Last week, we were invited to present at the inaugural LenderPalooza in Houston by Owen Raun from RMC Vanguard. See the press release here. In addition to running one of the best lenders focused on online mortgage origination (see the shelf in his office with award after award), Owen blogs intelligently at www.mortgageonlineblog.com and he hosts industry luminaries on his podcast. Last week, he had the foresight to put together a group of the smartest folks in the industry to talk about ways to get better. At Sparkroom, we are all about transparency, and data, and sharing; anyway, we love other people and companies who share our vision and values. All in all, it was a great day and we will be blogging more about what we learned in the coming weeks. Owen – thanks for the invite and we tip our hat to you for putting this event together. And another hat tip to the all of the lenders in attendance who had the courage to share best practices with each other. Business is way more fun when you work with smart, trustworthy people.

At Sparkroom, we spend a lot of time working with our lead provider partners. At the end of last month, we spent a few days visiting with some of the lead providers in Los Angeles and the Bay Area. After the series of meetings, we started trying to recognize the patterns that differentiate the lead providers. On the buy side, lead provider differentiation is driven by a pretty simple equation. Lead provider value = volume x quality x consistency x price. But this got us to thinking, what assets are important to be a great lead provider. How do they create value? What are the core assets of a lead provider?

Lead provider core skills = customer acquisition + monetization

Customer acquisition is pretty simple. How does a lead provider generate leads? An incomplete list of lead gen methods would include search engine optimization, search engine marketing (PPC), brand (see LendingTree), domain names (www.mortages.com), online display ads, affiliate marketing, and email lists.

Monetization is also pretty simple. For the small guys, they can monetize through an exchange like Leadpoint. This is a good news/bad news story. The good news is that you don’t have the cost of developing a sales force. The bad news is that you give up some of your economics in exchange for not having a sales force. For everyone but the small guys, there is the cost of a direct sales force and an account team. But monetization is about more than having a customer list, it is also about lead distribution. You want your leads to go to buyers who will convert them. Why? Those buyers will pay more for your leads. So what you see is that the top providers have reasonably complex algorithms that deliver the leads to the buyer based on volume needed, price per lead and ability to convert.

This boils the lead provider business down to pretty simple terms. Why isn’t everyone doing it? Mostly because doing it well and doing it at scale is very difficult. And it requires a deep expertise in technology. LendingTree is the only provider that successfully scaled without great technology; they did it with brand and a differentiated lead. LowerMyBills, NexTag, QuinStreet, and Adchemy all have technology expertise at the core of their business.

Why does Sparkroom care? No, we don’t want to be a lead provider. But we do think it is really important to understand the business of your partners.

We announced on Tuesday at Finovate in San Francisco that we shipped Sparkroom Lead IQ. Read the release here. Our platform has been in the hands of our customers for a few months now and our team of rock star developers has been busy adding functionality, stability and scalability. Lead IQ is ready for prime-time now.

Like any announcement, there needs to be an appropriate Oscar speech. We want to say a big thank you to all of our customers who have provided invaluable feedback and direction on how we can make the product better. And we wouldn’t be where we are today without the hard work, dedication and creativity of the best development team I have ever worked with building product. Keep up the amazing work folks!

Why is Sparkroom Lead IQ important? It provides transparency into the performance of their leads so that lenders can know that they are making the right optimization decisions. It is a very simple and powerful concept.