(Less) Shameless LeadsCon Plug: Week 5 – Consolidation
It is now less than two weeks until LeadsCon, that means a few things, one of which is a slow transition back towards content about direct response not direct response focused content. Then again, perhaps if we find a way to craft another show in between it will give an excuse to continue writing about content that only partially disguises itself as looking to increase interest in an event. Oh wait, I think we may have found that real story reprieve with the first ever Daily Deal Summit. But we digress. In this installment, we cover arguably one of the biggest and most recent trends to take place within the lead generation space – consolidation.
Before talking about consolidation, it is first worth looking at an example of little to no consolidation within lead generation, and that is within the education sector. There are some clear behemoths – Education Dynamics, Quinstreet, Collegebound, CUnet, and All Star Directories to name a few, but that’s just it. We’re naming a few. Each has hit that pinnacle of performance, growing their businesses to north of $100mm per year, and we’ve probably forgotten one or two on that list. More amazing is that the gap between the giants and almost giants is not that great. There are probably five maybe ten companies that do $50mm to $100mm per year in the marketing of education inquiries. The exact opposite would be outside of lead generation with search. The gap between Google and Bing is enormous, and the gap between Bing and number 3 is just as cavernous on a percentage basis.
Insurance lead generation, especially auto insurance lead generation, looking initially as though it might take the shape of the education market. It has been a distant number two to education for many years, and it was a distant number three until recently. Then it crossed some magic tipping point – perhaps it was the buyers starting to come online, or maybe it was the economy and user’s desires to seek low hanging ways of saving money. It could also be that those in the performance marketing space simply started to pay attention to insurance lead generation and put money behind it. Whatever the combination of factors, insurance has come on strong as a market segment, and for one company, Quinstreet, a pioneer in education marketing, it has even eclipsed its education revenue. Unlike education, though, insurance does not have an evenly distributed industry revenue curve.
The consolidation started slowly enough, a handful of purchases in 2007 and 2008, but in the past twelve months, it has just exploded. It seemed as if Quinstreet and Bankrate had decided to see who could outspend the other. Quinstreet added Insurance.com and Car Insurance.com for somewhere near $80mm total while Bankrate picked up the largest insurance lead aggregator, Netquote, for a number closer to $200 million than $100 million. Yes, it was a busy twelve months, but recently got even busier. Not content to go from third to perhaps second, All Web Leads made an aggressive move for the top spot. The company partnered with Great Hill Partners, the Boston based private equity firm, to acquire InsuranceLeads.com.
If you didn’t know either of the two companies, the sale still makes for a good story. If you do know a little bit about the two companies, the story becomes even more interesting. Those who knew them would never have guessed that they would have ended up together. InsuranceLeads.com was one of the oldest and most established firms, operating under the original Itsol brand. If a company was looking to acquire one of the major remaining independent players, they would have come up high on the list. The size, the expertise, it all fit. Their cultures, though, aren’t a natural fit. It’s more than culture, because that implies incompatibility. Both companies have a strong emphasis on technology, and they are both high achieving and incredibly driven. They just don’t seem like two companies whose executives would have the same interests and hobbies, so in that sense, the match felt good but perhaps contrived. That’s something the performance marketing space has seen, a match on paper for scale but perhaps not much else. A look at the strengths between All Web Leads and InsuranceLeads.com helps explain the business rationale and ease any doubts about why the two should go together.
Unlike education where a seller can work with ten or fewer buyers to gain the ability to run ads nationwide, insurance doesn’t work that way. The majority of lead buyers are individual agents who have learned about lead generation. To gain coverage, it means having an enormous amount of insurance agent buyers. That is exactly what InsuranceLeads.com has done over the years. All Web Leads has a good insurance base of its own, but its strengths are much more on the marketing front. They have a smaller agent base but greater in-house generation skills. Putting the two together creates a company that is not only good at driving traffic, it also has the agent base to garner a high yield on the leads they generate. Looking at it that way, we see how this acquisition could become a 1+1=3 and not a 1+1=<2 scenario. It also helps explain why insurance is harder to break into than other verticals and we see such concentration in a handful of companies.
We wish the two companies nothing short of absolute success and thank them for creating continued excitement in lead generation. If you want to read more, here is a copy of the release; or even better (shameless plug alert), you can hear the CEO of All Web Leads speak at LeadsCon. Even better, you can still avoid paying retail and save $300 if you Register through here.
