bet and align themselves with University of Phoenix even at the risk of disappointing their other major spenders such as Career Education Corporations' AIU Online. This explains the logic but not the alarming piece. The deal unsettled those providing the leads because unlike Datamark or the better example, Avenue A / Razorfish, Advertising looked more like a competitor than a vendor management firm.

Unlike Avenue A / Razorfish Advertsing.com had access to inventory, lots of it, along with a skilled media buying team and contacts at every major inventory source. In addition, it had search technology and handled some large clients campaigns, ones that required Advertising.com to maintain certain CPA objectives. If UOP wanted to lower their enrollment costs what better way than to funnel all activity through Advertising.com then allow Advertising.com to purchase media smarter based on the activity of the other lead providers. Fortunately, despite these concerns the past 18 months have hummed along smoothly with no major incidents or breach in trust. From the beginning of the University of Phoenix / Advertising.com deal, though, Advertising.com seemed poised to benefit the most. With last months earnings results, you might (finally) call it equally beneficial and worth continuing, But in an even more surprising turn of events than the original March 2006 exclusive partnership comes the announcement this week that Apollo has struck a deal, this time purchasing an internet advertising firm, namely the publicly traded and not profitable Aptiumus for roughly $48 million.

In the press release announcing the deal, Apollo President Brian Muller said, in a statement not all that different from the Advertising.com announcement, "This acquisition is another step to strategically position the company to best monitor, manage and control our marketing investments and brand," and that "Integrating Aptimus' technology and very experienced team into our current marketing initiatives and service center model will take us to the next level in managing student inquiries and achieving further process and cost efficiencies in new-student enrollments." Later he adds, "While the exclusive management contract with Advertising.com expires over the next several months, Apollo believes that the significant investments it has made in personnel and technology, as well as the acquisition of Aptimus, will enable the Company to efficiently and effectively manage Internet marketing internally, without any disruption." Translation, no more Advertising.com after February 2008.

I've re-read Muller's statements a few times, but I'm still a little confused by the purchase. Last year, we hinted that it might make sense for an institution like Apollo to not just partner but to acquire. From that perspective, it makes sense. But, Aptimus? According to their CEO Rob Wrubel, "This is a significant opportunity to deliver our business vision to one of the most important education companies in the market, improving their ability to reach new students." I guess he speaks of new students via-coregistration as that is Aptimus' business to date. And, if I were to buy a company, I might buy one that actually made money. Aptimus lost money last year, and they earned all of last year what Azoogle earns per month. Not only did they lose money, but they saw no top line growth year over year, most likely attributed to their exiting the incentive space. Perhaps in the end, Apollo will pay close to $50 million for people and tracking. They have eighteen months of information and process expertise from Advertising that they can port over to the Aptimus team. We'll see if this move turns out to be penny wise and pound foolish as it looks like a way to avoid paying commission to Advertising.com, which surely equals about $50 million per year.

Lead Generation - Quality over Quantity

There was a time in lead generation when all that mattered was the number of leads someone could produce. The price paid per lead was almost exclusively based on the numbers generated, not necessarily how those leads performed for the end buyer. Those buying leads instinctively knew that leads from certain sources did better than others, i.e. leads from email did better than co-registration, but all too often vendors looked out for only their bottom line, charging buyers full price for leads they knew contained, at best, a mixture of sources and, at worst, nothing but garbage.

Today, suppliers of leads to the market still look out for their bottom line and that can still mean acting in a way that isn’t always in the best interest of the lead buyer, but sneaking in the garbage has become harder and harder. The change from quantity to quality has taken several years, but the environment has in fact changed quite dramatically. This is the message that many echoed at the recent invite-only Online Lead Quality Summit being hosted by TARGUSinfo. The validation firm has made a name for itself in the online space, even though this piece represents only a fraction of its overall business. That the company can organize a one and half day event around the topic, though, is proof about the changing landscape.

Perhaps no other vertical summarizes the changes in online lead generation quite as well as mortgage banking. Today, if an online firm says that it generates mortgage leads, a person will be curious what their edge is. But, say that three years ago or more, and that same person will have to withhold from making a snap decision (negatively) about the company. In other words, more than a few supplying leads as the refinance boom started did not earn the best reputation within the Internet advertising industry.

I don’t have the figures, but I would imagine more than a few people decided to enter the mortgage banking field during the refinance boom, either as an independent broker or by joining one of the large institutions. And, these people needed leads. Mortgage banking had already taken advantage of online leads prior to the refinance boom, so scaling operations to accommodate more leads didn’t necessarily require reinventing their business. What it did mean, is that companies made projections based on the number of leads needed, close rates, and the amount per close to determine just how many people they would need in order to meet those projections.

