Innovation Ads has long and colorful history in the space. I was unaware that Capital Source Finance of Chicago was the majority owner. Founded in 2002, the company was acquired by Seaport Capital in 2006. The press releases stated, “This was a strategic move carried out by Seaport Capital in order to compliment its earlier acquisition of Direct Response Media, Inc. (DRMI), a full-service agency specializing in direct response television. Seaport Capital has created Think Media, a holding company that will preserve the autonomy of Innovation Ads and DRMI, while creating the opportunity for collaborative direct marketing endeavors between the two entities. This heavy-weight amalgamation of unique talent promises to be the premier direct marketing solution for advertisers.” Whatever it was, kudos should go the investment bank. The majority owner of Innovation Ads now, according to those closer to the company, is not Seaport but Capital Source Finance of Chicago.

Prior to the acquisition, Innovation Ads did not have a reputation for high quality… this according to feedback from the schools. More recently, though, it seems as though the company had turned the quality corner and for some schools was starting to be seen as a preferred vendor. Those we talked to (on the buy and sell side) liked dealing with them.

A big question looms around the future of UMUC (University of Marlyand University College) from whom Innovation ads was the Agency of Record. I suspect there are some pretty excited other firms who would like to take over the relationship with such a marquee brand.

Best of luck to the team there. We wish them well.

The online education business might comprise the largest segment of Quinstreet’s business, as it was their primary line of business. But, education does not represent their fastest growing segment, financial services does. For those with some familiarity with Quinstreet’s business, financial services means SureHits, the auto insurance click marketplace the company acquired several years back. The SureHits business differs fundamentally with the cost-per-lead approach of Quinstreet’s online education business and with the cost per lead approach favored by a large number of other marketing services firms in insurance such as Netquote, InsWeb, and AllWebLeads.

Outside of the obvious, namely that vertical click marketplaces charge on a click basis, vertical marketplaces have other differences that many advertisers favor. An advertiser in a vertical click marketplace owns the conversion experience. A common complaint of lead aggregators is that buyers do not know from where the leads come – what was said in the steps of the funnel up to their acquiring the name. In the click marketplace, they own the ad, the landing page, and are responsible for the conversion. The ultimate cost per lead could end up much higher than through a lead aggregator, but it is the only option for many brands who have policies against leads. The marketplace is all about control, and judging from SureHits success, there is something to be said for vertical marketplaces as an alternate vehicle in the quest leads. But, they are not for everyone. If you do not have expertise in online advertising, you will find yourself spending a lot for little in return.

This week brings news of a new entrant into the vertical click marketplace for auto insurance – BrokersWeb. Those in the health care space most likely know BrokersWeb by their HealthCare.com brand and their additional owned properties HealthInsuranceFinders.com, HealthCare.org, MedicareSupplemental.com, MedicareSupplement.com, and LifeInsurance.org. In addition to owned properties, they also have robust network of highly-targeted website distribution partners. (HealthCare.com purchased the BrokersWeb assets in Q3 2008 and has grown them 5x since – primarily through partner distribution). As you can see from the domains, the company goes deep into the health care vertical, and it is my understanding too that they are the only solution for those niche health insurance sub-categories, i.e. Medicare Supplements, Group Health Insurance and Dental Insurance. Prior to this week’s auto insurance launch, life insurance was the most recent, launching in 2009 and buoyed significantly by the organic traffic coming through the highly ranked LifeInsurance.org.

Auto insurance may not seem like a logical next step for a company with deep health expertise, but from a market perspective, it is the exact right choice. Everyone who drives needs it, i.e. a large overall market, relatively high natural churn so advertisers must spend to grow, and those insured with one company can switch to a new carrier with less friction than cell phone. Plus, there are a lot of major brands spending for direct access to customers – perfect for a vertical click marketplace. As such, it’s a logical next step for a company with an operating history in vertical click marketplaces. Like any entering, there is still the classic chicken and egg scenario of having enough buyers and sellers. Distribution partners will want high CPC’s, and advertisers will want to see quality before coughing up the high CPCs. It’s a slow process, and simply saying, we’re doing it doesn’t mean both sides will come. Luckily, there is enough latent demand from both that BrokersWeb stands a good chance of speeding up this process in order to become a viable player, and they are kicking off the launch with several high profile players on each side at launch. This includes top-tier bidders such as GEICO, Esurance and The Hartford on the advertiser side and AutoInsurance.com and OnlineAutoInsurance.com on the distribution side. We wish them luck as it’s always good to see growth in the space.

