Lead gen business model explained

Lead gen business model explained

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 Lead gen business model explained



The lead generation business is booming online right now.

A lead generation company's primary function is to produce leads for a certain business or company. These companies could be anything from your neighborhood chiropractor or dentist to an international college or vocational institution.

Finding qualified leads for your client businesses that they can convert into customers is your job in this industry.

The Lead Gen Business Model Explained

How Does It Earn Money?

Lead gen sites all vary, but generally you earn money for every lead you generate for one of your client companies. It is important to note here that no sale is being made in this process. The lead has not bought anything; rather, they have merely provided some information, or they have picked up the phone and called your client business.

Some businesses only consider a lead qualified if they complete two forms. Others won't qualify a lead unless the lead picked up the phone and spoke for at least 30 seconds.

Although every lead generation program is completely unique, the basic idea is constant. You will receive a finder's fee from the company for each qualified lead you send to them for lead creation.

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The Pros of the Lead Gen Business Model

The lead gen business model can be lucrative, but it can also be very passive if you are using organic traffic sources, especially similar to those found with AdSense or Amazon affiliate sites.

One of the intriguing things about the lead gen business model is that, unlike other affiliate sites, the lead gen site does not need to follow the affiliate model if you don’t want it to. 

You might easily arrange a contract with local business owners in your neighborhood or even in other towns outside of your own. Many of these business owners will pay you on a pay-per-lead basis or on a monthly retainer basis to keep this lead generation website sending customers to them.

If you decide to pursue affiliate marketing, you can find numerous affiliate programs that focus exclusively on pay per lead offers. such as:

  • Quinstreet
  • Campus Explorer
  • Ring Partner

Quinstreet and Campus Explorer both require their leads to complete forms in order to qualify them, but Ring Partner does things a little differently. Ring Partner uses a pay-per-call business model rather of the typical pay-per-lead one.

If you choose to pursue the affiliate way rather than the direct path of locating business owners that want to pay you per lead, all three of them have dozens of various offers you can utilize.

However, there are clear advantages to going it alone, as your rewards will be bigger. The affiliate model is normally going to be a simpler migration process if you ever plan on selling your lead generation website. The drawback of this is that it can make your payment system less efficient.

Two Other Pros of the Lead Gen Model

  • Focus on geolocal keywords. These keywords are often easier to rank for than other keywords because there is less competition for the keywords themselves. (E.g. “carpet cleaning in Phoenix + Arizona,” or whatever city and state you’re targeting.)
  • Can use spun content. As of this writing, Google continues to permit duplicate content on local pages and does not punish the websites that use it, unlike when a website is not aimed at a local market. Although it has been around for a while, this loophole still exists today. If you "spin" the content—that is, put an article into spin syntax—it is safe. This enables you to create thousands of unique articles from a single article. Here is a great article describing spin syntax in more depth.

As you can tell, the lead gen model is pretty fantastic.

When compared to a client-based firm, the lead gen approach has a few extra benefits if you choose to skip affiliate networks and go direct.

Even after applying all of your search engine optimization (SEO) work to a client's website, you might not get paid in a client-based business. If the client does not pay you for the leads or your monthly retainer cost, you can simply hand the website over to a new tenant (typically their rival) and give them the leads instead. Compare this scenario to the similar one in a lead generation firm.

Although this is a great business strategy, there are some disadvantages as well.

The Cons of the Lead Gen Business Model

While focused traffic is crucial to any company model, lead generation business models require it most. Your lead generation campaign will fail if you promote a carpet cleaning service in St. Louis, Missouri, to traffic seeking carpet cleaning in Anchorage, Alaska.

Targeting local keywords—even hyperlocal ones that divide a metropolis into smaller suburbs—is crucial for this reason. Although there would be less traffic, the conversion rates will be significantly greater.


You also run the actual danger of customers not paying if you choose to forego the affiliate route and go direct. This is more than just bothersome. If you can't find anybody else to start paying for the leads in this extremely specific location or very precise service, it could also be disastrous for your website's earnings.

There are also not as many lead generation offers available as there are for affiliates like Amazon and AdSense, which alone have millions of offers. This limits your possibilities, particularly if you want to target hyperlocal traffic for your offers.

Furthermore, the migration process to the new buyer could be a major issue if you decide to go direct and sell this site at a later time. Some of your customers might object to paying the new owner and decide to stop using the service completely under the new management.

Because of this, selling direct lead generation websites may be a little messier than other business strategies. It is still feasible, though.

What Buyers Need to Know

As was already discussed, a buyer needs to be aware that in order for this traffic to convert on these offers, it needs to be carefully focused. The traffic is useless if the offer does not exist where it is being generated.

Many of these websites function in a local to hyperlocal setting as a result. This implies that you have some additional SEO advantages over other business structures.

For instance, you can take advantage of getting listed in Google Maps’ 3-Pack. The Google Map’s 3-Pack appears above the main organic search results for local keywords. Often people will click on these listings before any other listings to either get directions to the business or to give the business a call to create an appointment.

