Google’s View on Lead Aggregators

We had an interesting conversation with Jay Weintraub, the entrepreneur behind LeadsCon today. That conversation together with Google testing Merchant Search in the UK raises some very interesting questions about Google’s view on lead generation. Paul Knag tries out the Google Merchant services user experience here. LeadCritic talks about it here. The broad question is what Google thinks about the role of the lead aggregator? Google’s mission is “to organize the world’s information and make it universally accessible and useful.” Certainly, there is an argument to be made that LowerMyBills, LendingTree and the rest of the lead aggregators are not creating much value for the consumer by hosting a simple form. This is not a viewpoint that we hold at Sparkroom. Google could just as easily host that form and then act as the distributor of the leads. Ergo, they would be organizing information. Going back to our thinking on lead provider assets, we boiled it down to customer acquisition and monetization. Gee, those are things that Google is capable of doing. Oh, they already do both of those things every day and they do them better than anyone on the planet. This isn’t a question of Google trying to enter the travel space by buying Expedia. That is a bad deal for GOOG because it buys a huge customer service operation. There isn’t a similar customer service component in mortgage lead gen. Let’s do some simple napkin math:

1. LowerMyBills buys $100MM in Google keywords
2. They sell the leads generated by that $100MM in marketing expense for $225MM.
3. That creates $125MM in gross margin for LowerMyBills.

Google is looking at that $125MM and wondering if they can’t figure out a way to do it better while capturing all of that $125MM. They are also wondering if it doesn’t eliminate a player in the value chain that doesn’t create a lot of value for the consumer. But alas, we don’t see Google executing against this opportunity at scale. Why?

1. Lead aggregators are Google’s best customers. There aren’t many banks that are spending $50MM+ per year on Google.
2. Google has too much on its plate. Think about it. There is international expansion, scaling their business, killing MSFT with Google Apps. There is too much opportunity for them to worry about picking up the $125MM in margin that LowerMyBills is making off their advertising platform.

Lead generation is not going anywhere fast — even though the product managers at Google (and Sergey and Larry) probably think of the lead gen folks as taking advantage of their platform. Look for our thoughts on the value that lead aggregators create in a coming post.