Lead Generation, The Underappreciated Revenue Channel – with Jay Weintraub

How much of your revenue is coming from lead generation? With lead gen, a company gets paid every time it gets a user to do things, like fill out a form for a mortgage request or ask for a local contractor or apply to a college.

Jay Weintraub is the founder of LeadsCon, a premier conference and trade show for lead generation, the premier and the largest. I invited him to Mixergy to teach how the leads business works and to talk about how the most successful companies use lead gen to grow.

The FULL program


About Jay Weintraub

Jay Weintraub is the founder of LeadsCon, the pioneering conference and expo dedicated to increasing the effectiveness of those operating in the online lead generation industry.

Raw transcript


This transcript was prepared by SpeechPad.

Three messages before we get started. First, do you know what I did when I needed a simple document template? I wanted it to look good. So, you know what I did? I went to 99designs.com. I described exactly what I wanted. Then, I got a flood of designs that were customized to my request. I picked the one that I liked, and I paid for it. 99designs is the largest crowd-source marketplace for graphic design. When you need anything designed, maybe, you need a logo, a website or like me, just a new document template, go to 99designs.com.

Next, RateBrain.com, a site created by a Mixergy viewer, is where you want to go to find the best CD rates and savings rates. RateBrain updates its data daily. RateBrain has more fresh and comprehensive rates than the competition. And with Rate Brain you can even get an alert when a rate changes. RateBrain.com. Go check out the website.

Also, why is it important that Scott Edward Walker, the entrepreneur’s lawyer, participates in online startup communities? Why do I think it’s important that Scott Edward Walker writes on popular entrepreneur blogs? Well, I think you’re going to agree with me. I’m having a hard time with this. I have to make sure I say it all clearly. I think you’ll agree with me, is what I want to say, that as a tech founder, you need a lawyer who gets the startup world and knows who’s in it. If you need a lawyer and you’re a founder, I recommend going to WalkerCorporateLaw.com.

All right. Here’s the program.

Andrew Warner: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. And what I do here is I invite people who are building interesting Internet companies to talk about how they do it, to teach you and, hopefully, you’ll take all these ideas, go out there, build an incredible company and do what today’s guest is doing, which is come here and teach.

So, big question for today is how much of your revenue is coming from lead generation? With lead gen, a company gets paid every time it gets a user to do things, like fill out a form for a mortgage request or ask for a local contractor or apply to a college.

Jay Weintraub is the founder of LeadsCon, a premier conference and trade show for lead generation, the premier and the largest. I invited him to Mixergy to teach how the leads business works and to talk about how the most successful companies use lead gen to grow.

Jay, welcome to Mixergy.

Jay: Oh, thank you very much for having me.

Andrew: I said the largest. How many people are coming to your conference?

Jay: We see about 3,500 people a year and growing. We run two events, one in Las Vegas and one in New York. And probably not a surprise, the Las Vegas one is still the largest.

Andrew: All right. Give me an example of a company that’s doing lead gen well and one that can maybe help us understand how lead gen works.

Jay: We could easily talk about a public company doing lead gen, but I think a more interesting example is going to be a good buddy of mine who was here the other day. He runs a site called Boomerater, and I met him at an ultralight sort of startup mixer. It was funny because at the time he was trying to build a social networking and community site for boomers and seniors. I think everyone knows boomers and seniors, so why not put them together?

It just so happened that he discovered, well, let me put some other content on the site, and the other content was I decided to aggregate listings of health care facilities. Nothing that we necessarily think about. But, if you’re a boomer, especially if you’re a senior, you’re starting to think about places to live after your main home.

So, it turned out that he created this content and this directory. And before he knew it, he was getting requests from other directories, other places to be listed on his site, and he was getting consumers who wanted to then go and get more information about those particular properties.
Before he knew it, he was like, wait a second, I’ve got this lead gen business and I didn’t know it. So, a little bit of tweaking and all of a sudden he has a very profitable revenue center of visitors who were coming to his site and saying, “I’d like to learn more about this property,” and paying him for a lead.

We talked about getting paid for a lead. It’s not small change. We’re talking anywhere from $20 to $40 for a relatively short form.

Andrew: Okay. And this was for . . . we cut out when you said it. But it’s for health care facilities, right?

Jay: It is for the elder care and sort of private care facilities, yes.

Andrew: Okay. All right. And in a standard advertising model, he would get paid every time he showed the ad, and another way to monetize it would be to maybe charge people for top placement or to charge them per click. But what he’s doing that makes it a lead gen business is he’s actually collecting the user’s name and address and requests for follow-up.

The reason that pays more is because he’s getting a user to take more action. But because it’s embedded into the process, it’s part of his site, he can do a better job of convincing people to raise their hands and say, “Yes, I want more information,” because they trust him because it’s part of the experience that they’re already there for.

How much does a lead like this pay?

Jay: So, a lead like this pays somewhere between, we’ll call it $20 and $40, and we’re looking at, maybe, 10 fields of information total.

Andrew: Okay. And do you have a sense of how many leads he’s generating a day?