Historically, marketing and the market could operate quite separately. If a marketer, it helped to understand the market you served, but not being a vertical expert didn’t stop you from generating leads in a particular category. Generally, those with greater vertical expertise scaled larger than those who did not. The vertical expertise enabled them to talk shop with their clients and create more effective ads because they understood the nuances. That vertical expertise also meant a greater awareness of the issues surrounding the industry. Except, until now, that hadn’t been an issue. Vertical expertise was really about talking shop not as a means for staying out of trouble.

The landscape is dramatically changing; yet, it feels like too many people in a position to influence enrollment (namely those who touch consumers) do not appreciate the seriousness of the situation and the scrutiny under which the industry has come. The average affiliate, responsible for 10% to 25% of all leads, does not see the connection between their actions and the 70 Billion dollar / year education industry. They view the world only in terms of conversions. From their perspective, the industry doesn’t extend beyond their ability to generate a lead. Their job is the lead. The advertiser’s job is after that, and if the advertiser doesn’t empower them to create conversions, they take matters into their own hands.  They say to themselves, “What’s the big deal,” and “No one will really care.” They then create misleading ads like this one.

Even we, who have been following the more developments closer than the average person (namely the 2008 Higher Education Opportunity Act and subsequent negotiated rule making process), find making sense of the processes, time lines, institutions, and acronyms confusing. Ads like the above, the countercyclical success of the for-profit industry, and the re-examination of government funds has lead to the every so-often re-examination of the for-profits.  Almost every major publication has run a piece on the topic, but this same complexity that makes it tough for us to summarize makes it just as tough for others to as well, especially if education is not their focus. The pieces, though, are becoming more frequent, and one in particular came out that initially had those who lean towards for-profit education growth nervous.

Frontline, the documentary series on PBS, ran an expose titled, “College, Inc.,” a piece that given the generally tone of most public broadcasting seemed as though it would turn out as a roast of the for-profit sector. It wasn’t quite roast, but for those who care enough to understand the issue but need to see something, this is for you. The Frontline piece (6 segments online) is just under an hour long in total and worth every minute. Watching it and reading this post from Higher Ed Watch, will help any marketer understand those with misgivings about the for-profit space. If I could, I’d make this required viewing for any lead seller, especially those for whom education is not their primary focus. Below is Part 1.

Perhaps the best quote in the piece comes from a former Director of the University of Phoenix who from the sound of it made millions during his tenure through mostly equity growth. He quips, “What makes education so special” and compares the spending and profit margins of schools to perfume. Not his best moment. And he says what most marketers know – that they must advertiser; to succeed, the schools “have to get people’s attention.” If you believe education should not be a business, you’re reading into that as a prime example of a system that is broken.

Some other facts from the piece:

• The typical for-profit schools spends double on marketing than what it does on teaching
• For-profit education is not cheap; a degree costs 5x a typical community college and 2x state schools. The degrees are not far off from the typical private liberal arts school, leading to the comparisons of what you get for your money.
• The for-profit sector has a lot of financial backing; they have investors who expect certain returns, the implication being that they must not only grow fast but charge as much as possible
• Sector also has to spend a lot because they have to add a lot of students per year to keep pace with all that theylose
• Not mentioned but worth mentioning is if this were an other big ticket item, there wouldn’t be as much sensitivity, but it’s education so talk of sales tactics and business growth will unsettle many people
• The sector represents 10% of the total higher education student body but consumes 25% of all student aid, i.e. a much larger than average reliance on tax dollars, and roughly 20bn loans are generated each year to the for-profit
• Regional accreditation is key, and the financial community values that alone at $10mm; regional accreditation is what enables a school to qualify for student loans. It’s the key for unlocking federal funds.
• The criticism is that accreditation is treated like a tax badge, able to be bought indirectly when a struggling not-for-profit agrees to go for-profit.
• One school charged 30k for a 12 month program for nursing without the students ever stepping foot in a hospital; they are suing as no one will hire them
• The for-profits might be 10% of all college students, but one person estimates it is responsible for 44% of all student defaults
• Mandate by Obama – by 2020 America will have the highest percentage of college graduates. Community colleges can’t fulfill that. The for-profits will have to play a role
• It’s all about student loans. They aren’t like other loans. If you default on a federal student loan you are “hounded for life.” It’s the “most collectible debt” – non dischargeable in bankruptcy, wages can be garnished, tax refunds intercepted, you can be sued in court and ineligible for other federal benefits. In other words, it’s a serious thing when agreeing to one, and 20bn are being generated each year. The should go to only people qualified and with an understanding of what they are getting into. When marketers use language
• Outstanding student loans equal the nation’s credit card debt, 750bn. We got into a credit crisis among other reasons when people were given credit who were at risk from the start of paying it back. That’s the issue here with student loans, especially from the for-profit sector; could it contribute.
• “You can’t be afraid of going into business because of regulation risk, “Jack Welch, who invested in a for-profit and lends his name to one of the graduate degrees.

