Reader Question: Isn’t Lead Generation just another form of Display Advertising?

Q: Chris you say “we don’t do ad-supported deals at Founders Co-op” yet the first thing you’ve invested in after Judy’s Book is Cooler Planet? The IAB counts lead gen as ads, why don’t you?
Asked by Niki Scevak

A: Hi Niki, thanks for the question. The IAB can call it what they want, but paid lead generation is to display advertising like running a store is to retail leasing. To make money in lead generation you actually have to take responsibility for finding qualified customers and matching them with buyers; if you don’t do a good job, you don’t get paid. In display advertising, you just rent space to others and let them deal with messaging, screening and conversion; you get paid whether they succeed or not.

Cooler Planet isn’t just a media buy for solar installers, it’s a marketing and CRM partner. We actually talk to their customers before they do, and the quality of the service we offer is an integral component of the overall customer experience. We develop direct relationships with the consumer and earn the permission to communicate with them on an ongoing basis on a broad range of topics. In my experience, display advertising shares none of these characteristics.

Since you know more than a little about this marketspace I’d be interested to hear your views: do you think lead gen and display advertising are really the same?

Ask Chris DeVore a question.


  1. nikiscevak

    Firstly, sorry for the curt question: it was merely to escape the character limit on the question.

    I do believe lead gen is advertising. I agree with your shop leasing versus running a store to some extent but the relationship breaks down after a certain point.

    Are you taking on more risk? Yes. But your job ends at finding the best quality prospect, the actual installer has to offer a great product and great customer experience (running the store, not you).

    You wouldn’t know it but nearly 2/3rds of display is priced on a CPC/CPA basis. Publishes are taking on the risk. They are doing a horrible job of managing it, but it doesn’t negate the fact they are taking on the risk.

    My initial question was prompted by what you called ‘greater fool investing’ and implied that online ad deals were part of that (I know it’s a Buffet reference but still).

    Firstly, you will always get in trouble tarring an industry with a broad brush. There are great online ad ideas and there are horrible online ad ideas.

    The best online ad ideas (to me) are when you help a consumer make a decision about buying some product or service.

    Google is the gold standard of breadth on that.

    Cooler Planet is helping people buy solar panels.

    Homethinking is helping people select a real estate agent.

    etc. etc.

    Horrible online ad ideas are not formats (display advertising) but rather user intent. Specifically, getting in people’s way when they are communicating with other people (the telephone started off as an ad supported medium) and also when they are looking to complete a certain task.

    So an online ad supported word processor, or online ad supported image editor are two horrible online advertising ideas.

    After rambling on, I guess I was compelled to respond because:

    1) You associated online ad investments with the greater fool theory when the best ones have excellent fundamentals

    2) Your distaste tended to revolve around a format rather than an experience/intent (which I disagree with).

    p.s. it’s fine not to make online ad investments but continuing on with the Buffet analogy you should say you are relegating them to the ‘too hard’ tray rather than calling them greater fool investments.

  2. Chris DeVore

    Excellent, thoughtful critique, Niki – thanks for posting. My intent with the greater fool post wasn’t specifically to condemn ad-sponsored ideas, but I can see in retrospect that I wasn’t at all clear about that in the post. Greater fool deals come in every possible form (including direct-pay models), and there are some astoundingly good ad-sponsored businesses (i.e., Google), as you so rightly point out.

  3. Boomstyk

    Hey Chris and Nikiscevak,

    I wanted to add to this very interesting post.

    I think to start I might agree with Chris that his point may not have been made to the inth degree – but a point well made none the less.

    Nik I have to disagree with you! Lead Gen is not advertising. Your contention that the relationship breaks down is not only wrong in my opinion its counter to the idea of web 2.0 (to use the term loosely). Your idea is counter intuitive.

    Now, are there some lead gen ideas that run bad. Absolutely! But this point only goes to prove the rule. Chris is right. You might sell the initial idea for lead gen but any savvy business will do the numbers eventually and bad leads will break down on a cost per basis without doubt.

    Your next assumption is that the customer experience relies on the actual retailer to provide. Agreed but off point. If your lead gen is based on giving the consumer advice on how best to spend thier money with a particular retailer based on that retailers ability to service your needs, your lead gen monetization doesn’t rely on the relationship between the consumer and the retailer it relies on the fact that there will ALWAYS be a better retailer.

    Chris that last statement actually provides a problem for my startup that I would love to pick your brain about.

    Also Nikiscevak please understand that I’m not being argumentative or mean spirited.

    3rd point is that you raise CPC/CPA as a correlation to lead gen and I guess in a platitudinous way you could make that leap. However, to me they are very different. CPA only requires an action. That action does not require interest in most cases.

    Lead gen is different simply because by its definition it implies interest. The customer does not just take action but in fact must direct and decide the actions taken. Can that action be from a simple curiosity sure. But in the end the person has to, directly or indirectly, ask for execution of the lead and in this sense asks for information to be sent back to the him/herself. And in fact must give up personal information to get the desired information.

    How you can correlate that to CPC/CPA is, to me at least, a ginormus leap.

    Are there good biz models that have advertising as the main rev stream sure. But I think chris’ call is to the point and acurate

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