Jay: I’m trying to figure out how much we can say without giving away his own revenue, but needless to say it’s more than enough to give him a healthy, six figure, high six figure a year channel just for the leads. And it’s relatively new and growing.

Andrew: High six figure a year, you and I talked earlier about how we might be able to say this without violating the trust that your friend put in you. So, what we’ll say is it’s enough to, at least, hire a couple of people to help run his website. And it’s more than that, but we can say, at least, that, and that’s what he’s doing with his business. It’s called Boomerater.

Jay: Yes.

Andrew: All right. How about another example, maybe a more popular site that people are more familiar with?

Jay: I’d say two of the sites that people may have come across have followed a pretty similar approach, and that’s Vitals.com or HealthGrades. Another one that they may not know about yet, depending on their life stage, would be a company like Sittercity. It’s another good example. And similar to Boomerater, these are companies that help connect customers with service providers. They are paid for the fact that they are connecting a customer with what is usually a long tail of particular providers and adding some value in there so that you can find them. So, again, it was Sittercity and Vitals.com. Another one I think that is really neat to check out is Avvo.com.

Andrew: Okay. All right. I’ll tell you what. For the audience, I want you guys to know where I’m going to this. We talked a little bit about the basics. I want to make sure that everyone understands it. The next step for me is to understand how the business breaks down so that we have an understanding of the two categories that Jay and I talked about in the pre-interview.

And then, Jay, I’d like to ask you about how the companies who are listening to us right now can use lead generation, can get into it if they’re not it or, maybe can get more revenue from it, if they already are.

So, let us start off with the two categories that you and I talked about in the pre-interview. What are those two?

Jay: We talked about the notion of a directory site, and we talked about the sort of arbitrage business. The directory site is kind of a pretty self-explanatory term, and it sounds to some people, depending on their age, you know, it may sound like what Yahoo did way back in the day and that’s so old school. Who could possibly do that? And it turns out that there’s still countless areas where if you can aggregate and organize information that’s kind of scattered and maybe enhance it a little bit, you’ve got a business that Google will find viable and will get you traffic.

A story I like is a guy that runs a company called Relocation.com, and you’ll find so many of these stories are individuals or a pair of people. And the way they got started is pretty simple. They said, “Wait a second. I have a problem I’m trying to solve. I don’t understand this market.” And this market is usually some form of life event. It’s usually some form of, a transaction that costs money. Moving costs money. And so, he decided to create a listing of different moving companies and their attributes, and before he knew it, he was getting traffic. He was getting moving companies that said, “I’ll pay you to put me up at top.”

We see it with “Pick a specialty of doctors.” We see it with lawyers. We have several that were really prominent. This was the AVVO example of a legal site. You’ve got a huge number of attorneys, and you’ve got customers who are trying to say, well, maybe, they need bankruptcy help. Maybe, they need personal injury.

And so, it’s saying, okay, the Yellow Pages is not very helpful, but I can do that a little bit better and make it user friendly. And it turns out that that turns into very profitable businesses pretty quickly because you will start to accumulate the user queries, both in the keywords and the proprietor’s names. And then you find the proprietors who want to spend money because they’d like to get better known.

So, that’s the directory model. Pick an area, aggregate the information, add a little bit of value to it. There’s a great number of examples of light startups doing that.

The second is saying there’s a lot of paid traffic. Google, now Facebook, there’s a ton of self-service platforms. Gee, if I can generate a lead for somebody that might be interested in going back to school, get their master’s or finish their bachelor’s online, wow, that pays me $40. How much does a click cost? Clicks, what’s my conversion rate? And can I make this work? And so, you’ll find some really interesting stories of companies that said, you know what? I’m going to make this work. It’s two different approaches — one of buying media and the other of building a media property.

I think we talked about some examples. These are ones where you probably have not heard of them because instead of trying to build up a Vitals or a Relocation or a Sittercity, it’s something something interactive.

There’s one in the education space that’s done very well in Search, and it’s called Tightrope Interactive. And they do a lot of paid search for the for-profit education sector. It’s a tens of millions of dollar a year company that started out as just a handful of people and a will to make it work.

Andrew: All right. Let me see if I understand it. So, we’ve got two different categories. One is a directory model, and the other is the arbitrage model.

Arbitrage, I did interview with Jerry Shoemaker. He says whenever there is a new ad opportunity out there, he’ll buy a little bit of it. And then, he’ll direct it towards some kind of lead gen or affiliate program. So, he gave us the example of when Facebook started selling ads, he bought ads on Facebook that led people to a test where, I forget what the test was, but once you won it and you were definitely going to win the test, you got a free Netflix or you got to sign up to something else, and he got paid.

Jay: Yes. That’s great.

Andrew: Right, exactly. And whatever it is you signed up for, essentially you’re becoming a lead to another company and he was getting paid.

The directory business, I did an interview with an entrepreneur, who I can’t remember right now, who said that what he looks for are major life events, like when people get married, and he creates a directory around it. In the case of weddings, what he’ll do is he’ll have an engagement ring directory where you can find a local engagement ring or you can find someone who will call you up and give you some advice.