With so many companies going through the same exercise, you had a confluence of events happen, at least in my opinion. It began with a huge flood of demand for leads entering the market; this demand entered the online advertising market but not in a coordinated method. The buyers of leads didn’t know with whom to run; many of today’s firms existed during the lead rush but their reputations had yet to cement. That left buyers in the hands of whoever got to them first; then with the volume needs in hand, these buyers ended up being more brokers than anything else. They would then farm out the deals to whoever said they could produce and the cycle would repeat.

The information asymmetry bred the operational inefficiency that, as the market cooled and competition increased, began to highlight the weakness in the entire system. This ended up with buyers having a lower lead to close ratio than in the past, frustrated employees, upset customers, and a sense that the buyers were paying more than they were receiving. Buyers started to then cut down on the number of companies with whom they dealt, cut back on the number of leads, and implemented systems to better track performance of the incoming leads. Those on the supply side, that both sensed changes afoot and intended to survive the shakeout, began demanding more accountability with those that they worked, implementing technology solutions to improve quality, and in many ways, earning their money.

The system isn’t perfect but enough innovation has occurred and enough external pressures – higher cost of media, greater performance tracking to identify low quality media, and decreased demand – that overall lead generation moved from simply focusing on quantity to quality. Will quality always remain more important than quantity? I think it will, but when another industry develops an insatiable demand, chances are quality will again slip and those in the field look to fill demand. The good news is that while it might take a step backwards, this occurs after taking two steps forward.

Eduventures - Higher Ed meets Internet Lead Gen Part 2

Part One of this piece on the recent Eduventures conference in Boston sets the framework for the information below. It tells of the unique nature of the conference as it brings together, not necessarily by choice, two very different worlds, the world of post-secondary education and Internet advertising. Both the education market and the Internet advertising market have seen high growth and intense competition. Institutions outside of the large for-profits now feel the need to turn to the Internet for more than content delivery. They look to it in order to drive awareness and enrollment growth. Lead generators of course are happy to take their business, but outside of a handful of schools, most remain a ways away from plugging in to the machine which is online education lead generation.

The brief speech I gave tried to help the firms navigate not just the Internet landscape but also the physical landscape, i.e. the small table-top exhibit area overrun by us lead generators. As part of a panel, I had fifteen minutes at most to cover the material, not enough time for attendees to absorb it, but perhaps enough to provide a flavor, so that when they reviewed the physical printouts later, it would make sense. One of those slides is here, and is my take on the types of vendors found in the education lead generation space.

Those at institutions that currently accept leads understand varying pieces of the diagram above. Many already use outsourced software solutions to help them take in leads and track their progress as a percentage of the students move towards enrollment. Two years ago the lead management bubble didn’t touch the others which are very Internet focused. Lead management companies started to see the increasing role that online lead generators play and started to bridge the gap between managing leads and managing the vendors (lead providers) who supply them. That said, they still offer a pure technology solution. At best they act as a silent agent for the schools and, at worst, a gatekeeper that inhibits the marketers ability to help drive enrollments.

As for the other groups, most reading this have a keen familiarity with the other categories, but they remain very Internet advertising specific terms and not common sense to most at the show. Engaging them in the subtleties is the equivalent of getting a non-car person excited over the difference between DOHC versus SOHC. It’s necessary, just not easy. Schools do need to know, though, that certain types of firms will play a role in the stewarding of the brand, while others simply act to get the message out in a pay for performance fashion. For the marketer, the key takeaway is the continental shift that some companies drive to help connect our two worlds.

Among the biggest differences between the firms playing a role in generating leads for schools are a) the services they offer – how active are they in the brand process, what role they play with respect to banner, landing page creation, etc. and b) how they drive their traffic. This next graphic applies not just for education lead generation but for other areas of online advertising. It focuses on the latter point, the traffic. The chart presents nothing new to those who have gone through the Internet advertising learning curve, but for those who haven’t, the relative positioning of the channels and the terminology take incorporating into their vocabulary.

One channel not listed but one that proved viable for many schools are online education directories, not necessarily the large ones like ClassesUSA or eLearners but some more niche sites that focus on specific verticals. As schools begin to increase their ability to handle incoming leads, they can then move to other areas of online marketing. The most sophisticated schools have the ability to take leads from each channel, qualify them, and pay for them appropriately depending on the enrollment rate. Not every school at the conference will use or want to use lead generation for the marketing of their school, but many institutions, including traditional brands, have turned many of their degree programs into profit centers and want to keep that growth.

More and more schools seem to feel the need to actively market, and it’s that need, plus the opportunity to hear from institutions large and small that have undergone similar challenges that attract them to Eduventures. It isn’t, however, an Internet advertising show. PPC is often the last thing on a 100+ year old institutions mind as it is trying to convince its Board of Regents that offering a degree online makes sense. The conference does provide a closer look to the behind the scenes challenges current and future Internet advertising clients face, and we as marketers benefit greatly when we listen to their process for becoming a client. As was the case last year, it was a worthwhile show if you were looking to understand a market and not just close a deal.

