Here's the case for it:
Here is one example: Take a look at one of the highest lead generation sources available today: Google. Type in “real estate” or your local area such as “Seattle Real Estate”
As of the moment I write this (Wednesday, Sept 12, 2007), roughly 70% of the pay-per-click advertisements for “Seattle Real Estate” are going to lead generation companies.
What does this mean?
According to Google the average cost of having an ad under “Seattle Real Estate” is $3.74 to $4.95 per interested lead. There are 107 to 134 users per day clicking on that ad, which therefore has a daily cost of $410 to $670 to capture every person looking for “local real estate” in a decently sized metropolitan area.
Now we use basic business math to come to the conclusion of how the market becomes “destabilized” in this scenario.
With 70% of the leads potential of Google’s pay-per-click system going to lead generation companies, realize they have to sell the $410 to $670 of daily leads back to the real estate professional at a higher rate.
Depending on the lead generation company- the rate may be anywhere from 2% to as high as 200% over the cost they paid for a lead. For a real world example, this is just like the ticket scalper who stands in front of a stadium and buys the hottest seats and resells them on the street for twice what they paid.
Using the Seattle example: realize the monthly ad potential of Google alone for the term “Seattle Real Estate” is $76,930 to $129,830. Unlike a street scalper selling tickets however, the online marketplace becomes even more problematic because the scalper in this case doesn’t really tell you exactly what type of lead you are buying. It could be hot… or it could be cold. It could have come from Google pay-per-click, a professional partner, a blind mailing list or anywhere.
So that brings us to the real question: Why isn’t every agent or broker a lead generator online?
I don’t actually know. There are tools and services that require minimal effort to become your own lead generator. This effectively cuts out the middleman who is charging you more for what you already had access to. Every time you look at a magazine, a newspaper, a website, or a search engine and see a lead generator company advertising you should be asking yourself, “Why am I not buying that ad directly from the publisher?” or “Why isn’t my information there?”
I think this is my new mission: Helping small businesses cut out the middle man for local online lead generation.
This space needs a craigslist.