Small Businesses Should Generate Their Own Leads Online

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.

Comments

[Andrew]

Not to over-simplify it, but might it be that these local business don't have the manpower, infrastructure, or even care to do it themselves?

An analogous example might be selling homes. I COULD sell my home myself, but I'd prefer to cede some control and pay some commission to have a realtor do it for me.

There are a million niches and business where a middle man (in this case a lead generation company) plays a role in facilitating some transaction. In nearly every case, it would be cheaper and better for the buyer/seller to deal directly with the seller/buyer, but more often than not, it is far less efficient to do so.

Now lead QUALITY and where leads are coming from, and transparency is a different story...lots of grey area for shady companies to be shady in.

[Peter Caputa]

Well put, Andrew. And given you have lots of experience in online lead generation, I am sure you see this from different vantage points.

Lead generators certainly play an important role - being the middle man between a seller and a buyer. And I can't imagine every small biz owner coming up with adwords campaigns, designing banner ads, writing their own blog, etc, etc - in order to generate leads for themselves.

But, I do think that more small business owners will get savvy to all of this. (Or maybe more mid sized biz owners.) For example, I can't see every realtor writing a blog. But, it certainly makes sense for a coldwell location with 30 realtors to write a blog and do ppc campaigns for the office.

They will certainly still buy leads from 3rd parties. But, they'll learn to "create demand" online like they "create demand" offline. Meaning... networking/prospecting will increasingly be done online through blogging, ppc, email marketing, link building, commenting on blogs, etc.

Most importantly, I also think that there is more room for innovation on the web around connecting local buyers/sellers of services. Currently, google has a near monopoly over "buyers looking".

I think sites and services will spring up that allow buyers to find sellers without sellers paying for it. Or atleast without them paying for every click or lead. Similar to a networking event or a trade show, where a "seller" pays a flat fee - and their success is dependent more on their ability to network and sell (and help buyers solve their problems) - less on their ability or willingness to pay google per click or a lead generator per lead.

There's too much money being made right now... the market is too big and profitable. Lower cost or no cost solutions will come along and make adwords less profitable by reducing the friction between searcher/buyer and merchant/seller. If you look at what craigslist did to classifieds... i think a similar app will arrive that'll destroy the profitibility of adwords....putting the power of local commerce back in the hands of local people... not needing to pay it's tax through Silicon Valley.

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[Innocent O.]

Let's be honest with ourselves. The web is filled with more scams than legit opportunities. It's hard to find something that really does deliver what it promises. Some of the scam programs now call others scams, promising not to charge you any money. Then, at the end of the webpage, they are telling you to buy something from them. I have been looking for REAL paid survey site for a while now. I paid to join the top 5 I could find. I have to say that 3 of them were total crap. One was so-so, but it only had about 25 companies to work with. One of them was definitely head and shoulders above the others. It had everything it said it had, and it was easy to get started making money. That's the one I'm stuck with: http://www.all-teamed-up.com/?frankinno

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[DEKARONデカロン-RMT]

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