Let’s take those two. I want to dig deeper into them, and then I want to go to the next step of this conversation. Sittercity, let’s use Sittercity or maybe Cooler Planet as an example of the directory model. Which do you want to talk about?

Jay: Well, I think we’ll start with Cooler Planet.

Andrew: What is Cooler Planet? It’s a directory of what?

Jay: Cooler Planet is a site that is helping consumers install solar panels. So, it’s taking advantage of energy saving trends, solar panels, and ultimately they make their money by selling a lead to contractors that can help you with the installation. It has all the right . . . when we think about lead gen, what are we looking for? You’re generally looking for some offline transaction, and you’re looking for something that generally has a decent ticket price, in the case of solar panels, high ticket price. Government subsidies are making it more attractive, so the market is getting bigger.

And where does Cooler Planet play? It’s something where users are going to be looking for information and saying, “Hmm, not only do I not know who to turn to, I’m not even smart enough to figure out what I should be asking.”

And so, they said, “We’re going to help you become smarter in this process. And then, when you’re ready to do it, we’ll connect you with a contractor that can help you.” And when they connect you with that contractor, they get paid for that lead.

Andrew: Gotcha. All right. That’s great. Because you know what? I wouldn’t know where to look for solar panels. I wouldn’t know where to even begin understanding whether they’re a right fit for me.

Jay: Exactly.

Andrew: The first thing I would do is I would go to Google, and I would do a search to see if I could find a local solar panel installer, I guess. And that’s what people do. And then, their goal with the directory business is to rise up in the rankings on Google, make sure they’re one of the top three results so that they could convert me to a customer on their site, or to a lead at least.

Jay: Yes.

Andrew: Sittercity, have they come to your conference?

Jay: Sittercity, I met them just the other day. Hopefully, I’ll be seeing them out at the Las Vegas event in March. So, Sittercity, they and Angie’s List are two directory models. They turned lead gen on its head. So, they say, “You’re a parent. You’re looking for a babysitter.” Instead of charging the babysitter, who gets the lead, they actually charge the user for access to the directory.

So, they’re sort of saying, who’s in need more. A contractor is the one more in need, they pay. And so, it’s a fascinating approach where, similar to Angie’s List, the consumer ends up paying. So, it’s a different take on lead gen, but again, it’s all about aggregating content and helping you figure out who you should talk to.

Andrew: Zillow is the website I go to to find out what my friends’ houses are worth or what my house that I grew up in is worth today and so on. They also have a lead gen component. What is that?

Jay: This is one of those where if you had asked Zillow or talked to Richard Barton from day one, “Lead gen? What’s lead gen? I don’t do lead gen.” And so, it’s one of those things where it just sort of, “Hey, wait a second. This is the best business model for us.” And so, it’s a great example of how you stumble into lead gen from a consumer site.

In their case, exactly, you’re finding out what your family’s home is worth, or maybe you’re actually looking for a property. Being in Manhattan, there’s nothing more fun than going to Zillow and being like, what’s that one, what’s that one? And who knows, maybe you’ll find one that you are actually like, “Hey, I can almost afford this.”

And so, what’s the next step? It used to be, “Okay, I like this house. Let me go call the realtor, and then I’ll go through the realtor, and then they’ll refer me to a mortgage broker.” Here, it’s different. Instead of saying, “All right, I have found a house. Now, let me get a good offer, and I want people competing for my business.” Not to sort of talk about The Lending Tree approach. But it is very much similar to that.

So they’ve let mortgage brokers basically sort of list themselves on the site, and you, as an individual, will fill out some basic criteria about the loan that you want. And you will see which people will offer you the best deals. And the when you select one of those people to talk to them, that’s when they get paid.

Andrew: I see. Zillow gets paid by that mortgage broker. All right. That’s the directory. Let’s talk about arbitrage for a moment. Arbitrage is where someone says, hey, I can buy a click super cheaply. I can bring that user to my website after the click, and I could convert them into a lead of, maybe they signed up for a college at the University of Phoenix. Maybe they sign up for a mortgage. Maybe they get debt consolidation or a lawyer to help them with their bankruptcy.

Who’s doing that well?

Jay: There are people doing it. What’s made this one so compelling for so many people . . . pardon me for a second.

Andrew: Yep. Go for it.

Jay: What’s made this one so compelling is if you talk with Jeremy, Jeremy when he started, it was as simple as going to an affiliate network, picking up a link, buying a click, and sending the click somewhere else. You didn’t have to build anything. You just had to buy.

And so, this means that anybody could become an arbitrager. And when you think about what’s the next level, the next level is when you build out your own pages. And so, you’re buying traffic to your page, but you’re getting paid by sending that lead somewhere else. So, it’s an interesting distinction. Instead of just buying the click and sending it to someone else’s page right away, you’re buying it, sending it to your page, filtering, creating that intent, capturing that intent and sending it off.

And so, we see now it’s . . . well, one of my favorite examples is, just because they’re great guys, a small company in San Francisco called Ampush Media.

Andrew: Okay.

