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Lead Generation: Are Directory Sites & Pay Per Lead Services Worth It?
Sales are the lifeblood of every business, but you can’t get sales without leads.
Every business owner recognizes this; in fact, according to a 2016 survey conducted by Content Marketing Institute, how to attract new customers (read: lead generation) is the number one thing keeping 86 percent of business owners up at night.
Most CEOs I work with are tough as nails. They’re level-headed and don’t scare easily—but that level-headed coolness drops the second the words “lost leads” are mentioned. It’s easy to make the jump onto a home services lead generation platform. While lead generation sites are great for short-term sales cycles and supporting owned assets, I just don’t see them as being a viable solution to your lead problems by itself. Here’s why:
- With lead generation techniques like signing on with Angie’s List and HomeAdvisor (and even Google Home Services ads) you don’t own the leads generated
- You have no control over the type of leads you get
- You aren’t nurturing long-term client relationships
Below I’ll break down the issues above, but also give you a framework for approaching pay-per-lead directories and sites so you can balance your online real estate and get the maximum amount of recurring revenue and repeat customers.
Editor’s Note: This post on lead gen strategy was originally written in 2014. A LOT has happened since then, so we’ve updated it to reflect the most current trends and data.
The Lead Generation Strategy Challenges for New Companies
If you’re just getting started with your business, developing affordable lead generation strategies and finding new customers are even more critical. New companies haven’t been around long enough to get repeat business from previous customers nor do they have the sales volume to live off referrals. New businesses need leads and sales now—they can’t afford to wait.
Herein lies the challenge. Some of the most affordable (and effective) lead generation strategies take time to develop. For example, a great website, opt-in email list, or engaged web community might generate a handful of qualified leads every day. But, with rare exception, you can’t build any of these lead generation assets quickly. They take time to develop—often 6 – 12 months or more. Some new businesses just don’t have this kind of time.
At some point in the quest for more leads—like yesterday—you may find yourself tempted by directory sites like Angie’s List or pay per lead services such as HomeAdvisor, Thumbtack, etc. There’s nothing wrong with testing listings in directory sites or trying a pay per lead service; however, if you go this route, you want to do so with caution.
3 Options for Generating More Leads Online
There are a lot of different ways for online lead generation—some more effective than others. In this article, I’ll walk you through a few lead generation options and explain why you should approach some of them with a fair bit of caution.
Lead Generation Option #1: Directories & Media Sites
The web is filled with millions of directories and media sites. There are generic directories like DMOZ and Best of The Web (BOTW) as well as those that target a specific industry (or industries) and/or specific geographic areas. In theory, a directory uses an asset (a consolidated list of something) to aggregate an audience. They monetize the asset by either selling listings (renting access to their audience) or using a pay per lead model (more on that below).
Sites like Angie’s List, HomeAdvisor and the Yellow Pages are really nothing more than niche directories. They’ve created an audience and they make money by renting access to that audience. If you want more leads, you can rent access to their audience (the key word here is “rent”). If you go this route, be sure to accurately track your results with a third party vendor (as opposed to using the “free” tools provided by the company renting you access).
Lead Generation Option #2: Pay Per Lead or Lead Generation Companies
Another option for generating more leads is to engage a pay per lead company (also known as a lead gen company). Pay per lead companies charge you only when they generate a lead. How they generate their leads varies considerably. Some pay per lead companies operate directories, but instead of selling you a listing on their site(s), they offer a free listing and use a tracked phone number and web form to determine how many leads they generated for your business. They charge you based on the number of leads. A newer option is Google Home Services Ads, which is slowly being rolled out across the US.
Another way pay per lead companies generate their leads is using co-registration. Co-registration isn’t something most business owners or consumers are familiar with, but you should be.
Have you ever gone to the mall and seen a Lexus that you can register to win? Often times the promotion appears to be put on by a local car dealer—and sometimes this is the case. However, other times, the “contest” is actually being executed by a marketing company on behalf of multiple companies. One of the participants might be a local car dealer, but another might be a company that sells timeshares. You give your email to the car dealer hoping to win the Lexus and end up getting spammed until eternity by a company selling time shares as well as the local car dealer.
Lead Generation Option #3: Building In-House Lead Generation Assets
If you look at lead generation, studies show that between 70-80% of people research a company online BEFORE visiting the small business or making a purchase with them. This means your website is one of the most powerful lead generation assets you can own. You can spend your money renting audience from another company via a listing in their directory or paying per leads on an a la carte basis, but you can also invest in your own in-house lead generation assets and systems. You can do this on your own or hire a company like Blue Corona to help you or handle everything—sort of your virtual online marketing manager. Your primary website, opt-in email newsletter, and optimized social media profiles are all good examples of lead generation systems owned by you (as much as any business can “own” something).
Be Careful with Directories & Pay Per Lead Companies
If you look at the way to nurture leads (infographic above from Hubspot), it’s actually a lengthy process, and one that involves multiple trips to your website and other online assets. I haven’t run a detailed analysis lately, but my guess is that Blue Corona invests more than 80 percent of our advertising and marketing budget developing, optimizing, and maintaining our own lead generation assets. Most of our clients take a similar approach. This approach might not be right for everyone, but it’s landed us on the Inc. 500|5000 six years in a row (note: many of our clients have also made the list).
