Thanks to Niki Scevak I went back to Bankrate’s 4Q05 earnings call, where CEO Tom Evans calls companies reliant on paid traffic a ‘looming disaster’ – presumably because, as Tom said the previous quarter, “we have all seen the competition for traffic and the cost of buying traffic doing nothing but increasing over time.” Bankrate’s in a sweet spot, with over nine-tenths of their traffic coming from unpaid sources, but I’m a bit skeptical about Tom’s overall claim about paid traffic. Since revolutionary market-based ad pricing (a classic edge competency) transformed paid search, prices are at least somewhat rational. Higher prices reflect more competition for the traffic, not extortion on the part of the publisher. And more competition for the traffic means more competition for the product of the traffic – the personal information that makes up a lead. During a period of rising interest rates and declining loan volume, lead generators can simply pass the rising cost of traffic on to lead-hungry loan originators. And if paid search gets too expensive, there’s billions of remnant banner impressions out there that are significantly less competitive – if the publishers can’t sell all of it (hence the term ‘remnant’), they can’t command high prices for it.
I’m a bit more concerned about reports that refi originations as a whole are going to drop by 40% next year. Maybe this will be the year loan originators repurpose their businesses to focus on home purchase loans? If there’s any sort of switch-over, it’s not a disaster for lead generation companies – every company doing mortgage gets a lot of home purchase leads along with their refinance leads, and the home purchase leads are (currently) a lot harder to sell. (Want to buy some? Shoot me an e-mail.) I figure the industry will just repurpose and adapt – but the nimble and flexible firms will have an easier time of it.