If you’re unfamiliar with what the 3-Pack looks like, here is a quick example for dentists in Anchorage, Alaska:

lead

There are several ways to get a lead gen website into the 3-Pack. I would recommend Mark Luckenbaugh’s guide on the subject over at Local Client Takeover, which you can find here.

One of the nice benefits of targeting local searches with lead gen offers is that the competition is going to be less fierce than if you were building a normal affiliate website.

It also makes every town, city, and locale a unique niche for your specific offer, which is pretty cool.

If you’re looking to purchase a lead gen business, we’re happy to offer you our guidance.

What Sellers Need to Know

One advantage sellers have with selling lead gen websites is that they are unique websites. They are not typically monetized via Google AdSense, Amazon, or mainstream affiliate networks.

For someone looking to diversify their income, lead gen websites often make a lot of sense. Their uniqueness can make lead gen websites very alluring to prospective buyers.

One thing to keep in mind is that you will need to provide the buyer access to the proof of earnings, just like with any other firm you seek to sell. This may be an additional bother you have to deal with if you decide to go direct and have clients rent your websites or pay you per lead.

The buyer must be able to verify that the earnings are legitimate, thus either they or one of our vetting agents will need to enter into the payment processor you are using.

This also comes back to the migration portion of the business. Have you laid out how you will transfer the payments over to the new buyer if your website is using direct clients instead of affiliate programs?

If not, you should come up with a good strategy whereby you can transfer the business over as smoothly as possible. We can help you with this strategy, as well as help you create a profitable exit plan for free, just schedule a call here.

Got Questions About Selling with Us? Click Here to Schedule a Call

What Buyer Persona Best Fits a Lead Gen Business Model?

A lead gen business can fit the style of most buyer personas, but in each case it does so for very different reasons.

Strategic Sally

This kind of buyer is more interested in how lead gen will grow her overall business. She might be the owner of an ad agency, so buying out lead gen websites or even other service companies makes sense for her to grow her own brand. It is part of her overall strategy to grow her main business even bigger.

Lifestyle Larry / Portfolio Paul

These two would be most interested in running websites of this nature if it involved only using affiliate sources rather than reaching out to customers directly. Lifestyle Inconveniences for potential clients and potential cancellations are something Larry wouldn't want to deal with. Equally as easily, he could post a relevant affiliate link, make money, and never have to deal with all of that.

Similarly, Portfolio Paul most likely does not want to manage customer contacts through a direct lead generation website. Paul already oversees a number of websites, so dealing with client issues is the last thing he wants to do. Both of these potential customers might be interested in a lead generation site, but only if it is paid for by affiliate lead gen offers.

DIY Dave

DIY A lead generation website would most certainly pique Dave's interest. Since most lead generation websites only have a few geographic locations that generate income, there are several potential for them to expand.

a DIY Dave might be really receptive to the notion of including dozens, hundreds, or even thousands of new sites that are optimal for the offer. They might also be amenable to a lead generation site that receives payment directly from users.

Lead Generation Growth Strategies

When it comes to scaling lead gen websites, there are several different strategies you can use to grow them.

Local Paid Traffic

Similar to the uniqueness of local SEO, you have a unique opportunity here to run local paid traffic. It will often have less competition, especially in less competitive cities and smaller towns.

This can be a huge opportunity for the right buyer who is looking to master the paid traffic learning curve.

Adding New Content in New Local Areas

If someone wants to significantly increase the traffic to their lead generation website, they simply need to locate every place where their specific offers are available and create the pages for those locations since the majority of lead generation websites do not cover every area where the offer is available.

The number of additional markets where owners of lead generation websites can expand could actually be thousands, depending on the affiliate offers or the direct collaborations.

Some lead generation websites grow to be so large that they transform into directories on their own. This is especially true for individuals who are generating leads directly from clients rather than through affiliate deals.

Expanding into Related Offers

It's improbable that a website's offer has spread to every neighborhood. Even if they already have, they can decide to add another offer. For the majority of lead generation websites, this is a fantastic growth approach.

If you can locate an offer that complements your own or even adds value to it, you might be able to develop new content centered around this offer for all the local markets that your website already highlights.

Additionally, your connected offer does not necessarily need to be based on location.

For example, if you have a lead gen website that generates leads for colleges, you might also want to offer an affiliate link to online courses or other educational opportunities.

Resources to Learn More About Lead Gen

When it comes to understanding how to manage lead generation websites, there are many resources available, but there is one that stands head and shoulders above the competition.

That resource is Local Client Takeover. While they mainly talk about building lead gen websites directly for clients who then rent those sites, their process works whether you decide to do direct partnerships with local businesses or decide to go the affiliate route.

Although lead generation is distinct from affiliate marketing, there is still a lot of similarity between the two strategies. A few of the more effective lead generation campaigns that pay you also function very similarly to an affiliate network or offer. Watching this video we made on the subject can help you understand more about affiliate marketing if you don't already know much about it.

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