Tim Hart, a manager at AMR International, recently authored a white paper titled, “Opportunities in Lead Generation: What Every Publisher and Investor Should Know.” AMR is a strategic consultancy that specializes in media and publishing.
Media Business:In your paper, you valued lead generation at 10% of online ad revenue. How did you define lead generation and what would you estimate the percentage would be in b-to-b media?
Tim Hart: The market size is strictly defined as revenue generated on a cost-per-lead (CPL) basis. We estimate that lead-gen is about 15% to 20% of b-to-b online advertising spend. In b-to-b IT, where there are a number of established players, like UBM TechWeb and TechTarget, lead-gen's share of online budgets is probably much higher than 20%.
MB:While lead-gen has been widely adopted by the b-to-b media serving technology markets, why hasn't it become as critical to media monetization in most other verticals?
Hart: Lead-gen has been widely adopted among the tech-savvy, but we see two reasons why adoption is less widespread elsewhere. First, some verticals just aren't suited to lead-gen. For the model to work, marketers must need an ongoing supply of fresh leads, which means buyers have recurring needs or new buyers continually enter the market. Second, in many verticals, b-to-b media companies have lacked the resources or skills to introduce lead-gen products.
MB:Based on your research, why should b-to-b media companies participate in lead generation?
Hart: Across many verticals, online advertising budgets are growing and lead-gen is taking a greater share of those budgets. During AMR's consulting engagement, we conducted substantial primary research with b-to-b marketers and heard time and time again about their unmet need for more, better-qualified leads. Publishers have a huge but often untapped opportunity to step into this void. Delivering custom lead-generation campaigns could also open the door to marketing services and access to larger budgets that were previously out of reach.
One longstanding concern we hear from the investor community is that lead-generation businesses are not differentiated from one another and leads are becoming commoditized. We also hear that marketers will pay for quality. If a lead generator can provide an ongoing stream of highly qualified leads—and the content to help nurture those leads—they can command a premium. One great example is Advantage Business Media's daily email newsletter business, which is able to drive open rates well above industry averages by using metrics to continually optimize content.
MB:What level of M&A activity do you expect to see in lead-gen?
Hart: We see opportunities for publishers and lead generators to form partnerships, and we've begun to see this in action over the past year. Ziff Davis Inc. acquired Focus Research and Toolbox.com, and QuinStreet recently purchased Ziff Davis Enterprise. Whether the funding exists on the publishing side to invest in lead generators or if lead generators have the appetite to become true content businesses remains an open question.