Many thanks to Greg Yardley for the compliment on my Incentive Promotion 2.0 article (Read his great take at Free iPod spot market) and the version of this article that appeared recently in the DM Confidential.
Companies in the lead generation space are doing some innovative things, and it's these companies that provided the inspiration for this piece...
The “interpreter of supply and demand,” that was a definition I came across when trying to figure out how to describe markets and marketplaces. When I hear the word, I think of the stock market, of people buying and selling in hopes of making money. I think too of the physical markets – the bazaars of the Middle East, the Chatuchak Market in Thailand, and of course, of the Internet product market, eBay. All are places where buyers and sellers come to get connected with one another.
Both the stock market and physical markets bring buyers and sellers together and facilitate transactions. What makes the stock market and eBay so unique, though, is their ability to, as the definition of marketplaces says, interpret supply and demand. Prices are not static. They constantly change based on the actions of the market participants. And while well-known, eBay and the stock exchange are just the tip of the iceberg. You can find these types of marketplaces making everything from golf club buying and selling more efficient to now, lead generation.
Whether golf clubs or mortgage leads, what each shares is a focus on offering buyers and sellers two things, a) true pricing and b) better access. With respect to lead generation, true pricing means leads get bought and sold for a closer reflection of their actual value. For example, with mortgage leads, rather than buyers and sellers interacting on one, flat CPA, i.e. $40 per refinance lead, the market would give buyers the ability to pay differential rates based on the characteristics of the lead. Leads from California would have a different value than those from West Virginia. Loans with one minimum loan amount could go for more or less than another loan amount.
Additionally, true pricing also implies that leads from one seller could differ from another seller based on the quality of their leads, i.e. the number of leads it takes, on average, to turn into a customer. Values for leads would go up or down not just based on their characteristics and conversion but also depending on the various economic factors influencing the mortgage banking industry.
The second piece to the marketplace concept, better access, states that buyers and sellers will find each other easier than they could on their own, and they could do so in a trusted, agnostic fashion. Just as eBay means that you no longer have to rely on the comic book shop down the street as the only option, in lead generation it means sellers have a larger pool of potential buyers, increasing the likelihood of their making more money. This access plus the ability to pay a price that suits them, makes for an interesting opportunity. The big question, can it work? The answer, like so many things is yes and no, at least for the current state of lead generation marketplaces, which is all of two companies servicing only a handful of verticals.
If you have a small site that collects leads, you will make more by going to the market than the equivalent of the local comic shop – an aggregator or affiliate network. The problem is that if you are a bigger player, you will make more money by disintermediating the current marketplaces rather than embracing them. Unlike the buying of keywords, the purchase of leads is not yet an efficient system. Leads themselves are complex, and as discussed above, making sense of them means analyzing them for content and performance. The majority of big lead buyers are not able or willing to do that. They need relationships, and in their eyes the marketplace is just another relationship, not a solution for them.
At some point in time, a lead marketplace will not only make a lot of sense but will become the most profitable solution for majority of the buyers and sellers. Currently, though, they are closer to bid management systems, that is, they work well enough for everyone but great for no one. They are the solution to turn to first but a competency to be built and managed in-house to achieve ultimate scale. This of course could change when the market becomes less fragmented and more efficient. In the meantime, those marketplace pioneers will just have to hang in there and not get too frustrated playing second fiddle. It’s not their fault; it’s the markets’.
