One of the most complex areas of online advertising — what happens when a prospective customer clicks on an ad — ironically happens almost entirely outside of the customer’s awareness.
The ubiquitous dancing Santa, robot or alien that we see on so many mortgage refinancing ads actually is only the tip of the iceberg. Once clicked on, that ad must route the customer to a contact channel, and, once connected, that channel must get the customer into the hands of a company that can deliver a product or service.
That middle ground is where lead generation companies specialize. Staying out of the way, according to LeadPoint chief marketing officer Michael Rosenberg, is one of the things his company seeks to do. CRM Buyer caught up with Rosenberg in an exclusive interview to discuss Leadpoint’s business model.
LeadPoint has applied the concept of the online auction — a’la eBay (for which LeadPoint Vice President of Marketplace Greg Isaacs formerly served as head of the developers program) — to the lead generation field. Why should a company whose expertise is generating leads also have to manage a sales process to sell those leads to companies that want to buy them, Rosenberg asked.
That company should be able to sell those leads to the highest bidder and be done with it, he said, and LeadPoint wants to put its marketplace model right in that space.
Cutting Out the Middleman
Of course, there already are companies positioned between lead sellers and buyers, but they serve as business intermediaries, said Rosenberg. Autobytel.com is one. Customers can either make an inquiry through one of Autobytel’s sites directly or get routed there through a variety of online advertisements. (Rosenberg used to be a senior vice president there.)
The problem with such intermediaries, Rosenberg stressed, is that they control the financial parameters of the deal being made between the generator of the lead and its eventual buyer — a car dealership, for example.
In the older model, he noted, the intermediary seller of the lead might make as much as a 50 percent markup on the price of the lead.
By contrast, “when a lead comes into our exchange,” he explained, “it gets routed to the highest bidder.” Thus, the company selling the lead makes the price the market will bear when selling it, minus a commission taken off the top by LeadPoint.
Refining the View
Like its marketplace model, eBay, LeadPoint wants its marketplace platform to allow sellers and buyers of sales leads to create very precise categories into which prospective customers can be placed — much like a shopper looking for an obscure piece of Depression glass or out-of-print book on eBay.
With older lead-generation models, said Rosenberg, a car dealership might be able to purchase a lot of, say, 30 leads for prospective customers looking to purchase a Ford vehicle. However, when following up on that lead, the dealership might find that most of the people are looking for Ford Explorer models, and not one Explorer is on the lot.
In an electronic marketplace, Rosenberg asserted, those who generate those leads can attach much more specific information for bidders. For example, a dealership might be seeking leads for people interested in the Eddie Bauer model of the Ford Explorer with leather interior.
Although that group of leads will cost substantially more, it also likely will generate more sales, Rosenberg argued. Those are the types of terms that lead sellers and buyers can negotiate on an auction-type platform.
Wheeling and Dealing
LeadPoint recently formed a strategic partnership with on-demand software vendor DealerTrack, a company that services dealerships with software modules that support sales, inventory, maintenance and other processes. The Leads Network launched by the partnership allows dealerships to do exactly as described above — source leads by applying a variety of filters and negotiating directly with the generators of those leads in an auction environment.
It’s a model that can be transferred to a whole range of vertical industries, said Rosenberg.
Car dealerships enter the Leads Network and see screens that are customized, or “skinned,” especially for DealerTrack customers, he noted. But why couldn’t a company like Home Depot do the same?
“Let’s say they have 20,000 contractors in their database — people who buy hardware and supplies from Home Depot,” he posited. “Why couldn’t they send out an e-mail to them, saying ‘hey, we can help you grow your business’ and get those contractors to sign onto a system that allows them to buy leads for consumers looking to have work done?” (This is an example; LeadPoint is not in talks with Home Depot at this point.)
A branded interface would allow those contractors to use the exchange without ever knowing that LeadPoint is involved, he noted.
Middle Spot Is Sweet Spot
Lead generators tend to want to stay in their areas of expertise, Rosenberg noted.
“People want to do what they’re good at doing,” he said. “A company like Debt.com wants to shoot television commercials and do media buys.”
“They don’t want to deal with contracts for selling those leads,” he added.
Thus far, LeadPoint has convinced lead generators in a variety of verticals to sell them in an auction format rather than through intermediaries; car sales and auto loans, mortgages and home refinancing, debt consolidation, and payday loans are a few.
Those leads, Rosenberg explained, can take a variety of forms — online inquires, responses to television ads, or telephone requests. The company even has started providing service as the target point for those 800-number calls.
“The phone number is pointed at LeadPoint, and we route the leads to the marketplace,” he noted.
Of course, this begs the question of whether or not LeadPoint is looking to license its technology rather than confining itself to creating branded marketplaces for particular communities of lead sellers and buyers. “I don’t think so,” said Rosenberg, “at least not right now.”
There is no demand for that type of technology transfer currently, he explained, as long as a company such as LeadPoint can provide it.