Dave Datars and I will be representing Sparkroom at the BMO Back to School Conference next Thursday, September 16th in New York City. It will be extremely interesting to take the temperature on the market-funded education industry after a year of radical change on the regulatory and rhetoric front.

Reach out to either Dave or myself if you are interested in meeting at the conference.

We are exciting to be heading to Las Vegas later today for the king of all lead generation trade shows, LeadsCon (www.leadscon.com). It will be great to connect with customers, prospects, partners and friends in the industry. Huge hats off to Jay Weintraub for organizing what is always a great two day conference.

We are exhibiting this year. Come find the Sparkroom team at booth 213 at the Mirage.

Some industry conversations since the QuinStreet S-1 was filed (get it here) got us thinking about market share in the EDU lead generation space. Real revenue numbers on the Top 5 lead providers (CollegeBound, QuinStreet, Vantage, Education Dynamics, All-Star Directories) in the education space are hard to come by but everyone talks about rapid growth in CY 2009. The standard growth number that I hear lead gen folks talk about is 20% YOY revenue growth. But let’s look at QuinStreet in education for a second.

*QuinStreet’s fiscal year ends on June 30th

Two key takeaways

1. DeVry is a huge chunk of QuinStreet’s EDU business and it is likely to decline given Starcom’s AOR relationship

2. Actual growth with clients other than DeVry in the EDU vertical has been anemic compared to the market over the past 24 months. They have grown 4% YOY for the past two years vs. 20% for the market.

This data speaks to the importance of the M&A machine to QuinStreet’s future growth.

First of all congratulations to Dave (@davewengel) and Jay (@jayweintraub) as they kick off Shouk Media. LeadCritic breaks the story here. Why this is interesting:

TargusInfo issued a press release announcing the departure and the formation of the new company.  First of all, this doesn’t happen – ever. TargusInfo must really like Dave. Secondly, they also said ” TARGUSinfo will be Shouk’s first customer.” Let the speculation on what Shouk is now and what it will be in the future begin. I have often asked Jay how he plans on monetizing his lead gen relationships and the platform that he has built with LeadsCon. This is obviously part of that play.

So what is Shouk Media going to be? (point of parliamentary procedure: I think Shouk is typically spelled souk).

I never thought I would be able to use photos from a recent trip to Marrakech to make a point about lead generation but here goes.  The souks in Marrakech:

* are incredibly, busy marketplaces

* have lots of vendors selling, what appears on the surface, to be exactly the same thing

* make it nearly impossible to authenticate and verify the identity/trustworthiness of sellers/buyers

* have zero price transparency – everything is negotiable

* are full of tiny niches (my favorite Marrakech souk was the one selling exotic birds)

Perhaps Dave and Jay can solve some of the issues above and provide a trustworthy marketplace where buyers and sellers can meet. LeadsCon in February will be even more interesting as I expect we will learn more about this new business.

Sparkroom will be exhibiting. Looking forward to catching up with the lead gen ecosystem there.

QuinStreet filed their S-1 for a proposed $250MM IPO last Thursday. While this has been rumored for months, it is exciting to finally get to read the fully disclosed story on this famously secretive lead provider. Read the full S-1 on the SEC website here. First of all, a huge congrats to the whole QuinStreet team for building a fantastic business and for wearing the white hats in the lead gen industry.

My observations on the company after reading the filing:

• QuinStreet has built a great business but it took time. 10 years of solid growth.
  • $260MM in FY 2009 revenue, on target for $320MM in FY 2010
  • $56MM in EBITDA in FY 2009, on target for $72MM in FY 2010 – note to self – does it take $70MM in EBITDA to IPO these days?

• QuinStreet’s competitive advantage is driven by 1) Technology 2) Content assets and URL libraries 3) Affiliate network 4) A superior monetization engine that allows them to be an M&A machine (100+ small acquisitions)

• Growth is going to be hard for QuinStreet in the long-term. At present, lead gen is pretty small outside of education and financial services. Doug Valenti must be banking on a) M&A b) international c) secular growth in online direct marketing d) new verticals.

• M&A is a major growth driver. They have used M&A to drive growth: “Since the beginning of fiscal year 2007, we have completed over 100 acquisitions of third-party website publishing businesses and other businesses that are complementary to our own for an aggregate purchase price of approximately $189.5 million.” Wow!!!!

• Here is how the M&A machine works. QuinStreet finds small lead provider with a) good content b) good URLs and/or c) good lead volume. They buy the lead provider for a small revenue multiple and then run the traffic through their monetization engine. Presto – they double the effective CPL and revenue generated by the set of URLs. This is identical to the TripAdvisor M&A growth strategy in the travel vertical.