Eduventures - Higher Ed meets Internet Lead Gen

Last night, I returned from Boston. This week marked the third year that Eduventures, a market research and consulting firm for education institutions, has put on their Competing in Higher Education tradeshow. With only a handful of lead generation firms at the show last year, yet fifty or so for-profits, it seemed like a rare find. Naturally, that didn’t last long. Instead of their being three or so advertising companies, this show almost ten crowded the small table top display area not to mention the others in attendance. Chances are the hundred or so representatives of smaller, regional universities or their counterparts from a few prestigious brands did not know what to make of the Internet marketers that descended upon them.

Eduventures’ Competing in Higher Education marks one of the only shows where the world of running a university meets with online advertising. Those from institutions attend because they run programs that target the adult-learner, one working full-time who has either completed some of their education, wants more education, or education for a new career. Attracting and servicing these students requires different operations than those required for the traditional, full-time 18-24 year old students. As they look to grow the adult-learner student base, it makes sense that these administrators have a dialogue with the online marketers, as the skills required to market profitably online require such specialization that for the schools to try and do so internally will become a distraction to their core business of educating students.

The accountability of advertising online has thus far made a good fit for growth oriented institutions such as AIU Online, who manages the key aspects of their brand in-house but relies on the performance marketers to show their message and deliver leads. Unlike more traditional schools, AIU effectively bridges both the academic world and the corporate world. Most institutions do not have their foot in the corporate world. They have not structured their processes the way a company might, and it will take time before these institutions can embrace Internet advertising in a manner that meshes with the tactical execution services offered by the lead generators. Most others, though, are still far away from being able to accept a lead.

The lack of immediate clients did little to deter the lead generators from attending even though virtually all of the presentations overlapped little with their area of interest. The majority of speakers were from institutions, and they covered topics ranging from how they market their programs in general to how they launched online degree programs, having not done so before, to how to change management techniques helped turn around decreasing enrollment. For the non-educator, like me, their stories and the presentations covering the market trends were at least more accessible than the equivalent presentations I attended in October of last year at the Mortgage Bankers Association trade show. I imagine though, that some in the audience felt as I did ther, when it came turn for one of the few non-educators to speak, me.

Some of the other lead generation firms would have preferred to see a panel or roundtable, anything but just one Internet marketer speaking. Given the economic impact the lead generator’s have, it’s one I suspect will happen at next year’s show. As it stood, I had the difficult but enviable task of covering online advertising to a show where a small subset of schools not only embraced lead generation but probably knew more than I, while the other half did not fully grasp the difference between paid search and organic. That other half included not just educators but also investment bankers that recently purchased small regional schools looking to run them like businesses. Neither the educators nor the bankers would find much value in a talk that tried to explain keyword insertion on the search engines or trademark bidding policies.

To make the most of their time, a talk to this group should have some practical, tactical value. If the information stayed too high level, it does not help them feel better armed when they begin planning or reviewing their online strategy. Often this means providing either a case study or a step by step guide that those interested in online marketing could follow. Both would have added value; each was like giving directions. In order for directions to have value though, a person needs a map. Directions without a map or directions on the wrong map both lead to the wrong destination. It was “just enough information to be dangerous” as one person put it. For any interested in some of what the presentation covered, I have a follow-up post coming. Long time readers will recognize certain elements as this one too contains an education lead generation specific “Venndor” diagram.

(And because I have some domainer traits at heart, I had to register "venndor.com" and "venndordiagram.com".)

Strategies of online education lead generation

The last piece I wrote about online lead generation covered the basics of lead generation and arose out of an agency/broker’s desire to get a CPA price quote for an unnamed school. Instead of simply saying “$50”, I proceeded to write out a lengthy reply on why quoting a single number poses a challenge. Today, we look at a related topic - the various strategies lead generators employ to drive leads to a school. What makes this topic so interesting is that as recently as five months ago, a few on this list were considered on the fringe. The increased cost of traffic to lead generators and desire for schools to focus on a narrower band of providers has opened the door, though for some, once fringe, concepts to make their way into the mainstream.

The “fringe” activity in this case is the desire and push by lead generators to promote more than one school as part of the sign-up process. Three companies have made the greatest in roads – Quinstreet, ClassesUSA, and Nextag. In the case of Nextag, they only promote education in this fashion, whereas both Quinstreet and ClassesUSA offer schools several different ways to generate leads. Below are the four most common mainstream strategies used by lead generators. In this piece we focus on the presentation of the school as opposed to whether visitors came from search, display, email, etc.

