Now that every Web 2.0, local search, or mobile commerce start-up is getting showered with money, Newsweek cover stories, or $750 million offers (which they are rejecting), I think it’s high time to stop asking "is this a bubble" and instead start wondering "just how big and silly will this bubble become? Clearly, many a VC has forgotten 1999, and there’s a lot of fat in the Valley these days. I’m actually beginning to wonder if SFGirl is going to come back into prominence.

So while we wait for the imminent collapse, the question on my mind is how a downturn in the Internet economy will impact online lead generation companies. My sense is that, while lead gen is not entirely recession proof, the industry should be largely unaffected by a 2001-like bubble burst. I have three reasons for my confidence. As follows:

Lead Gen is an "Established" Industry

Lead generation companies hate reinventing the wheel. Once you find a vertical, a media channel, a landing page, a sales rep – whatever – that works for you, you ride that winner as long as you can. As a result, the successful lead gen companies today have refined their models over and over again to the point that they are highly metrics driven, produce relatively stable monthly revenue, and have well-developed relationships with their clients. Moreover, the price per lead each company in the space receives is relatively similar, a sign that customers have also figured out the metrics that work for them.

Unlike, say, mobile photo sharing, this is an industry that has a demonstrated track record of success – both for advertiser and publisher. It’s not an experimental part of a marketer’s budget – in some cases, it’s almost the entire budget.

Lead Gen is a Safe Harbor in the Storm

Advertisers love lead gen because it is a form of media that enables them to control risk. When you buy a CPM advertisement, you are only guaranteed impressions. With a CPA (or better still, a rev share) ad campaign, you are guaranteed leads or even sales.

In a down economy, advertisers will no doubt flock to less-risky media campaigns. The result will be an erosion of CPM media buys and experimental buys (Podcasts, RSS feeds, etc), with an increased spend on CPC and CPA deals with more secure returns. I suppose a good analogy is the stock market. When times are good, people make risky bets – for example, paying $400 a share for Google. When times are bad, municipal bonds, CDs, and value mutual funds look mighty attractive.

Lead Gen Doesn’t Rely on Start-Ups For Revenue

When you look at the major lead gen verticals – mortgage, education, shopping – the focus is almost entirely consumers. As a result, the sudden death of hundreds of start-ups and the equally rapid dismissal of dozens of venture capitalists has little impact on the business models of lead gen companies. Granted, any economic recession will reduce consumer spending, as well as reduce the over-inflated valuations currently being given to Internet companies.

At least with respect to consumer behavior, however, you can argue that some of the major lead gen verticals could be consider counter-cyclical. For example, when the economy is booming, interest rates rise and mortgage refinancing falls, while the opposite is true in times of recession. Lead gen companies do much better on more refinance leads than they do on new home purchase leads. Similarly, when the economy is hot, people tend to stay at work; when the economy cools, applications for schools increase. Thus, another win for lead gen.


Lead generation isn’t flashy. It’s rare to hear words like "AJAX" or "social networking" in the halls of an online lead generation company. You’re far more likely to hear "revenue per click," "conversion rate," and "clickstream analysis." You’re also likely to hear lines like this: "The company has enjoyed 20 quarters of profitability with annual revenues in excess of $100 million two years running." That pays a lot of bills, something that you can’t say about a Newsweek cover story.

Tags: online lead generation, internet bubble, web 2.0, newsweek cover, monetization


  1. ChrisL May 19th, 2006

    You raise some interesting points, but I have to wonder if there are a couple fundamental problems with online lead generation.

    1) I’m concerned about “lead-gen fatigue” causing many–if not most–qualified leads (particularly in high-value markets) turning a deaf ear to lead-gen prompting or simply “bug-me-notting” their way into content designed to create leads.

    2) I’m worried that the efficiency of lead generation on the Web will rapidly cause every advertiser’s lead-gen database to look very much like every other.

    I’m not sure what can be done about either of these issues, but I expect that the extra efficiency of collecting the names of the willing combined with fatigue reducing the numbers of the willing could ultimately cause online lead-gen to be devalued in the same way as banner ads.

  2. afandina September 27th, 2009

    good blog

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David Rodnitzky
David Rodnitzky is founder and CEO of 3Q Digital (formerly PPC Associates), a position he has held since the Company's inception in 2008. Prior to 3Q Digital, he held senior marketing roles at several Internet companies, including (2000-2001), FindLaw (2001-2004), Adteractive (2004-2006), and Mercantila (2007-2008). David currently serves on advisory boards for several companies, including Marin Software, MediaBoost, Mediacause, and a stealth travel start-up. David is a regular speaker at major digital marketing conferences and has contributed to numerous influential publications, including Venture Capital Journal, CNN Radio, Newsweek, Advertising Age, and NPR's Marketplace. David has a B.A. with honors from the University of Chicago and a J.D. with honors from the University of Iowa. In his spare time, David enjoys salmon fishing, hiking, spending time with his family, and watching the Iowa Hawkeyes, not necessarily in that order.