Jay: It’s young guys, smart, former bankers. And as is the case, here they were in their banking world, and they came across this for-profit education. And a little digging sort of says, life event, sort of expensive. And it means that these companies will pay for a lead. And they said, “You know what? Surely, if there’s all sorts of scrappy people doing this, a couple of smart guys can get in there and figure out how to make it work.”

And I think, as they’ll tell you, it wasn’t quite as easy as they thought it would be, this arbitrage kind of route. They’ll talk about their first experiment of a lead where it cost them $400. They thought, it’ll be easy. I’ll buy a click for a couple dollars. Surely, I’ll get enough of a conversion rate, and I’ll break even at best. I remember them saying, we’re having these hundreds of dollars per lead. This is a nightmare. But again, at least their premise was correct that smart guys were able to figure out pockets of traffic and make the math work.

Andrew: Okay. It’s about finding the right traffic, and it’s also building the right landing page. It’s also increasing conversions. It’s all the stuff that goes into getting a random click into a lead.

I want to go even more basic than that. I want to say to myself . . . I’m thinking right now. Someone in our audience has a big audience for themselves. They want to add a directory to their site. They want to start maybe collecting leads. They don’t even know where to shop around to find the companies that are buying leads. They don’t know what offers are out there. Where would they go?

Jay: LeadsCon, of course.

Andrew: Actually, you know what? I know you’re here and it sounds like a commercial for it. But I do think that going to a conference and talking to people, LeadsCon is the right place to go for it. Is there a directory online for this stuff?

Jay: You set me up too well for this one. This wasn’t actually the case.

Andrew: Okay.

Jay: This is probably why, and I have to say that we in the lead gen world have not done a good enough job of letting people who are interested in this space kind of know where to turn to. As a result, it’s been a lot of entrepreneurs who had to do it on their own. So, I’ll give a couple of examples.

We’ll get back to the Homeboodle guy. How do you do lead gen for real estate? How do you help new home builders market their properties, and then you get customers who are interested in seeing those properties? They don’t know anything about lead gen, so they had to go out and find the lead buyers, build everything. They didn’t know is there a company that is already aggregated real estate agents?

Andrew: See, that’s what I would want. I’m wondering, not just real estate agents, but is there a company out there that would say, “In real estate, here are all the people who are buying leads, all the different kinds of people, and here are some specific companies you can contact. And in the contracting industry, here’s who’s buying leads.”

Is there a directory like that the way Commission Junction acts as a directory for affiliate programs?

Jay: I don’t think there is, and I think what you’re telling me is something that I need to be doing. But, if I’m doing my job right, I should be building this.

Andrew: It’s a great idea.

Jay: It is. And it’s one of those things where, like anything else, you end up getting into it, stumbling around, and then you figure out the map of the forest. Like any other landscape discovery, the problem is people have to end up knowing, oh, home improvement. Okay, I go to QuinStreet if I want to do home improvement or education and, maybe, senior housing and now insurance. If I’m in insurance, then I’m going to go to BankRate. They have Insure Me and NetQuote.

Andrew: So, there’s nobody that has a directory of leads offers who might make money from creating leads for the leads business. There’s no directory I can go to and say, “I’m in the real estate business. I want to collect leads. Here are a couple of companies. I’ll give them my email address.”

Jay: There is one.

Andrew: Who is that?

Jay: It’s just starting, and it’s TheLeadsPages.com. There is not, at this moment, that exact, sort of what you described, where it’s super comprehensive because it’s a world of people out there trying to make their money. And they haven’t picked their heads up and go, “Hey, find me over here,” necessarily.

Andrew: Interesting. LeadsPages.com, does it pain you to say their name because they’re building something that I just gave you the idea that you should be building?

Jay: No. But maybe I’ll pick up the phone and give them a shout. We’ll watch a rise in traffic as a result.

Andrew: All right. Okay.

Jay: There’s a LinkedIn group for lead gen, and so that’s also 5,000 members there. That’s another sort of area where people will go, read the discussions in the forum, but it’s very ask questions and read. Again, it’s not necessarily . . . I was embarrassed. I had someone contact me today, and they said, “We have real estate agents. We need to get more leads.” I was struggling to name more than a handful because I didn’t have that cheat sheet.

Andrew: Once people find the leads that they want to add to their websites, what do they do? What’s next?

Jay: What’s next is they have two major options, and it depends. They’re either going to send that click, that user out to another person’s page and then get paid if that person . . . so let’s say that you and I, we either weren’t all that sure if we wanted to build out . . . we’ll use senior housing as an example. We wanted to have a directory of senior housing properties on our site or a directory of lawyers or other service providers or contractors. But we weren’t sure if we wanted to collect the information on our page and send it to them.

And so, the first option is that you might consider, and many companies will require this, and when I say many companies, let’s break down the ecosystem real quick. You have an end lead buyer. It could be an individual contractor. It could be an individual school, mortgage broker, service provider of some sort, and then you would have the aggregators.

