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Believe it or not, old-fashioned offline dating services still exist. Paul A. Falzone runs a few of them, with names like The Right One and Together Dating. To compete with larger players such as Match.com and eHarmony, Falzone, whose companies are based in Norwell, Massachusetts, turned to outside help--an online marketing firm that specializes in rounding up sales leads. Falzone is not alone. A growing number of businesses are using these so-called lead generation services. Online lead generation companies produced $1.3 billion in revenue in 2006, almost doubling sales from the previous year, according to the Interactive Advertising Bureau.
Once used mainly by the mortgage and insurance sectors, lead generation specialists have recently broadened their reach to help all sorts of companies find new customers online. Dallas-based Instinct Marketing, for instance, has provided a big boost to Falzone's top line. It works like this: Instinct maintains a wide array of industry-specific websites it uses to generate leads. A visitor to one of its sites, MatureSinglesOnly.com, for example, is prompted to submit a variety of criteria he or she is looking for in a mate. Instinct forwards the information to a local matchmaking service, like one of Falzone's 60 locations.
Online leads are amassed using numerous methods. The best ones are so-called qualified leads, or people who have expressed interest in your product or service. Typically, those are collected when people elect to receive offers from your company while signing up for something on a different website or when people visit an industry-specific website (like LendingTree.com or Cars.com) and ask to be contacted by a local sales representative. Other methods include opt-out offers, in which prospects must actively choose not to receive solicitations, and mandatory sign-ups as part of entering a sweepstakes.
Companies are using leads generated online for various purposes. Whereas The Right One uses them to bolster the Web presence of its brick-and-mortar locations, several larger companies, including CapitalOne (NYSE:COF) and Foot Locker (NYSE:FL), have recently employed online lead generation as part of their branding efforts--and as an alternative to a broad direct mail campaign. Papa John's (NASDAQ:PZZA), a publicly traded pizza chain with more than 3,000 locations, hired New York City-based Permission Data to scrounge up new subscribers for the company's newsletter, which offers special discounts and trumpets new products and company initiatives. Last year, Permission gave Papa John's more than a million new subscribers for the newsletter. "Ultimately, we measure success in terms of pizza orders," says Robert Ford, director of online marketing for Papa John's. "But branding is a great side benefit."
Other companies use online leads to help them better reach particular demographics. When Russell Klein, co-founder of SendMe Mobile, a start-up in San Francisco, wanted to market his company's ring tones and other downloadable mobile content to Hispanic Americans, he turned to Consorte Media. Consorte, which is another San Francisco start-up, helps businesses target Spanish speakers. It does that by placing advertisements on Spanish-language websites. Click on an ad, and you'll be directed to a customized website with a form--usually in Spanish--that filters leads back to one of Consorte's clients. The company boasts that its network of websites collectively draws 18 million unique visitors a month. Consorte also uses search engine marketing in Spanish to drum up leads. "You can't just translate an English website into Spanish and assume it will still be effective," says Alicia Morga, Consorte's founder and CEO. For instance, she says, though the literal translation of the word debt is deuda, most Spanish speakers interested in debt consolidation would type préstamos, or loans, into a search engine.
Like most lead generation companies, Consorte charges clients on a per-lead basis, with each lead ranging from $1 to $150. The better the quality of the lead--the more information the company can glean about that consumer's age, interests, and income--the more expensive it will be. Some lead generation companies even supplement the information they've gathered online with a targeted phone call. Ward Media, for example, a lead generation company that specializes in the for-profit education sector, runs its own call center to follow up with interested leads.
Online lead generation is one of the primary ways by which SendMe finds new customers, but not all of the company's relationships have gone as smoothly as the one with Consorte. "We've tried a lot of different companies," says Klein. "And we ended up getting rid of nearly 80 percent of them." Indeed, some online lead generation companies have been caught engaging in dubious practices, like peddling the same "exclusive" leads to many clients, buying leads from spammers, and collecting leads with false offers of free prizes.
Industry leaders formed the Online Lead Generation Association, in 2005, to promote better standards, but shady practices haven't been stamped out altogether, and now the Federal Trade Commission is paying close attention. In May 2007, ValueClick, a publicly traded online marketing firm, revealed that the FTC was investigating whether it had violated trade laws with its lead generation practices. ValueClick's (NASDAQ:VCLK) online ads allegedly deceived Web users into providing contact information by luring them with empty promises of free iPods. As the industry scrambles to develop clearer standards, Klein says he is vigilant about researching the reputations of prospective lead generation partners and rigorously tracking the quality of all the leads they send. "We evaluate leads according to factors like churn, conversions, cross-sell, and what service the person ultimately signs up for," Klein says. "It's a data-intensive process, but it's worth it."
Falzone, too, is pleased with his results. "The backbone of our marketing efforts used to be direct mail," he says. "Given the response rates, a lead used to cost us $250. We now pay a tenth of that for leads that are generated online, and the cost is going down every day." Despite added competition, lead generation companies are matching Falzone's companies with a steady stream of new customers to match with mates. That, he says, has helped his revenue grow more than 130 percent in the past three years.