Commentary

Auction Model Moves Into Lead Generation

Those of you reading this newsletter already know that online lead generation is one of the fastest growing advertising vehicles today. You already know that capturing quality leads is the quickest way to a sale, and you probably know that selling leads is a better way to make money than selling ad space on your site. Permission to reach out to a customer is much more valuable to any business owner than simply driving traffic to his site. Google and Yahoo know this, too. Their recent acquisitions and tests in cost-per-action advertising show that they are thinking along these same lines.

These two historical acquisitions make it clear that the auction-style marketplace is a better model for not only ads, but for other goods and services too. An auction-style marketplace brings incredible efficiency and transparency to the table, while also allowing buyers and sellers in the marketplace to reach optimal pricing for their products. The same is true for lead generation. Why should a mortgage lender or car dealer have to receive mixed-quality leads for a fixed price based on a lengthy contract that he negotiated with a sales rep eight months ago?

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In the lead generation industry, much like the advertising industry, buyers of these products can now get exactly what they want at the price they're willing to pay. Up until recently, there was a lack of innovation in this space, and buyers were required to purchase leads in batches, regardless of quality and the specific details in the lead. In the auto purchase leads business, for example, dealers couldn't specify the model or trim of the cars they wanted to receive leads for. A Ford dealer got Ford leads. He might end up with 30 Ford Expedition leads and not have a single one on his lot. He might gross $2,000 more on a Mustang GT over a base Mustang, but he couldn't request or even pay more for a Mustang GT lead if he wanted to.

Now he can.

In a bid-based leads marketplace, the auto dealer can specify the exact lead he is looking for -- a loaded black convertible Mustang GT, for example -- and bid the price he wants on as many leads as he needs.

Just as Google and Yahoo! have seen in the advertising world, the auction-style marketplace brings more value to the table for all parties in the lead generation space. There are no more lengthy contracts to negotiate, no more middlemen taking a share of the profits from those who really generates the lead, and buyers have the power to purchase exactly and only what they want. A revolution is taking place in the lead generation industry, and now is the time to take advantage of it.

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