Customer Acquisition Primer, Part 2
So many Internet related companies can be thought of as lead generation companies. They separate out into a few distinct categories. Those that generate leads through:
- Straight media buying and arbitrage
- Delivery of “proprietary” content
- Directories or objective content
- Comparison shopping
Companies like NetBlue and Quinstreet are primarily in the business of media buying and arbitrage. They do have some unique content, but primarily they have leveraged their media buying muscle to buy low and sell high. That is, they buy a lot of media to advertise credit card offers or online degrees or mortgages. They can do this at an advantaged price versus other companies or individuals because they buy and sell in bulk. People click on ads, go to their web sites, and fill out forms. These forms collect data about people – names, addresses, and other information. Each form that is completed with valid data turns into a “lead.”
They do also have some natural / organic search engine traffic. But primarily they are buying a whole lot of media and converting that into leads.
A lead has a higher value than an ad. This is because a lead can be acted upon: a sales person can make an outbound call to a lead and try to turn that lead into a sale. When someone clicks on an ad and goes to a web site that can improve brand awareness, but unless it turns into an actual purchase, it’s just a cost. That cost gets factored into and deducted from every successful sale. It’s the cost of acquiring customers.
The thing that has the most value is of course a sale. If as a customer you say you want more info, that’s great – you’re a lead. But if you actually sign up – if you spend dollars (signing up for a data service for example, or to receive a new credit card) or commit to spending dollars, that is worth a whole lot more.
Some companies use the delivery of proprietary content to generate leads. Housevalues.com did this for the real estate market almost six years ago. They created a database of house values (thus the name) and advertised the site on national television. People interested in finding out what their home was worth went to the web site, provided some personal information, and were provided with a value. These people were willing to exchange some personal information and agree to be contacted by a realtor to get a little bit of data.
Is housevalues.com a real estate company? Not really. They are a lead generation company whose vertical happens to be real estate and who can provide some very useful and seemingly proprietary information in that particular vertical.
What did Zillow do differently? Three things:
- It generated tremendous buzz
- It provided a unique and cool interface that people found compelling
- It delivered unique data that people wanted
Zillow is sticky. Housevalues is not sticky.
How many times do you need to find out the value of your home? Not many. But Zillow allows you to get property value information on any address. So you can find out the value of your own home. But if you’re like a friend of mine, you can enter someone’s home address and find out what they paid. You can look at lots of different neighborhoods to see how a potential property compares. Everyone likes to window shop and Zillow capitalizes on that.
Housevalues generated traffic through traditional advertising (especially, TV ads). Zillow generated traffic through buzz – buzz about the features, buzz about the site, and buzz about the founders. Put another way, the founders are a tremendous lead generation engine for a tremendous lead generation engine.
Today, zillow might capture your address, but the way they monetize is through banner ads (look at the number of lowermybills.com ads) and Google Adsense (right-hand column of the site). But you can imagine them using the site as a true lead generation engine once they are further along.
Some companies are hybrid users of proprietary data. PayScale uses its “proprietary” database of compensation information to generate leads of people who will buy higher priced reports. They also try to sell data through software sales to companies. They partner with other companies to display job listings. So they’re a hybrid company, using their proprietary database to generate leads for themselves. (Is PayScale the highest value purchaser of these leads? It’s hard to say. In other words, is a lead generated from PayScale’s web site worth the most to PayScale itself or to someone else – unknown.)
Other companies provide directories or seemingly objective content. Small web sites do this today. Search for “dating” on Google and you’ll find a bunch of sites that compare the top dating sites. Of course, they get compensated if you click on one of the links on their site and sign up as a result. As affiliates, they are doing lead generation on a small scale for much larger companies like match.com.
Allstardirectories.com does lead generation for universities and other academic programs. Allstardirectories’ proprietary content is essentially its lists of schools and the information about these schools that is provided on its web sites. Because it has so many pages full of information, its sites rank well in GYM (Google, Yahoo, and MSN), so that the company receives a lot of natural traffic. It has clean pages with useful information that it uses to do lead generation.
In a sense, Allstardirectories is a comparison shopping engine for educational programs. Similarly, a site like DentalPlans.com, is a comparison shopping engine for dental plans, while eHealthInsurance.com is a comparison shopping engine for healthcare plans.
People typically think of comparison shopping more for physical goods that they want to buy. PriceGrabber and Shopping.com are two of the best known players in this space, with very healthy exits.
Over time, the straight media buying / arbitrage opportunity will diminish. How long will it take to go away? Probably a few years. Despite all statements to the contrary, the market is still not that efficient. Some of the big categories are becoming more efficient – mortgage leads for example – but within these categories, there are still many pockets of inefficiency to be found.
What is the cost of developing proprietary forms of content? If you plan to write a million articles yourself or pay other people to, clearly that will be cost-prohibitive. (That said, some people have built very successful businesses off articles – eHow for example.) But if you can get by with a smaller number of articles, you can get listed and generate some number of leads.
Do you need proprietary content? Certainly proprietary content gives you more defensibility. It gives people a reason to come to your site. To the extent that that proprietary content is useful on a repeated versus one off basis, that is goodness. Currently the rage is user-generated content. This is a form of proprietary content that you can acquire at low cost and with minimal work, as long as you can seed the process and get some users to start generating content.
