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Lead Generation is the New Search Market Space

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First Published: Mass High Tech: The Journal of New England Technology – May 25, 2007.

When the most popular websites in the world make money from selling advertising then you have to believe there is a massive need for companies to market themselves in a traceable, affordable way. Millions of businesses buy their advertising to get traffic with the hope that some of those visitors will also become customers.

If you’re one of these businesses and you’re using advertising to drive traffic to your site there’s only one thing left — converting the traffic to sales. If that sounds obvious then who is going to serve your do-it-yourself lead generation needs? With the recent news that Google will be launching its “pay-per-action” services, it is obvious where the next horizon will be.

Lead generation is nothing new. Telemarketers have been interrupting our dinner time for years. The problem is that the price of a telemarketing lead can be as high as $10, depending on the nature of the lead, but it comes at an even higher price. Pestering your customers into buying from you is a lose-lose situation and cannot last forever. That’s what makes online lead generation more interesting. It’s entirely permission-based, very measurable and in some situations, self service.

The interesting story for a lot of web-based startups is that lead generation might actually be the best way to take on the 800-pound gorilla. According to VentureOne, almost 70 search-oriented firms raised venture money and dozens of others have received a financial helping hand from private money. The dominance that large search engines have in the search advertising space may not translate immediately to dominance in the lead generation market. There is a lot of room for emerging businesses to grow and influence the sales process.

On the local front there are a handful of consumer-based websites that are getting more interest from pay-per-action advertisers than traditional CPM junkies. Pawspot’s founder Mark Roberge says the nation’s largest online pet medication distributor is generating several hundred leads through Pawspot’s pet-loving community.

“Advertisers are spoiled for choice when it comes to where to spend their advertising dollars, but what they don’t have is a reliable source of highly targeted leads,” said Roberge. Selling actions, like completed forms or a downloaded guide, is something for which both sides get rewarded.

Conversions from visitors to users ready to take action can vary widely. High conversion percentage rates can be in the high 20s. From some discussions with a traffic-rich site we’ve heard that for a site registering around 12,000 members daily, depending on the offer, there is a potential of over 100,000 new leads each month.

The tools of the lead-gen trade are easy to recognize. You’ve seen them many times before. The most obvious method is for sites to create a customized co-registration offer or advertisement that will prequalify leads for the advertiser. If one of the visitors opt in to the ad, they send the information so you can immediately start building a new database. Then you can send them an introductory e-mail and contact these potential customers as often as you like. The cost of a co-registration lead can be between 50 cents and $10 according to the number of fields and additional questions required.

Affiliate programs are the most entrenched form of pay-per-action marketing, but these programs are not for everyone. They share the fact they are becoming increasingly more fragmented and categorized forms of marketing.

As vertical and localized opportunities develop, more industry-specific lead generation services are going to appear. In spite of the lead-gen companies surfacing in almost every vertical, there will still be a strong relationship between advertisers and companies like Google. As I heard one trend-watching pundit comment this week, “the news of AdWords’ death in the coming decade is greatly exaggerated.”

Author Richard Banfield

As CEO, Richard leads Fresh Tilled Soil’s strategic vision. He’s a mentor at TechStars and BluePrintHealth, an advisor and lecturer at the Boston Startup School, and serves on the executive committees of TEDxBoston, the AdClub’s Edge Conference, and Boston Regional Entrepreneurship Week.

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