So, you would have companies like Education Dynamics, QuinStreet, NetQuote for insurance. They’ve aggregated a large number of these end lead buyers. So you, as an individual, have a choice. It’s you can do the leg work of trying to get all these individual lead buyers or, especially in the beginning, turn to what is an AdSense like solution, a one stop shop for sending interested traffic.

Now that we’ve talked about that relationship, when you send that traffic, you will oftentimes in the beginning, you will have the info on your site, but a user when they click to learn more or to contact is going to jump off to the aggregator’s page. That’s a pretty common implementation. And it’s usually when you’re getting more committed and the trust is greater will you be able to . . . they don’t use the term API necessarily in the lead world, but they’ll give you the host post information so that you can build the forum and send the data.

Leads are interesting because fraud happens in leads. What’s to stop an enterprising person from picking up the phone book or hiring somebody in India to go through the phone book or some other, the Philippines or some place where they can arbitrage the labor and say, “Okay, here’s a handful of sites. Start entering leads. And by the way, change your proxies and do some other stuff.” And you pay them $10 an hour while they can make a hundred just by submitting leads. There’s a risk element involved in leads. That’s why there’s a trust issue where you say to somebody, “I want to host.” Initially, they may go, “I don’t know.”

So, I was talking to the guys at Vertical Brands today, and they run a My Apartment search. So, neat entrepreneurs, another set of guys that came from finance, and said, “We want to be web guys.” So, they created a really cool metasearch properties for apartment rentals. They can tell you exactly about this where in their first conversations they would display the listings, but when a user wanted to learn more, they had to get sent off to the other company’s site. And it wasn’t until over time and trust that they could create and host all that data on their own site.

Andrew: I see. Okay. All right. Who else is coming to your conference? What are some other tools that we need to be aware of or other companies in this space that we would want to be a part of or work with?

Jay: Some very common service providers tend to be those that are trying to help you know is the person that you’re getting onto your site, are they valid and are they qualified. And so, you can think of it almost like a credit bureau score, except for a lead. And so, you’ll find there’s two companies, TARGUSInfo and eBureau, are the largest players in the space, but it’s a really big field with a lot of other players. It’s where you’ll get a lead and you’ll say, “Okay. Before I send it on, I want to know if there’s anything, how good this particular lead is.” And so, I can get a sense if I’m having good quality because you really don’t . . . the lead comes in. The lead goes out. You don’t really know.

Andrew: Okay. Did you just hit the mute button as you coughed? You did. It worked.

Jay: I did. That’s great. I figured the great people out there had heard me cough enough. And so, that’s why they put the mute button here.

Andrew: Yeah, you know what? I do it a lot. I used to cough into the mike, or I’d just find a way to cough away from the mike. It’d just be too distracting while the other person’s talking. Now, this new mike that I have has a little mute button, and I can just hit it, cough, and come back. It’s good.

Jay: Did the coughing come back? I’m so glad that I had a cough on the day that we’re talking.

Andrew: Are you coming down with something?

Jay: No, I think I’m getting over it. We think.

Andrew: Oh, okay.

Jay: I think. We’ll see. It’s to be determined.

Andrew: Are you a married guy?

Jay: I don’t know, actually. We’ll see.

Andrew: Oh, I see.

Jay: It as, you know, the proverbial . . .

Andrew: By the way, you go to this conference, and you’re seeing guys who are just making bank. In the leads business, two guys from nowhere with no money can suddenly become the two lead top dogs in the leads business, driving around in fancy cars, making tons of cash, having all kinds of TV sets put in the back seats of their cars. You see lot of these guys, right?

Jay: It depends. That’s a loaded question because those guys, living it up as they are, oftentimes aren’t the best for the long term, for the sake of the business. At the end of the day, education is great. There’s so many good stories of two guys getting rich, having the TV sets, and screwing things up for the rest of us.

Andrew: Why?

Jay: When you’re a performance marketer, especially when you’re an arbitrager, and I’m going to do the mute button again.

Andrew: Go for it.

Jay: Tell a joke or something to the audience.

Andrew: Actually, that mute button’s pretty good. I need a cough button, too.

Jay: We’ll put that one on next. A good example, there’s a lot of job sites that are out there. And there’s fake, we’ll call them fake job sites.

Andrew: Yes.

Jay: Go to Yahoo, do a search for “marketing manager SF.” And you’re going to see a handful of these sites that, you know, a thousand jobs found, starting at $100 an hour. You go there and they’re just a reg path trap. You go there. They say, “Wait, wait, wait. I’m sorry. Before you can fill out the form, you have to go ahead and fill out your information.” Before you can see job results, fill in information. And they get you started down a path, and what you don’t know is there’s usually check box that says “somebody is going to call you within two seconds and try and convince you to become a lead.”

Actually, it never says it that descriptively, so you’ll miss a check box saying, “I agree to be called.” And then before you get your job results, you’ll be taken through a hundred steps of, maybe you’ll want to sign up for mobile alerts. And by the way, before you know it, it’s $19.99 a month for these mobile alerts. And so, it’s all for something that actually should be free.

Andrew: Are the companies that are paying for the leads getting leads that they could convert profitably, and the companies that are generating the leads, are they earning enough of a profit on this to make it all worth their while to do this to the end users?