As Secretary of Education Arne Duncan says, there is nothing inherently wrong with for-profits providing education. The focus now is on making sure the practices are honest and that the students and especially taxpayers are getting value for their investment. High pressure tactics, deceptive actions, and dishonesty is what the Department is challenging in a very serious way. Again, we will see just how serious the challenge is and if the new rules suggest he believes that nothing is inherently wrong.

A name known to many but a company still unknown below the surface, Quinstreet announced plans to raise $250mm in an IPO and trade under the symbol QNST.  Having had their founder and CEO, Doug Valenti, on a panel at LeadsCon, it was a first opportunity for many of us to get a feel for their operation. There are volumes to be said on this, and a more detailed post is coming. If only we were part of the ex-Quinstreet list serv. Overall, a tremendous day for online lead generation, and we should all congratulate and thank Quinstreet, as a successful IPO will help list the entire industry and practice. Not everyone likes them, but for now, we should all root for them.

Here is what I wrote on my personal blog:

The day many of us have been waiting for (including Quinstreet) has arrived – the Quinstreet IPO. After years of speculation and some unanticipated market twists, Quinstreet announced its intention to go public, filing their S-1. For a company that has been incredibly secretive closed lipped, the S-1 is an amazing look under the hood of one of the most intriguing companies in the online lead generation space. It details their acquisition history, and while many of us knew about their acquisitive nature, none would have expected it to include more than 100 purchases with at least four eight figure deals. The Quinstreet today is no longer an education lead generation business. They are a roll-up and have been a source of liquidity for countless smaller publishers who sites earn revenue through lead generation. And, today they are a diversified play with some large client concentration but only 50% of the business being edu.

Much more to be said on the topic.

What’s another business known to run at extremely low margins? The travel industry, especially those offering airline tickets. Now, with most online travel agencies (Orbitz, Expedia, etc.) waiving fees on purchases, they make next to nothing. It’s why their affiliate programs pay out something like 4% of revenue on good day. The airlines themselves, aren’t exactly doing wonderfully themselves. So, it’s no wonder each has various ways of upselling users who convert. If you’ve booked on Expedia, in addition to being asked if you need a hotel or car, you will find yourself scrolling through countless activities available in your destination city. I can’t blame them. Those actually make them money unlike that flight you just bought. Frequent purchasers of tickets and ad junkies, will recall another upsell as well.

Here is the image of my recent booking for LeadsCon Las Vegas being held Tuesday, February 23 and Wednesday, February 24.

Notice something on the far right hand side? It’s a $50 cash back incentive.

For years, I can remember seeing a button like this one after I make a purchase on a variety of sites, especially airline sites. And, it’s this button that has come under fire, with a press release being issued by the U.S. Senate Committee on Commerce, Science, and Transportation. The release is below, but title tells enough, “Chairman Rockefeller Requests Information from Web Retailers in ‘Mystery Charges’ Investigation.” Read the list of companies who received a request for information, and those in our space will quickly connect the dots, or in this case,the button. The list reads like a who’s who of Adaptive Marketing and Webloyalty’s biggest customers. The key to their success and the publishers is something that the direct marketing industry refers to as Card on File. You’ve just made a purchase. They now have your credit card details. That makes an upsell easier and more rewarding because a purchase related upsell, generally a subscription service, is more lucrative than a data/form based one.

Here’s how it looks today. Click on the button, which has disclaimer language underneath, and you go here, to Reservation-Rewards. This site is not run by the airline/online travel agent. It is run by Webloyalty, a company that specializes in running subscription services, with their largest acquisition channel being online upsells. This is the same company and type that you would have seen offering these same subscription programs as an insert into your credit card bill. Sending an email telling someone to get $50 their next purchase and hoping they convert doesn’t work nearly as well as someone who just purchased.

Scroll to the bottom of the page, and here is what the conversion process looks like.

