The lead generation industry is growing rapidly and advances in technology as well as new processes are providing more complex ways to generate, sell and buy sales leads. We dedicate much of our blog to exploring new technologies and the future of the lead generation industry. However, for this post we decided to take a step back and discuss a fundamental piece of the lead generation and distribution process. Today we answer the question, “What is a lead broker?”
A lead broker is an individual or business entity that buys leads with the intention of reselling each lead to their own network of buyers. The lead broker (also known as a lead aggregator) sits in between the lead generator and the end-service provider. After buying a lead, the lead broker carves out a small profit from the lead price before selling the lead to one or more buyers. This entire process takes place in real-time in the form of server-to-server communication between the lead seller, the lead broker and the lead buyer.
Since the lead broker needs to carve out a profit from every lead her or she buys, any lead that is bought but goes unsold is a loss. In order to determine whether they will be able to profit from every lead they purchase, lead brokers use a distribution process called ping post.
In short, ping post allows the lead broker to ping partial lead information from the lead seller to their entire network of lead buyers. If the broker's buyers want to purchase the lead based on the partial information that was pinged to them, the buyers then respond with the price they are willing to pay.
After collecting every bid, the lead broker knows the maximum price at which he or she can sell the lead. The broker can then carve out a profit margin out of that price and offer a slightly lower bid to the lead seller. If the seller accepts, the lead is bought by the lead broker and sold again to the lead broker’s buyer.
If you are a lead generator looking for additional lead buyers, working with a lead broker can be a good option. The best lead brokers have an expansive network of buyers with large variations in the types of leads they accept. This gives lead generators more flexibility in the types of leads they can generate and sell.
Let’s imagine that you’re generating home improvement leads and have a network of contractors throughout California that are buying leads from you. What happens if you get a lead requesting services in Florida? None of your California contractors are going to buy your Florida lead. Normally, this would leave the lead to not only be unsold, but unserviced, hurting both your pocketbook and the integrity of your service offering. However, by working with lead brokers (and indirectly working with their large network of buyers) you could sell your leads, that would have otherwise gone unsold, to a broker.
Because lead brokers need to carve out a profit margin from every lead, selling leads to brokers is almost always less profitable than selling leads directly to service providers. The good news is that if your buyer network is built with several end-service providers as well as a few brokers, you can prioritize your higher-paying buyers and use the lead brokers as a fallback plan in case the lead won't sell to another buyer.
Another potential issue of working with lead brokers is stability. If a lead broker is not providing any additional value to the lead or are only re-selling leads to other lead brokers, they are operating in a 'soft spot' within the lead distribution process. The lead generation industry is so competitive and is becoming more efficient by the day that those acting simply as ‘middle men’ typically don’t last too long. Whenever possible, it is always beneficial to get as much information about your lead brokers as possible.