Jay: The generators, yes. The companies buying, now we’re seeing not so much. Good example, for-profit education. It’s a multi-year commitment. We always thought just get them started, that’s profitable, and the schools thought this too. Get them started, we’re fine.

But then, they realized, whoa, whoa. These people are dropping out. They’re not finishing. And if want a scary type of debt to not repay, federal student loan debt is the kind of debt you’d want not to repay. If you really want to have your life screwed over, stop paying those bills.

And so, that’s what happens. Before they knew it, it’s not saying that they were completely innocent in this process, but it’s such a long lag before it sort of realizes that, wow, this isn’t profitable. Let’s face it. They don’t have complete transparency either. While maybe they were understanding that there was some behavior that is not acceptable, now we’re talking about a billion dollar company that’s in jeopardy of losing 85 percent of its revenue because of what’s going on. So, big, big issues happening. It’s really just saying that the tactics that are profitable from one side, unfortunately, don’t make it profitable for the other side.

And that’s why performance marketing, lead gen, in some areas gets a bad reputation because it does allow really hungry aggressive people to find ways to make money and get away with it for a while, and then switch and do it again.

Andrew: I see. Okay. All right. But was there anyone who earned those TVs in the back seat of their car?

Jay: Yeah. A great example is a group of guys that was World Class Strategy.

Andrew: Okay.

Jay: Just good people. It was two brothers and a tech co-founder. They were in the Seattle area, not your typical tech guys. They were building out sort of directories in the education space in 2003/2004. They were sort of early at it, doing it very diligently, learned how to buy media. And they grew this business to what was a high eight figure exit. And so, it was a great example of people who were doing it the right way and earning the bling that they now have in the back of their H2s or something.

Andrew: I see. And so, it’s about building those directories, taking your time to learn how to get the traffic, how to convert that traffic, make sure that you’re generating quality leads. It’s all the basics that go into building a business.

Jay: The best litmus test there is, if you’re generating something, would you call it? Would you actually, if you had to buy it, would you buy it and would you call it? And so, if the answer is . . . you may not want to because it’s a tough job, sales, very tough. At least, I would talk to them and help them understand what to do. You’re doing the right thing.

Andrew: Is there still room in this market to build out directories or to arbitrage traffic, or have so many of these guys jumped into this space that every directory that’s going to be built feels like it’s built already and arbitragers have just bid up those ads so high that it’s hard to convert them profitably?

Jay: It’ll feel like that, but the answer is there’s still room. We see it almost daily. New arbitragers are coming in, and they’re either finding niches that hadn’t been uncovered before and the same thing with directories. There’s still service providers and so many areas that just have not been covered. But it’s still going to feel like there’s somebody already there. There’s just three 10 spots on the first page of Google.

It turns out that it’s such a ripe area for people who are saying, “I’m going to find high value niches, no matter what it is. I’m going to build out little pages.” Or if one of the people listening happens to have some money, a great way to get in the space is to find somebody that has built out little directories and may not have the savvy to take it to the next level, and/or you can aggregate more than one to achieve scale. So, there’s this resurgence in building content sites and those who are also buying up existing content sites.

Andrew: I see. Okay. What about you? You’ve been running this business now for a couple of years. Started from scratch?

Jay: Started it from scratch. I joke and call myself a glorified club promoter. I think this is sort of the token term you get. I was a near founder, right? Sounds good, I guess, but I was a near founder to a really cool company out in the Los Angeles area. After being there for about five years, I’m not a great hundreds of person company guy. So, never had the desire to be in the conference business, but I think, like many, I found myself trying to fall asleep at night and go, “Wow, why isn’t this here? And if it exists tomorrow and I don’t do it, I’m going to be pissed.” It was that, okay, I have to do this.

Andrew: How did you get your first sponsors?

Jay: The old-fashioned way. You have to do this. There’s no choice. It’s going to be great. You know, I was lucky. I had been doing a fair amount of writing on this space, so I had a pretty good network of people that I knew. And so, at least, it wasn’t a complete shock. So, when I talked to them about the lead gen world, it was like, “All right. Look, you’re a domain expert here. We get the fact that you would want to do this. It makes sense, and we’ll back you.” So, I think it’s like anyone else. They backed me as much as they did the actual conference.

Andrew: Who was your first big sponsor?

Jay: My first big sponsor was LeadPoint, and LeadPoint is a great company in Los Angeles. It has been my main sponsor for the past three years now, and TARGUS has been a great company. The problem is it’s sort of like getting on stage at the Academy Awards. You’re going to forget somebody, so it’s almost better for me not to say anything. I’m going to forget a company.

Andrew: Let’s talk about LeadPoint then. Did you know them before you got them as a sponsor?

Jay: I knew the company. Where I had been formerly working had some relationship with them, but I can’t say that I actually had an obvious “in” that was going to guarantee me anything. And so, it was really coming up with what I thought was a good proposition and say, “You represent sort of the marketplace. You’re in the digital marketplace. It’s time for a physical marketplace in the industry. It makes sense for you to be the thought leader in that space and kind of show your overall presence because you’re agnostic in terms of the verticals that you operate in, many reasons.” And so, they were my first target to say, “Don’t just spend money. I think you should be the title sponsor level.”