Regardless of the outcome, it’s a gray area. The companies doing card on file upsells in the past haven’t been angles. Since then, though, their practices are effective, but they haven’t been scandalous. The unfortunate truth is that I’m sure they do receive a higher than desired (by an outside governing body’s point of view) rate of people signing up who later didn’t recall doing so. Why would they? It’s an impulse purchase from a generic name. That’s the nature of the beast. That’s human nature, and there comes a point where you can only ask the companies to do so much and need to start demanding that the consumers take more responsibility. I’m sure I’d feel differently if the situation were reversed and I was paying $49.99/month+ and having difficulty canceling.

Copy of the release:

In classic Google style, the announcement came via one lone blogger and their Inside AdWords blog. I’m still convinced that posts for the Inside AdWords blog are re-written by a specially trained team in Japanese culture who know how to say one thing but mean something very different. Taken at face value, the words sound pleasant, almost complimentary, but translated into their real meaning, they would come across quite differently. The Comparison Ads announcement is no exception. The post, like almost any focusing on improvements to the algorithm speak about value to the user and a more qualified lead for the advertiser. What they are really saying is that the vast majority of those spending money today don’t do a good job. Not surprisingly, those within the online lead generation space have had a lot to say, and the voices represent some of Google’s longest, biggest spenders who can tell you that it was hard enough to spend effectively on Google without actually having to compete with them.  Both sides, not surprisingly, have many valid points.

(Photo credit: DoublePositive Blog)

Google Comparison Ads for mortgage is what every mortgage lead generator should have built but didn’t. (Read excellent non-partisan overview of the product from Nick Hedges of Leads360, who like LeadCritic, has hands-on mortgage industry experience.) And, it is because they didn’t build it that Google did. Saying that they should have built it doesn’t tell the whole side of the story. Should doesn’t mean could, and could is what separates Google from the aggregators whose results they displace. Dealing with Google is like dealing with the IRS. If they want something done, it gets done. Ignore the complexities involved with the actual quoting, and let’s focus on the buyers of the leads. Want lenders to buy anonymous leads, e.g., ones without the user’s real phone number? Want lead buyers to be ok with that phone number being tracked and the number deactivated after a while? Good luck being any other company who tries the same. It takes a Google to do it. Comparing others to Google or having them held to Google’s standards is itself a slight double standard.

Concerns about Google’s global positioning aside, we have an immense amount of respect for what was built, because it forces everyone to elevate their game and keep delivering a better product. This will cause some pain now but that Google speaks about leads is only a long-term benefit for lead generation. And not only do we respect the product, but we really respect the people who built it as they have lead generation and mortgage lead generation in their DNA.  First choice for many would be to not have Google enter, but since they did, at least the product was created by someone any in the industry would trust.

As Google (indirectly) said in their announcement post this is just the beginning. Here are our takeaways on what Comparison Ads means:

1. This is not about mortgages – a point we made when covering the Moretech / Lending Tree suit which blew the lid off the Google lead gen product, mortgages is the first vertical. But, it’s not even about verticals so much as Google’s stance on the way form-based lead generation is conducted today. There is a reason a landing page with a form can never get a 10 quality score. Forms themselves aren’t bad, but Google doesn’t like them to be the first and only goal. The user doesn’t click on an ad for “Compare Rates” because they want to see a simple thank you page and hear the phone ring. They want information, and if we can’t do it, Google will.
2. It still has to monetize – Google can’t lose money on their inventory just because they want to deliver a certain experience. If Google Comparison Ads do not help Google make more money, they will not continue to receive the premium placement. The same holds true for the lead buyers. They don’t hate the current ecosystem and so long as they spend money, don’t count out the current aggregation marketplaces.
3. It won’t work for everything – comparison ads work for things that can be compared; it requires standardized data and a more of a commodity product. Loans in general are a great fit as are credit cards and insurance. We weren’t the first to say or think that Bankrate got lucky by being taken private. Almost all verticals can use improvement, but the type of game changer created for mortgage isn’t as applicable to many service based industries.
4. Lead generation is not Google’s DNA – this platform works amazingly well for mortgages and financial products. But, not only is it no sure thing for many others, outside of a really small team, Google doesn’t get lead generation. The companies who do, and those who can add a marketing services + aggregation function, still have lots of growth ahead. Buyers aren’t going to stop wanting face to face meetings, hand holding, and golf outings. Comparison Ads is a game changer but not a category killer.
5. It’s just one spot – Google can’t capture every click and every conversion. They won’t stop taking money from others, and they aren’t marketers. That leaves many chances for others to continue to spend and capture those users who, as we all know, don’t actually want to do any work. They just want to fill out a form.