1) Single school landing page

• Exclusive lead, i.e. a student sees one brand on the landing page and can sign up for only one school.
• Form fields usually present; strong call to action; an information gathering page rather than an information giving page.
• Generally the highest quality but also among the most expensive.
• Viewers tend to see either a general landing page for the school,l or among the more advanced lead generators see a degree specific page, e.g. Criminal Justice based on prior intent, i.e. a click on a tab on banner or search query
• Some lead providers will, upon completion of this type of page, show a follow-up page with other schools; some schools will bar this, seeing it as leveraging their brand for a competitor.

2) Directory style page / Homepage placement

• Among the oldest style for generating leads.
• No form fields present; limited if any call to action; a focus on information giving.
• Many schools co-exist on a page that typically look to provide users a way to navigate to a particular degree / school combination.
• The non-sales, exploratory approach means that viewers will often convert on more than one school.
• Seen as a clean and often preferred way for vendors to generate leads.
• Easily digestible and as a result historically the type of page show to schools by vendors when attempting to work together even though it drives a smaller percentage of leads.

3) Multi-school “Shared Lead” page

• Credit goes to ClassesUSA for the nickname
• Marketing message driven page; focus on information gathering.
• Similar to the exclusive lead form except more than one school is presented on the page
• Unlike a directory page, focus is on a user completing a form rather than navigating deeper into the site.
• Nicknamed shared because after a user completes the form for a particular school, the page presents the user with other schools that offer the same or similar program, storing the user information so that they simply must click one or two times to be submitted to the next school.
• Students tend to sign-up for more than one school
• Some schools have seen only minimal degradation in enrollment rates by a switch to the shared model; whereas others have seen sharp decreases.
• Gaining increased acceptance among schools, albeit reluctantly.

4) Forced shared lead page

• Currently only used by Nextag and allowed with them given their size and clout in the mortgage lead generation business.
• Page mirrors their mortgage form in that users complete information in the first part of the form and then are “matched” to schools on the second part
• Students will sign-up for more than one school (assuming a degree of interest is selected that more than one school offers.)
• Lead degradation occurs, but it’s not linear, i.e. a lead shared 3 times does not perform 1/3 as well. Closer to one half.
• Most controversial page as it presents the least information per school and does not offer a way for a user to learn about a school and select just that school.
• Additional controversy and push-back from some major institutions due to its commoditizing education. With the schools being given little to no room for differentiation, such forms have the potential to impact negatively the sector, especially if others jump on board. Users will lose out and the page will be seen by accrediting bodies similar to co-reg being run on incentive sites.
• The first type of site to have volume caps reduced and be seen as expendable.

In Effectiveness in Lead Generation and Finding the Sweet Spot we hit upon a few of the reasons why mortgage has scaled so easily and the challenges that online education faced in doing the same. What we see here are companies breaking free of those constraints, but the results of these new formats will determine its long-term success, of course. The best bet for vendors is to treat these strategies like a portfolio and have diversity. The new formats might have strong growth but they are also the most volatile.

Lead Gen Support Business Idea

Like many creative thinking types, I often have more ideas than I know what to do with; some I would like to think I create someday; others just take up space and cause mental irritation because I know I probably won't get to them. Here is one of those -

Targus Info has made quite a name for itself and quite a business providing data validation, their services becoming the Akami of data validation for lead generation companies. I'll have to ask Dave over there if their service offers standard USPS look-up, but that's another topic.

What would help, and Targus could do this, but most likely a company such as Datran looking to expand their revenue stream should offer this, is an email validation service. This is nothing new; when I did email collection through a registration process, I wanted a better system for validating names. It's pretty easy to see if the domain exists and has a mail server set up on it. Finding a way to determine whether the actual address works and should count as valid is something else.

The idea that would seem to work is for Datran or a similar firm to allow others to send over an email address and have them score it for them. The first level of scoring would be whether that address exists in their database or ever has. They would them help shed light on that name by providing any deliverability information - name is valid and receiving email; name was in database but unsubsribed (meaning it is still valid); name is in database but not active (not opened email); name is a spamtrap do not send, etc. With their experience, they could probably add value to names that aren't in their database as well by applying learnings across names as a whole, e.g. whether certain strings in the name suggest it to be fake, or the structure of it to be good (the lead gen provider might pass in first and last name too).

Datran or others probably wouldn't want to share too much of the specifics but they could help come up with a score that would let those who just received the email gain some insight into the validity of the lead. Ideally, some third party would do this and Datran along with the other big mailers would participate, making their data accessible to the third party. The subscription revenue would be split among the data providers (with protections so that their data wouldn't be abused, competitor safegaurds, etc.). Given the forming a single organization (like Targus) who has access to the data owners (ex, Wireless carriers) takes more time, which is why the data carrier (Datran) could do this if they wanted.