Wireframe Joomla Template

Why Are Leads Vendors Here to Stay?

It’s actually the Insurance Industry’s fault.  By not having the foresight to see how the Internet could affect the Industry, the majority saw the Internet as a fad or some kind of distant distraction. In the mean time, savvy marketers during the “great domain name land rush” gobbled up all the great domains.  This happened long before the idea of Internet leads vending ever came along. They either figured out what to do with these domains themselves, or they sold it off to someone that knew what to do.  Now, fast-forward a few years (that’s decades in Internet time) when the Insurance industry woke up and looked around.  All of a sudden there are leads vendor guys sitting on our doorstep offering up leads that they are getting basically for, well…..free.

Great domain dot COM’s are just like land: “they ain’t makin’ any more of it.”  A good insurance domain name is like owning Park Place and Boardwalk in Monopoly.  And this is exactly what this business has boiled down to; a monopoly by leads vendors creating a layer between the consumer and the Agent.   Bottom line is that 99% of Agents reading this cannot compete with this monopoly.  So yes, this is why leads vendors are here to stay since they own almost all of the great domain names.  Plus, they have many years ahead of agents in insurance lead acquisition over the Internet.

How Does the Leads Vendor Business Model Work?

Our company, IAIMS, owns over six-hundred domain names related to the Insurance Industry.  To be honest, IAIMS has so many domains that it cannot possibly focus on all of them at one point in time.  So to monetize these domains (i.e., make some money while they are just sitting there), IAIMS began to build one-page web sites to collect lead information and send it to leads vendors.  Turns out in the online marketing world, insurance leads carry a pretty decent bounty; in the price range from $8-$12 per lead.

So this is how it works - because IAIMS owns CaliforniaHomeInsurers.com, this site got some organic (free) traffic (visitors) from search engine searches.  Every now and then someone would fill out the forms and click the “Submit” button.  That information went to a leads vendor and in return, that leads vendor would deposit money into IAIMS account.  It’s that simple.

Now let’s look at the scenario from the Agent side of things.  The leads vendor may have an Agent make a deposit of $2,000 to start an account with them.  Every time the leads vendor sends the Agent a lead, they deduct $16 from the Agent’s account balance.  When the Agent’s account hits $0, it’s time to dump in another $2000 so the Agent can stay in the game.

Here’s what the leads vendor didn’t tell the Agent (or maybe the Agent just didn’t read the fine print).  Every time that Agent received a lead, so did 14 other Agents?!?   It becomes a mad dash to see who gets to the consumer first.  So let’s do the math.

15 Agents x $16 for the lead = $240 gross

$240 gross - $8 lead cost = $232 net

$232 net / $240 gross = 96.6% profit margin

Not a bad business, eh?

What about bogus leads? Many times the Agent may get bogus leads that can be reported to the leads vendor and the $16 the Agent paid will get credited back to the account.  But how many Agents out of 15 report those bogus leads?  As such, leads vendors are still making money on a bogus lead, and they are sure as heck are not going to voluntarily report to the group of receiving Agents that someone figured out the lead was bogus.  Also, remember this is a credit and not a true refund because the lead vendor already made the Agent pay all of the money up front! It seems that leads vendors care about keeping Agents happy just enough so they won’t leave.

Let’s put one more twist on the noodle.  Some leads vendors wholesale leads to other leads vendors!  Oh but they are nice enough to put the following stipulations: “If you buy from us, you may sell the same lead no more than 10 times.  However we get to resell the lead with the same limitations to two other resellers”.  Hmmm…. if my math is right, that means the lead can be sold up to 30 times; that’s twice as many as they were selling if it wasn’t sold as a wholesale lead.   So, despite the low wholesale cost, they are still getting the same amount of money for the lead as if it wasn’t a wholesale lead.  How convenient.

Don’t Worry.  Not All Leads Vendors Are Bad.

In online marketing, I have met some genuine and helpful people who are leads vendors.  We can’t fault them for trying to make a buck; after all it is the American way.  Just as long as Agents understand that leads vendors are mercenaries.  As they are not Insurance Agents themselves, Agents cannot expect leads vendors to have the Agent’s best interest in mind.  The trick is finding the right leads vendor partner that offers the best support, and that has a great track record with other Agents.  These are the partners you will need as we all move forward into the future.

If They Are Here to Stay, Then What Can I Do?

In this Wild West of the Internet, Agents should always follow the doctrine of caveat emptor (“let the buyer beware”).  So protect yourself with education and simply ask the following questions:

1. Are the leads scrubbed? – Most vendors do not do this because it incurs an extra cost per lead whether they sell it or not. Leads can be scrubbed on two levels: validity and accuracy.  Validity means you don’t have “abcd” written in the phone number field.  Accuracy means that the number in the phone field is the consumer’s actual phone number.  If you can find one that does this, then it may be worth the extra cost.
2. How hot is the lead? – Notification time is key.  Find out if you have to log on to see a lead, get it in the email, or if you can get this lead sent as a text message to your phone.
3. How many other agents also get it? – You will have to gauge how deep in the rat race you want to participate.  You can ask for an exclusive lead, but be prepared to pay multiples in price.
4. If buying exclusive leads, are they TRULY exclusive to the vendor? – Inquire about the source of their leads and have them SHOW the source to you.  If they do not own the site or if the site is not run by one of their affiliates, then they are buying wholesale leads.  You don’t want this.
5. Is there automatic delivery to back-end systems avoiding duplicate entry? – Some vendors are getting advanced and thinking about the agent by routing leads directly into your software systems.  This saves on work and human error through double entry. These guys are worth a shot if you can find them.