A Look Inside This little-known $3-billion Industry
Free Book Preview: Unstoppable
If you ask your neighbor whether they’ve ever paid money to a lead generation business, you’ll be met with a blank look.
So how exactly does a hidden industry reportedly worth $3 billion a year—and growing at break-neck speed—earn its money?
To answer that, let’s consider the case of a fictional character, Kelly, who lives in Pearland Texas, a pleasant residential area outside Houston.
When Kelly needs to have the trees trimmed along her front fence, she does what most homeowners do: she turns to Google.
She’ll search for something like “tree services near me” or “tree trimming Pearland TX”, and she’ll call one or two of the businesses listed in the search results.
One of the websites she lands on and calls is owned by Ben Hirvi, an Australian-born lead-seller, living in Asia.
However, Hirvi does not own a tree service business in Houston, and says he’s never touched a chainsaw in his life: “Absolutely not. I could probably tell you which end to hold, but that’s about it!”
Instead, he does a brisk trade selling phone calls—like Kelly’s—to business owners who need customers.
In this instance, Kelly’s phone call would have been routed directly to a tree service business operating in the Pearland area, with whom Hirvi had established an agreement to sell phone calls.
Hirvi says business is booming. “I built my first site back in 2013—a pest control site in Australia—and since then, each year has been bigger than the last. In my first year, if I had 20 or 30 calls a day, that would have been big news. Now, I’m disappointed if I don’t crack 1,000 calls a day.”
When a call comes in from one of his hundreds of sites, Hirvi’s phone system routes it to his highest paying client. “Our software calculates a bunch of things within the first ring, including which client has open availability on their calendars—so that the caller is more likely to book—but also and most importantly, which client has offered to pay me the most for those calls!”
Hirvi is tight-lipped on exactly how much he earns from each call, and says it’s impossible to give an answer. “First, not all calls are billable, some are unanswered, some are marketing calls, some are previous customers, and so on. As for the billable calls, each industry is different. If you consider tree services, that customer is probably not going to be a repeat customer, so the scope for me to charge my client is firmly under $100 per call, maybe even under $50. But if you take something like accounting or bookkeeping, you can imagine that the lifetime value of a caller is very high—they might spend thousands of dollars a year for many years, which opens the door to me charging my clients a solid 4-figure fee for each person I send to them”.
While Hirvi has taken the path of selling his calls directly to clients, that’s not the only option for would-be lead sellers.
Several pay-per-call advertising networks exist, promising to pay lead-sellers a fixed fee for every qualifying call. These networks, explains Hirvi, do the thankless work of finding and managing buyers for the calls, though not without charging a hefty premium. “Often, a new lead seller discovers that the client-side of the business is the most difficult and time-consuming—and they’re absolutely right—so they choose to take a 50-70 per cent haircut on revenue and send all their calls to a network, which then handles the client-side and gives them a single payment each month”, says Hirvi.
Even with hundreds of businesses and lead sellers competing for the top position on Google, the pay-off can be handsome, says Hirvi. “If you look at something like ‘bed bug exterminator NYC’, there are about 600 to 800 searches per month, and more in winter. Those guys are going to end up paying a couple of thousand dollars each to fix their bed bug problem, so with just one website, you’re in front of over a million dollars per month of customer spending; so even if you have your fees on the very low end and you’re charging your clients 10 per cent of what they earn, you have a very lucrative website.”
The legalities of operating websites like his are complex and vary by state and country, but Hirvi says that in addition to having a lawyer review all sites before they receive a single call, there is one simple principle that has kept him out of trouble. “The first rule of lead selling is that you don’t sell calls to dodgy businesses. If customers have a good experience, you’ll never have a problem.”
After eight years of running his own portfolio, Hirvi has begun offering income-producing lead generation sites as a ‘done for you service’ through his agency Lead Commanders. “It’s a good deal for me and its attractive for my clients, for somewhere around $30,000-40,000, they end up with an income-producing site, sometimes paying them well into 5-figures a month,” says Hirvi, adding “and it’s a good alternative revenue stream for me because we charge a percentage of revenue to manage the sites long term.”
While it’s clear that business owners can benefit by buying calls from lead sellers, it’s not clear what impact the increase in online competition will have on those businesses who choose not to buy from lead sellers, and instead, to drive their own calls. Instead of competing with only the other service providers in their local area, small businesses are now increasingly competing with potentially unlimited numbers of lead sellers, making the task of driving customers to their business more competitive than it might otherwise have been.