- Straight media buying and arbitrage
- Delivery of “proprietary” content
- Directories or objective content
- Comparison shopping
Companies like NetBlue and Quinstreet are primarily in the business of media buying and arbitrage. They do have some unique content, but primarily they have leveraged their media buying muscle to buy low and sell high. That is, they buy a lot of media to advertise credit card offers or online degrees or mortgages. They can do this at an advantaged price versus other companies or individuals because they buy and sell in bulk. People click on ads, go to their web sites, and fill out forms. These forms collect data about people – names, addresses, and other information. Each form that is completed with valid data turns into a “lead.”
They do also have some natural / organic search engine traffic. But primarily they are buying a whole lot of media and converting that into leads.
A lead has a higher value than an ad. This is because a lead can be acted upon: a sales person can make an outbound call to a lead and try to turn that lead into a sale. When someone clicks on an ad and goes to a web site that can improve brand awareness, but unless it turns into an actual purchase, it’s just a cost. That cost gets factored into and deducted from every successful sale. It’s the cost of acquiring customers.
The thing that has the most value is of course a sale. If as a customer you say you want more info, that’s great – you’re a lead. But if you actually sign up – if you spend dollars (signing up for a data service for example, or to receive a new credit card) or commit to spending dollars, that is worth a whole lot more.
Some companies use the delivery of proprietary content to generate leads. Housevalues.com did this for the real estate market almost six years ago. They created a database of house values (thus the name) and advertised the site on national television. People interested in finding out what their home was worth went to the web site, provided some personal information, and were provided with a value. These people were willing to exchange some personal information and agree to be contacted by a realtor to get a little bit of data.
Is housevalues.com a real estate company? Not really. They are a lead generation company whose vertical happens to be real estate and who can provide some very useful and seemingly proprietary information in that particular vertical.
What did Zillow do differently? Three things:
- It generated tremendous buzz
- It provided a unique and cool interface that people found compelling
- It delivered unique data that people wanted
Zillow is sticky. Housevalues is not sticky.
How many times do you need to find out the value of your home? Not many. But Zillow allows you to get property value information on any address. So you can find out the value of your own home. But if you’re like a friend of mine, you can enter someone’s home address and find out what they paid. You can look at lots of different neighborhoods to see how a potential property compares. Everyone likes to window shop and Zillow capitalizes on that.
Housevalues generated traffic through traditional advertising (especially, TV ads). Zillow generated traffic through buzz – buzz about the features, buzz about the site, and buzz about the founders. Put another way, the founders are a tremendous lead generation engine for a tremendous lead generation engine.
Today, zillow might capture your address, but the way they monetize is through banner ads (look at the number of lowermybills.com ads) and Google Adsense (right-hand column of the site). But you can imagine them using the site as a true lead generation engine once they are further along.
Some companies are hybrid users of proprietary data. PayScale uses its “proprietary” database of compensation information to generate leads of people who will buy higher priced reports. They also try to sell data through software sales to companies. They partner with other companies to display job listings. So they’re a hybrid company, using their proprietary database to generate leads for themselves. (Is PayScale the highest value purchaser of these leads? It’s hard to say. In other words, is a lead generated from PayScale’s web site worth the most to PayScale itself or to someone else – unknown.)
Other companies provide directories or seemingly objective content. Small web sites do this today. Search for “dating” on Google and you’ll find a bunch of sites that compare the top dating sites. Of course, they get compensated if you click on one of the links on their site and sign up as a result. As affiliates, they are doing lead generation on a small scale for much larger companies like match.com.
Allstardirectories.com does lead generation for universities and other academic programs. Allstardirectories’ proprietary content is essentially its lists of schools and the information about these schools that is provided on its web sites. Because it has so many pages full of information, its sites rank well in GYM (Google, Yahoo, and MSN), so that the company receives a lot of natural traffic. It has clean pages with useful information that it uses to do lead generation.
In a sense, Allstardirectories is a comparison shopping engine for educational programs. Similarly, a site like DentalPlans.com, is a comparison shopping engine for dental plans, while eHealthInsurance.com is a comparison shopping engine for healthcare plans.
People typically think of comparison shopping more for physical goods that they want to buy. PriceGrabber and Shopping.com are two of the best known players in this space, with very healthy exits.
Over time, the straight media buying / arbitrage opportunity will diminish. How long will it take to go away? Probably a few years. Despite all statements to the contrary, the market is still not that efficient. Some of the big categories are becoming more efficient – mortgage leads for example – but within these categories, there are still many pockets of inefficiency to be found.
What is the cost of developing proprietary forms of content? If you plan to write a million articles yourself or pay other people to, clearly that will be cost-prohibitive. (That said, some people have built very successful businesses off articles – eHow for example.) But if you can get by with a smaller number of articles, you can get listed and generate some number of leads.
Do you need proprietary content? Certainly proprietary content gives you more defensibility. It gives people a reason to come to your site. To the extent that that proprietary content is useful on a repeated versus one off basis, that is goodness. Currently the rage is user-generated content. This is a form of proprietary content that you can acquire at low cost and with minimal work, as long as you can seed the process and get some users to start generating content.
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