I've done lead generation via PPC (mainly Adwords) for almost 10 years now. It can work for both affiliate and lead buyer, but you need to be absolutely clear before you start on the criteria for a valid lead, with a rejection policy in place to ensure that risk for both parties is limited.
It's easy to say 'avoid lead generators like the plague' or 'do it yourself', but in reality lead gen CAN and DOES work for certain industries. It's the high lead-value sectors where it works - finance, insurance, home improvements - because these companies can afford to pay a higher price per valid lead. For instance a life insurance deal is very valuable - buyers are paying up to £40 per valid lead as long as that lead hits a certain criteria.
What doesn't work in my experience is the lower value leads, e.g. less than £10 per valid lead. The reason for this is pretty simple:
- Adwords provides the highest converting leads, as customers are actively searching for that particular product
- Adwords is expensive for this reason
- Affiliates have to pay upfront, and per click, regardless of whether their clicks convert into leads.
- To make a margin, affiliates must target the 'long-tail', longer keywords and phrases which are cheaper with not so much competition from the 'big boys'.
- By targeting the long tail, the volume a single affiliate can produce is limited.
- On a £10 lead, the affiliate is only making (if they can do Adwords properly) maybe £1-3 per lead. If they can't do huge volume then they simply aren't making enough to make it worthwhile.
On a £30-£40 lead, the affiliate may be able to make £5-10, which means that lower volume is OK and they can still earn a half-decent amount from their endeavours. As long as the buyer is good at converting leads, then it's usually a win-win.
Pro tip: there are genuine 'premium lead providers' who only use paid advertising to generate expensive but high quality leads. Then there are the shoddy data companies who recycle old data, use co-reg, incentives etc to generate high volumes of poorly-converting leads which clog your call centre and will cost you a lot of money.
My advice is to start off with a small test of maybe 50 leads with the option to cancel sooner if the leads are clearly terrible, and take it from there.
Lead generation can work very very well - I have made a living from it for nearly 10 years - but as a buyer of leads you have to be very careful.
Another avenue to explore is mobile leads, as these are currently cheaper than traditional leads and convert very well in our experience. Quick though as any opportunity like this will become saturated.