Building lead generation assets you own and control—your primary website, marketing microsites, opt-in email lists, etc.—is like buying property vs. renting it. It’s a long-term strategy. It takes quite a bit of time and effort invested before you start seeing the dividends. In some situations, waiting isn’t an option. If you need leads yesterday, joining a directory with a large, established base of traffic and/or signing up with a pay per lead service is an option.
If you decide to test directory listings or a pay per lead company or two, here are some of the things you should keep on your radar:
A Framework for Thinking About Lead gen Directories
Getting listed in targeted high-traffic directories can deliver short-term leads, but whether or not the effort is worth it depends on your execution. With directory sites like Angie’s List and the Yellow Pages, you’re not building any long-term equity in a lead generation asset you own. Keep this in mind as you develop a strategy for testing such sites. Additionally, by investing in these sites, you may actually be making the road to long-term success more difficult—something I’ll touch on briefly below.
With directory sites, some of the questions you have to ask and answer include:
- How much traffic does this site receive (and how much of it is relevant to my business)?
- How many of my competitors are using this site?
- How many sales will I need to get from this site to recoup my investment?
- Is the user experience offered by the site going to help or hurt my business?
- How is the directory getting its traffic?
If a directory only gets its audience from Google (whether from the paid or organic results), investing in that site may actually reduce the performance of your in-house lead generation assets. By investing in a listing with the directory, you’re increasing that site’s resources. If it spends those resources on larger PPC and SEO budgets, you’re actually creating a stronger competitor to your own in-house assets.
You also have to consider what will happen to the value of your listing on the directory when Google finally decides to drop all these sites from their organic results and/or replaces them with a Google-owned alternative. Many directory listings are 12-month agreements. If the directory you’re considering only gets traffic from Google and Google makes a major change, the value of your listing could fall to zero.
If you think this can’t happen, you need to revisit why so many of the dot-com companies crashed and/or talk to business owners in the travel and wellness industry.
Things to Consider with Pay Per Lead Services
With pay per lead services, you’ll need to find out:
- What constitutes a “lead?”
- How many companies receive each lead?
- How are the leads generated (broadly speaking)?
- What’s the cost per lead and when is the last time it changed?
If you’re running a high-end window and door company, a “lead” might be a booked appointment with a vetted prospect. Most pay per lead companies sell a phone call or a web form—more of an inquiry than an appointment. There’s nothing wrong with this unless you pay the lead generation service for your definition of a lead when really what you’re buying is something much different.
Some pay per lead companies sell leads exclusively to one company; others sell each leads to multiple vendors. For most home service companies, the latter setup will result in a much lower lead-to-sale conversion rate as well as lower profit margins. Depending on what you pay for the leads and your overall business model, this reality might be acceptable… just know the game you’re about to start playing.
The reason you need to know—generally speaking—how a pay per lead company is generating their leads is so that you can make sure they’re not using poorly executed co-registration programs to generate low quality leads.
Knowing Your Numbers Is Critical
With both directory sites and pay per lead services, it’s important that you know your numbers. If you know the lifetime value of a customer and your lead to sale conversion rates, it’s pretty easy to determine what you should be willing to pay per lead (just make sure the pay per lead company defines a lead like you do). Without these numbers, you could be headed for trouble—faster than you realize.
Conclusion & Final Takeaways
Investing heavily in pay per lead services may generate leads today, but those leads come with a large hidden cost—the time lost building up lead generation assets of your own. What happens when all your leads come from a pay per lead service and suddenly that service decides to raise the price per lead and/or begin selling the same leads you’re buying to your competitors?
If your company is profitable and you have the capacity to take on more work, there’s nothing wrong with signing up for Angie’s List or buying leads from HomeAdvisor. Just make sure you do your homework and exercise caution with whatever action you take.
If I were you, I would:
- Track everything (and don’t rely on the metrics provided by Angie’s List, Yellow Pages, etc. Use your own analytical/tracking tools)
- Do your homework. Not all directories and media sites are created equal and not every “lead” is a lead.
- Dedicate a significant portion of your budget to creating lead generation assets, systems, and campaigns that you “own.”
Ultimately, the lead generation approach you take—directories, pay per lead, or building in-house assets—depends on your goals and your overall web marketing strategy. You do have a web marketing strategy—a written plan for how you’ll use the web to achieve defined, measurable business goals—don’t you? (Note: if you don’t have goals and a strategy, we should talk!)
I like to have most of our leads come from in-house lead generation assets over which we have a high degree of control. In addition to greater control, the leads we receive from our in-house assets come at a much lower price than what we might pay for leads from a directory or pay per lead company.
You can build your in-house assets on your own or you can hire a professional web marketing firm to help you or do it for you. Whatever you do, make sure it aligns with your overall web marketing strategy. Don’t have a digital marketing strategy? We should talk! Our team will analyze all your digital assets—including your website—and create for you a strategy to better utilize your presence online to achieve your business objectives.
Have a safe and happy Labor Day weekend, and get some sleep. If you’re up worrying about how to get more leads, call Blue Corona!
About The Author: Ben Landers is the Founder of Blue Corona, an award-winning, technology-enabled home services marketing agency focused on growing the trades. Want to book Ben for a speaking event? Send us a message.
View more blogs by Ben Landers
The information on this website is for informational purposes only; it is deemed accurate but not guaranteed. It does not constitute professional advice. All information is subject to change at any time without notice. Contact us for complete details.