Andrew: How did you get people to attend? That’s always interesting.

Jay: [interference]

Andrew: Sorry?

Jay: I was saying I was really lucky. I had some great companies that stepped up and said, “Yes, we’ll go ahead and we’ll bite the bullet with you.”

Andrew: How did you get the original event goers? How did you get people to come in?

Jay: That is sort of one of those things where even today I go, “Wow. How the hell did that actually happen?” And I think, like a lot of things, I was lucky. I will be honest and say that there’s more art than science. It’s a lot of emails that go out. It’s a lot of making sure that influencers with networks sort of go there and let their audiences know. It’s fairly straightforward. So, there wasn’t Twitter at the time. There was Facebook. So, it was the equivalent of those who had an audience and making sure that they were engaged enough and saying that we did this.

Andrew: How did you convince an influencer to go? You give them a free ticket, but how do you still convince them to get up and come to a conference?

Jay: The best way is find a topic they’re passionate about and get them up on stage.

Andrew: I see. Yeah.

Jay: And it’s no guarantee that they’re going to then go and blast their entire audience and say, “Come see me here.”

Andrew: But the chances are good that they’re going to. Who is the biggest source of event goers, of ticket sales?

Jay: I’m not sure I even understand the question exactly.

Andrew: Was there one person who sent an email out to his list and sent you more customers, more registrants than anyone else or posted a note on his blog?

Jay: You know, it was actually LeadPoint.

Andrew: So they paid and they also became the biggest driver of tickets.

Jay: What we try to do is create a data co-op, and we say it’s very scary because if you . . . at a lot of companies, they don’t want their clients going. They want to get new clients, but they don’t want their clients going because they don’t want their clients to switch.

We have to get over that hurdle and say, “It’s best for the industry if everybody is there, and if nobody’s there, nobody wins.” So, we try to create a data co-op in a sense where we get as much participation, and we’ve got to the point now where companies see it as a value add. And so, our major companies all market on our behalf to say, “Come see us here,” knowing that they’re going to get a whole bunch of new clients. So, we got over that initial hurdle.

Andrew: I see. So, LeadPoint told their customers to come to your event, helped you make sales, even though they were risking people going to AllWebLeads.com, your other sponsor, and buying their insurance leads from them. They took that risk because they believed it was good for the overall industry?

Jay: And their business, because they knew that by having their clients there, it’s going to make them look better as well.

Andrew: Okay.

Jay: So they sold the virtuous cycle of you’ll see us being the leader, and you’ll get to spend time with us. And you’re going to thank us ultimately for the exposure and the experience. And that’s what’s happened. So it’s now a value add for companies to sort of say, and you’ll see that in your email, I’m sure from a company where they say, “Come see us at X, Y and Z.”

Andrew: All right. Yeah. You know what? When I go speak, I do that, too. Ticket sales are $545. You’ve got 3,500 people who come to your event in a year. So, can we assume, maybe, 3,000 of those people are paying and do 3,000 times 545. Is that about right?

Jay: Is this when I joke? You can assume anything you like.

Andrew: [laughs] All right. Oh, actually, ticket sales go up. Ticket prices go up.

Jay: That’s true.

Andrew: All right. So, you have to factor that in. I’ll say this, 3,000 tickets at 545, which is the discount that people get before November30th, comes out to $1.6 million a year. Am I crazy with this math?

Jay: No. You’re really not that crazy with the math.

Andrew: All right. Interesting. Okay. And then, from what I know about the conference business, tell me if it’s too much because I’m not asking you about specific numbers. I’m just doing the kind of math that I would do on the back of an envelope if I was at home. You just tell me if I’m nuts or not. And then, conferences tend to make as much from sponsors as they do from ticket sales, right? So, it’s probably double that.

Jay: And it depends. I will say, if my business was double what you just did right there, I’d probably be the first to go ahead and tell you yes. But what ends up happening is you end up having it more fully baked in because your sponsors are part. I gave you a number that also includes sponsors’ attendees as well.

Andrew: Right. Right. Sponsors get it, right? Okay. All right. But still, pretty good revenue. Let me ask you this. Does your car have television sets in the back seat?

Jay: It doesn’t, but I have a Metro Card that is unlimited per month, baby.

Andrew: I see.

Jay: I can swipe that thing as much as I want.

Andrew: Interesting. You know what? The reference to the television in the back seats, I remember when I was living in New York and working there, guys who I started my business around the same time they started theirs would suddenly have a hit in the lead business. And one of the first things they would do is they’d start spending it on a car.

Now, you live in Manhattan. You really don’t need a car because where are you going to drive? Where are you going to park? It makes no sense. They get the car, and then they’d have the TV put in the back and then tell me it’s not really that expensive anyway. In the front seat, they would have the TV that would just kind of pop up, and suddenly they were driving to their home in the Hamptons. I thought, wow, there’s a lot of money in the lead business.

