Lead generation has faced a tough time recently through some organisations’ unscrupulous practices and people getting their fingers burned as a result. But as firms have endeavoured to bring legitimacy and integrity back to the market, there is now some questions over the future of lead generation firms. Mortgage Angels has predicted there is not enough business to sustain the current number of lead generation companies and said consolidation between firms is inevitable, prompting a mixed reaction.
Nat Daniels, managing director for Mortgage Angels, believes there is a finite amount of business to be found and new entrants to the lead generation market will struggle to survive as they fight for the same business. But this view has not found favour with all. Vanessa Blount, head of paaleads.com, says: “There are more and more people accessing the internet and using it as their first port of call for information. It’s a prime opportunity for lead company numbers to increase, because there will be more business. Businesses need to be run effectively, the idea that there aren’t enough leads isn’t because the lead numbers aren’t there. That’s why brokers need to ask the right questions before signing up to a firm.”
Consolidation
While Daniels does not dispute the market will continue to grow, he firmly sees the consolidation of firms as inevitable and the creation of ‘superplayers’ within the market that will take on leads from other firms who lack national coverage. He says: “We have coverage in every post code. Companies have to have national coverage and a national spread of brokers. Unless you have someone to sell it to, you don’t have a business. So they sell to us, because we have the route to market and advisers.”
However, Nick Chapman, managing director of Leadpoint – a recent entrant to the UK market – believes there is still room for anyone that can generate good leads. “For those operating in a highly professional way there is room to enter. In the past, people have entered and done a bad job, which gave lead generation a bad name. But it is the end of the road for companies like that. The internet is the way to generate highly qualified leads and where companies will make an impact on the market.
“It’s a performance-based market. The companies that are successful at generating good leads are the ones that brokers buy from. Brokers have to be open-minded and test out companies that have transparent policies. If the leads are good, they come back.”
While Daniels sees just a small number of companies surviving and thriving, he does not believe brokers will be frustrated by the lack of choice or that competition will be stifled by such dominant players. He explains: “Essentially we generate leads from hundreds of affiliate websites and the adviser is getting a good spread of the market just channelled through one portal.”
Understanding the implications
Simon Baker, operations manager for Leadbay, points out that many new entrants fail to succeed through a lack of understanding the implications of what they do in the mortgage market. “Part of the problem is the low barrier to entry. Anyone from any country can put a form onto the internet and call themselves a lead generation company. However, it takes a long time to understand the UK marketplace and deliver what brokers want in a model that is commercially viable and in a complaint manner.”
Daniels adds part of the problem for companies coming into the market, via the internet, is that banks are coming into the same area and forcing advertising prices up. But Baker says: “The idea that big banks or even small intermediaries are increasing the price of advertising on the internet is not quite the whole picture. Often we find companies come and spend a huge amount of money on internet advertising only to find it is not cost-effective and then stop their advertising.” “The cost of advertising is not all about who can pay the most. Other factors that affect the costs are how relevant the advert is to the end user and the rate at which the advert is clicked on.
“Small lead generation firms may find themselves struggling to compete and cut corners to stay in business, but intermediaries should be safe with the lead generation companies that have been in the marketplace for some time and have proven business models and conversion rates.”
Despite the rise of the internet as a source of information, Blount says the advisers role is still vital and lead generation is proof of this. “People are not going to cut advisers out, because they still don’t like putting their information in online and the average man in the street isn’t confident enough that the product in front of them is right. I’ve looked at lender websites and found only one had an online application for mortgages and that speaks volumes. Customers are not yet ready to apply online.”
Whether the lead generation industry can or cannot sustain new entrants is something that only time will tell. What is apparent is it is the companies providing the leads that convert into business that will find favour with brokers and survive. If the ‘super players’ do emerge, one can only hope complacency does not set in and the quality is maintained.
