Building a Lead Marketplace is Hard, as Zillow is Learning

Bill and Dave:
A lot of Buzz about Lead Exchanges again lately.

Dave: Congratulations on opening your Lead Exchange.

As you may know, I originally posted the following to the LeadCritic blog. I am seeing a lot of recent buzz about Lead Exchanges again, so I thought this post might be interesting to the readers of the Lead Marketwatch.

I made a few changes, so here it goes...

When talking about Internet Leads, Leadpile has heard it all before. Many time before! At Leadpile, we have been hearing it for six years!

Isn’t it interesting that almost everyone says the same thing, every time, about leads (they are either good, bad, or in between)? So let’s take a look at what everyone has been saying for years…

“We are the best”, “Our leads are the greatest”, “We rule the world”, “Our leads are better than your leads”, “My leads can beat up your leads”, “Our leads are the Super Duper Leads”, “Your leads are garbage”, “These are the Glengarry Leads“, “Coffee and XYZ Lead Provider’s Leads are for phone closers only!.”

…“And not only that, I have heard that your leads are terrible. How do I know? Well I just spoke to your competition at another leading Lead Exchange/Lead Provider who told me so. So obviously it must be true! Why would they say such a thing about your leads? I can’t imagine!”

And now for the comment about leads that I absolutely just love…(in this case a mortgage lead)

“I heard from my Uncle’s Sister’s Brother’s Aunt’s, Half-sister’s Brother’s Loan Officer (who cannot even close his own sister’s loan because another Loan Officer from another Company just outhustled him to get it done!), that the lead he just bought from XYZ Company “Reply/Leadpile/Leadpoint/YZZ Exchange”) was terrible because it was only a 70% LTV, FHA Rate and Term Refinance (and the customer’s current rate was 8.9% with a 27% back end ratio!).

In addition, he complained that he did not have enough equity to work with to close the deal.

And not only that, he tried a Lead Company out by buying one lead. And when he called that lead four hours after receiving it because he was in a tanning salon, the customer told him that he just signed an application 15 minutes ago with a local lender that sent a friendly Loan Officer over to their home!

Now that is a bad Lead! The audacity! I was in a tanning bed, and some other Loan Officer out-hustled me for the deal.
Let’s give that lead provider a whopping 1.22111 stars for sending a lead to a Loan Officer who waited 4 hours to call it (but has a really nice tan), and then was told by the customer that they signed an application 15 minutes ago with a Loan Officer who drove to their home! These leads are pure crap!

“In addition, I heard through the grapevine that my Uncle’s Sister’s Brother’s Aunt’s, Half-sister’s Brother’s Loan Officer knows another guy (who works part-time as a Net Branch Loan Officer out of his bungalow in Malibu) who just closed a loan by calling 10,000 random numbers from the White pages. And he says that the best leads are the leads you get from the phone book!

So let’s tell everyone about the Phone Book Leads so someone can give them a rating of 97.78899655 (or maybe 12.55 stars) so that everyone will run out and get a phone book.

Let’s make sure that all the other Loan Officers in the world know that the phone book leads are the Holy Grail of Leads!”

Now What?

Well, the good people spreading the good news about the good Phone Book leads are actually the good people who own the Phone Book Company!

How convenient!

So, spread the word! Who needs leads from any other lead provider besides the phone book? All you need is a phone book, and to prove it…Just look at our 12.55 star rating!

Note: I have seen some amazing Loan Officers who could actually close more phone book leads than many Loan Officers who are busy complaining about real-time leads…but that is another post, and another story completely.

So let’s continue…

Let’s say you are selling cars and I give you ten real time delivered auto leads. You do not close one lead. So what do you do next? You say the leads are garbage, right! Right!

Run for the hills…These leads are a joke!! Tell everyone that the Auto Leads I gave you (assuming you are a good closer, with a good lead management system, good supervision, good sales scripting, and a good product to sell) absolutely stink! I will agree with you…for a second.

But wait! I sell the next three leads to another Sales Person, and they close two deals from the next three leads (Too bad sales person #1 did not by thirteen leads instead of 10!)

So now the leads are the greatest thing since sliced bread right? Wrong.

All this really means is that 2 deals closed from 13 overall leads. What this also means is that the sales person who went zero for ten says the leads are garbage, and the sales person who closed two out of three says the leads are terrific!

But maybe the SuperCloser who closed two out of three leads is not going to tell anyone how good the leads are! I sure as heck would not publicize this very much! Would you? He will probably tell everyone he knows that the leads are crap (just like the first guy) to eliminate as many people as he can from buying the good leads!

So what does this mean? It means that the only way to get a more pure, efficient model is a Lead Marketplace with volume.

In essence, the Lead Marketplace makes mince meat of this insanity.

Why? If the leads are working for the buyers, they will continue to buy the leads from the provider through the exchange, and will probably eventually “up their bid” as more competition for the leads is created.

On the other hand, if the leads are not working, Lead Buyers will stop buying the leads and/or lower their lead bid.

Either way, the Lead Marketplace works for the buyers and Sellers. If the leads are not working for the buyers, they can wait on the sidelines. But what happens when the sideline players see the lead prices going up? It may be a clue that the leads do indeed close, and maybe they need to get themselves back in the game (maybe slowly at first, but that is up to them!)

This is the beauty of the Lead Marketplace or Lead Exchange. It levels the playing field.

Bottom line: Lead Marketplaces work and they are in their still in their infancy.
With ramp-up in volume, Lead Exchange will become even more compelling.
To our fellow pioneers, I salute you. To new players to the game, we wish you the best.

Andy Jacob
Founder
LeadPile

Hi Bill, it's David from Zillow,

Your summary is excellent. Balancing supply and demand is a fascinating challenge and has been our primary focus. Surfacing quote data is a great solution for satisfying less urgent borrowers without creating busy-work for lenders and so you should expect us to do a lot more with the information that the marketplace aggregates. The reputation system will take some time (and oversight) to mature and if anything the lack of reviews thus far is a good sign that users aren't abusing the system (for the most part.) Lenders have let us know that they want us to focus on features that indicate buyer urgency. We're kicking around ideas for this; if you have any, I'd love to hear them.