It’s true some of these guys are actually building these forms that you and I were talking about earlier with an offer in the beginning of the process that actually takes people through many, many steps until they get to that offer at the end. But the offer doesn’t come at the end, because it comes by email at the end or at some point in the future. And until they get to that step, they’ve signed up for lots of different leads.

To be honest with you, I tried building a business like that. I was trying lots of little things. That was something I tried. It never really worked for me. I don’t know how those guys made it work. It was too competitive to buy ads and then convert people through a process like that.

Jay: I saw the TVs in your car.

Andrew: That’s true.

Jay: I don’t know.

Andrew: That’s true. I used to hire entertainers to entertain in the back seat. TV was just too inexpensive.

Really, if you guys want to check out the conference that we’ve been talking about, go to LeadsCon.com. You’ll get to see all these people who we’ve been talking about. You get to find out about the lead business. You get to go to Jay and find out how much money he’s making. Maybe you can do better math than I can. And you can find out more information from him about his business.

But, more importantly, really check out the leads business, the lead gen business, and give me your feedback. Let me know what you think. LeadsCon.com, I added an “f” by accident to the end of that. That’s not the right URL, LeadsCon.com.

Jay: But thank you. So, I’m going to go and make sure I register it before . . .

Andrew: I think somebody else registered it.

Jay: Yeah. Maybe the affiliates. Maybe somebody will register. You can become an affiliate and make money that way.

Andrew: Right. Become your affiliate and sell tickets to your event and make a commission off of that. All right. Before we lose the connection again, I’m just going to say again, thank you for doing the interview with me.

And thank you all for watching.

Jay: Thank you.

This transcript brought to you by www.SpeechPad.com.

Sponsors I mentioned

99designs - The largest crowdsourced marketplace for graphic design. When I used them, I wrote a description of the design I needed and how much I wanted to pay. I got a bunch of designs back. I gave each designer feedback and picked the one I liked the best. Try them for Logo Design, blog design, app icons and more.

RateBrain – Created by a Mixergy viewer, this site will show you were to find the best interest rates. Could you please click the “Like” button at the top of this page and help him spread the word about his site?

Walker Corporate Law – Scott Edward Walker is the lawyer entrepreneurs turn to when they want to raise money or sell their companies, but if you’re just getting started, his firm will help you launch properly. Watch this video to learn about him.

Share

  • Melvin Ram

    Different type of interview. Interesting to understand a different business model. I have a number of friends in the space and they very much see it as a limited time opportunity, particularly in a few of the fields mentioned in the interview.

    What I’ll add is that the key factor becomes conversions and you have to get good at testing like crazy.

  • http://www.bidsketch.com Ruben

    This was awesome; very eye opening interview for me since I have a product background and know very little about this type of business. I love hearing those clever tactics some of those lead gen people use — it makes me feel like I’m using boring old traditional marketing tactics in comparison.

  • Ian

    Andrew — is there a way to get in contact with Jay? I’ve been in the Real Estate lead business for the last couple years and would love to get in contact with folks interested in the leads generated.

  • Tom

    Great interview, very interesting. But he has the most annoying and distracting habit of pausing mid sentence and clearing his throat, then pausing again. I had to stop watching!

  • Anonymous

    This was a great interview as a high-level introduction to lead gen! As a publisher, I would love if you could interview some practitioners who actually sell leads. After reading this interview, I googled to find lead-gen software for publishers, and it’s a very low signal-to-noise endeavor. If you could interview a publisher who does lead gen so we could get a hands-on view of how to do lead gen, that’d be great! :-)

  • sawa0018

    really good interview Andrew. I find the interviews with actionable ideas/sites to checkout the most useful.

  • Jay Weintraub

    Ian, I look forward to chatting. jay.weintraub(at)google.com

  • Jay Weintraub

    Sorry, Tom. I was getting over a cold!

  • Samira Izadifar

    This was great… Thanks Jay and Andrew! Though, I have to be honest, I didn’t fully understand the arbitrage model.

  • Anonymous

    Samira, the arbitrage model is when you can buy traffic from one source, then convert that traffic into leads that you then sell to another source. So, for example, say you pay Google $700 to get 100 people clicking to your site. Of those 100 people, 20 “convert” and fill out a lead form saying that they want more information about going to the University of Phoenix. You then turn around and sell each lead for $50 to the University of Phoenix. You thus earned $1,000 ($50/lead times 20 leads). Meanwhile, you paid $700 to Google. So your profit was $300 ($1,000 minus $700).

    The benefit of the arbitrage model is that you can buy all the traffic that is profitable for you, so you can make a lot of money. The downside of the arbitrage model is that your business is totally dependent on your traffic sources, including the price of that traffic. If (say) more competitive AdWord auctions meant that Google doubled its prices in this example from $700 to $1,400, you would no longer be able to sell leads for more than you bought them, and you’d have no business at all.

  • Pingback: Lead Gen Answers

  • Pingback: Business tips for startups by proven entrepreneurs – Mixergy » Lead Generation 101 [Resource Page]