What’s the difference between lead generation and a lead exchange? Believe it or not, it is a question that comes up pretty frequently especially for anyone new to the lead industry. So what are the strengths and weaknesses of each
What is a Lead Exchange?
A lead exchange is a 3rd party service that connects lead sellers and lead buyers. Lead generators or anyone selling leads can plug into the exchange in hopes that their leads will sell to the exchange’s network of buyers. Likewise, buyers plug into the exchange to buy from the provided network of lead sellers.
The Pros
This scenario is a win-win situation for both buyers and sellers that don't yet have business relationships. If you're a buyer and don't know any sellers, or a seller without anyone to buy your leads, an exchange is a great option.
The Cons
Lead sellers and buyers are limited to whoever is at the opposite end of the exchange. If you don’t have anyone to buy your home improvement leads at the time you generate them or can’t get a fair offer per lead, you’re out of luck. If you’re looking to buy mortgage leads and the supply dries up, you have no other options. This not only limits your immediate revenue, it also strongly influences your ability to grow.
The lead exchange needs to make money too. They do this by either taking a cut of each lead that passes through the exchange or charging a subscription fee. A few dollars and cents shaved off each lead might seem insignificant, but aggregated among all of your leads, this can turn into a significant chunk of change.
You are limited to the lead verticals supported by the exchange. Lead exchanges typically only operate in the largest verticals, removing your ability to broaden your lead portfolio.
What is Lead Generation?
Lead generation, in general, is the process of aggregating sales leads via your marketing activities. In reference to this article, we are referring to the practice of generating leads and calls and selling them in real-time to your network of buyers.
The Pros
You have the freedom to grow. By not relying on the ebb and flow of your lead exchange, you have the ability build your own network of buyers and raise your company's growth ceiling as high as you can take it.
You have the ability to operate in any vertical. If you can find the buyers, you can operate in any vertical of your choosing. This is especially useful in niche markets that may not produce high volume, but can return triple figures per lead.
You can achieve the maximum price for every lead you generate. Because you're not relying on the buyers and price structure of an exchange, you can 'shop your leads around' to each of your buyers and ensure you are always selling each lead for its maximum value. This can be further optimized by utilizing ping post distribution logic.
Utilize the distribution options of your choice. Running your own lead generation company also means utilizing the lead distribution options that best fits your business. Whether you choose standard real-time distribution, ping post or decide to generate calls, you have the freedom to build your business as you see fit.
The Cons
You need to find your own lead buyers.
Which is Right for Me?
We'll admit it, we are absolutely biased towards lead generation companies as opposed to those who plug into a lead exchange, but there is a reason for that. It is a more lucrative business model than a lead exchange for every party involved. There is a reason we provide lead distribution software instead of running a lead exchange. If you're looking to build a lead business with the ability to grow and sustain long-term success, your best option is operating a lead generation business rather than utilizing a lead exchange. However, if you are just starting in the lead industry and have no potential buyers, a lead exchange could be a good place to start. However, as you increase your lead volume and look to grow your business, your only option is building your own network of buyers.