• DeVry! DeVry! DeVry! One client, DeVry, represented 19% of 2009 revenue of $49.5MM. Note that they only spent $10MM in Q1 2010 which shows that they are cutting their QuinStreet spending 20% in 2010. Note to DeVry CMO – you might be able to save even more money on this. Please call Sparkroom for help.  :)

• Verticals
  • Education is the base of the business and DeVry is a huge part of the EDU business. QuinStreet generated $151MM in revenue in the EDU vertical in FY 2009. DeVry represented 33% of that revenue. Surprisingly, their growth in EDU lead gen is reasonably muted – 6% growth in FY 2009.
  • Financial services growth driven by SureHits acquisition and organic growth. QuinStreet is taking share from LowerMyBills and LendingTree. Financial services also includes insurance lead gen. Sadly, EDU vs. mortgage vs. credit card vs. deposits is not broken out in the S-1.

• Media mix: QuinStreet owned URLs, PPC, affiliate networks, email lists, display. I wish this was broken out in the S-1 but alas it is not.

• Culture. See page 61 of the S-1. I am a culture nut and now a bigger fan of Doug Valenti after reading the QuinStreet business values.

• Doug Valenti is the largest shareholder at 18.33% before the offering. Nice work Doug! I love stories where the entrepreneur makes money and makes money for the investors.

• See the notes to the financial statements (starting on page F-20) for details (price, earnout, etc.) on their big acquisitions

Congrats again to Doug and the QuinStreet team. This is a great story.

Sparkroom announced two very important milestones today. Firstly, and most importantly, we announced that Premier Education Group (PEG) is now working with Sparkroom. PEG’s brands include Branford Hall Career Institute, Salter College, The Salter School, Seacoast Career Schools, Suburban Technical School and Harris School of Business. We are thrilled to be working with Tony McPeck and his team and are excited to help them solve some of their most pressing sales & marketing issues.

Secondly, we are pleased to announce Sparkroom Lead Deliver, which PEG is implementing. Lead Deliver performs real-time lead capture, scrubbing and distribution and is integrated with leading CRM platforms in the EDU vertical. Tony captured the essence of the product when he said:

“We have always managed our vendor relationships in-house but we have lacked a technology platform that can aggregate, validate and distribute our leads quickly and efficiently. We selected Sparkroom Lead Deliver to solve those problems.”

See the press release here.  We look forward to a great partnership with PEG and to continued adoption of the Lead Deliver product in the marketplace.

I spent last Tuesday at BMO’s Marketing and Advertising Thought Leaders conference. Thanks to Pete Stack and Jeff Silber from BMO Capital Markets for the invitation to attend and sit on the EDU panel. Anna Maria Virzi from ClickZ covered the day here.

I shared the stage on the EDU marketing panel with some of the smartest folks in EDU lead gen. The panel was moderated by Jeff Silber and included Michael Platt from Plattform, Doug Brown from All-Star, Greg O’Brien from CollegeBound, and Steve Isaac from Education Dynamics. My notes from the panel:

* for-profit education is counter-cyclical as all of the companies on the panel talked about growing budgets

* there will be a flight to quality as schools increasingly choose the larger, better converting lead providers. Sparkroom tends to agree with this conclusion and hopes that Lead IQ is part of every school’s plan to get smarter about marketing and enrollment

* the not-for-profit universities are going to start marketing more like the career colleges over the next decade; I am not sure about this one — someone on the panel mentioned that Penn State, UMass and University of Maryland have all built large and successful online education divisions — I think it is going to take more than 10 years for a marketing and customer acquisition ethos to permeate the culture of the not-for-profit university

* all the panelists talked about regulation risk — particularly as it relates to the Department of Education regulating marketing education to potential students. One of the panelists did the quick math – $40B in for-profit EDU revenue, 25% of revenue spend on sales & marketing and 80% of the revenue comes from Title IV funding. Ergo, the Department of Education is spending $8B every year (through career colleges) marketing education.

I learned a ton over the course of the day and met some great digital marketing companies. Thanks again BMO for the invite.

Earlier this year, we launched Lead IQ for the education vertical. Yesterday, we announced a milestone relationship for our company with U.S. Education, which operates its schools under the Apollo College and Western Career College brands and is a division of DeVry Inc. We met Jason and Andy earlier this year and were immediately impressed by them as smart direct marketers and business people. The good news for us is they liked what Lead IQ could do for them. Andy said it best in the press release: “By implementing the Lead IQ platform, we expect to make better business decisions and drive increased operational efficiency, ultimately allowing us to scale our business more quickly.”

We look forward to a long and fruitful partnership with US Ed.

Our first webinar happened yesterday, Monday, February 2nd. Thanks to all those who participated. If anyone would like to listen to a recording of the webinar, simply email us at events@sparkroom.com and we will reply with a link.Thanks.

Sparkroom is doing our first webinar in the higher education space. Get details and register here. The date is Groundhog Day – February 2, 2009 at 2 PM EST. Looking forward to sharing our EDU platform with you then.

UPDATE: Thank you to those who attended the webinar. For those who missed the live event, simply email events@sparkroom.com for a link to a recording of the webinar.