The years of 2005-2007 saw a lot of activity in the mortgage refinance market, as we know, and a big part of that was the explosion of internet advertising in the US about it including the lead generation market. Here’s a clip from a NetRatings press release in January 2006 showing the top online display advertisers in the US:
Top 10 Advertisers by Estimated Spending
Advertiser* Total Estimated Spending Impressions (000)
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Vonage Holdings Corp $36,574,400 14,954,696
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Netflix, Inc. $16,770,200 5,042,750
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United Online, Inc. $13,588,500 3,383,704
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NexTag.com $12,557,100 3,517,763
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LowerMyBills.com, Inc. $12,470,400 2,580,703
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BellSouth Corporation $11,593,400 3,139,830
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Verizon Communications,
Inc. $10,346,400 2,979,028
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InterActiveCorp $9,261,900 2,307,974
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General Motors Corporation $9,260,900 1,749,433
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Scottrade, Inc. $8,655,200 1,866,586
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Estimated spending reflects CPM-based advertising only, and excludes search-based advertising, paid fee services, performance-based campaigns, sponsorships, barters, partnership advertising, advertorials, promotions, email and direct response. Impressions reported exclude house ads, which are ads that run on an advertiser’s own or related Web property and co-branding relationships.
Numbers 4, 5 and 8 above were mortgage advertisers. NexTag (my former employer), LowerMybills and LendingTree (InterActiveCorp in the list above) were not spending as much as the amounts above, perhaps 40-70% of these numbers would be about right depending on the month – but even if we assume 50% of the $35 million here between these three providers, we’re looking at about $17 million or more in a single month (January 2006). That’s pretty amazing. What has changed since then? Well, some the big spenders in display today are Groupon and LivingSocial, and a raft of me-too competitors. Unfortunately, Nielsen’s AdRelevance is a severely broken product and they don’t put out these kinds of press releases as much any more because the data is just way too unreliable.
Mortgage refinance aggregators like LendingTree, LowerMyBills (“LMB”) and NexTag used to advertise the idea of “four offers from competing lenders” which was a nuance in that the lenders were competing with each other not on how good of an offer they could give the consumer, but really based on how much they would pay the intermediary for sending them the lead. As you can imagine, the vendors able to pay more money were the ones that were making more money and often this was via lower monthly cost sub-prime mortgage deals.
In a nutshell though, here are some interesting similarities between these two sets of online advertising programs as they have existed 4-5 years ago (mortgage) and today (and I would argue these were the first advertisers to use banner/display advertising at real scale include the biggest placements on the Web like MSN/Yahoo! front pages for direct response campaigns profitably):
The mortgage refinance business is very different today, as we know, driven largely by a lot of macro factors. I don’t believe the local deal/merchant game will see the same degree of fall-out, because it’s more diverse and there is more depth and variety compared to the banks and brokers, but certainly there will be fall-out and consumer burn-out. The valuation and prospects of companies like Groupon are almost certainly overhyped, as these businesses are more about being marketing engines today than having truly innovative products… but they are still creating some meaningful new consumer value — which I believe is a lot different (for the most part) compared with the lead aggregators who were mostly just masterful at marketing.
I used Square this weekend for a small moving sale. Square is (in my case) an iPhone app with a little credit card reader you plug into the earphone jack of the phone that you can then use to swipe credit cards. There were a couple of categories of potential transactors as you might imagine:
So, the neighbors also were fairly tech savvy and it didn’t seem a stretch that something like this might be possible. They may have seen such an application e.g. at the Apple Store where wireless PDA-type credit card readers are commonplace. They were also quite happy to give it a try and have me email them a receipt. The other types of people were more interesting.
The responses were fairly predictable – one person asked how does this thing work? Though really, most people seemed to think the technology made sense and it was possible; credit card swipers in stores are understood by most to be a telecom-like device. One older gentleman asked me if I was going to store his credit card number – a good question, of course I said I never see the number it gets sent straight to the processor, and if anything bad happens he can call the credit card company of course. (Not something the merchant really wants to be talking to the buyer about though at the best of times) This same person wasn’t sure if they should sign their name or something else, but I said just use your finger to sign your name and that was okay. The email receipt worked well, though another person asked if I was going to send them some email later — I said no. Etiquette about who enters the email address remains unresolved though mostly it’s me except in just one case where they typed it in.
Overall, a good experience for me and the buyers – some issues that will clearly come up from these initial observations: as is usual with payments, there will be issues around trust of the payment mechanism as distinct from trusting the merchant (and especially if that is an unknown). Credit card safeguards already have a lot of mindshare so that helps – but as Square extends to less tech/finance-savvy customers it’s likely they will have to get their name out there to be seen as a trusted payment brand as well.
Good luck to Jack Dorsey, Keith Rabois and the rest of the Square team with that – it’s a very cool concept and as usual the payments space could use some more disruption.
I just received a letter from a Financial Advisor at Merrill Lynch Wealth Management (part of Bank of America Corporation). In it, it says that “Mortgage rates are at some of their lowest historic levels” and that “For over 25 years, we have been offering innovate refinancing solutions and one of the broadest product spectrums in the industry. We have [my emphasis added] distinct options such as interest-only payments and 100% financing, as well as great rates on traditional fixed-rate mortgages.”
Yes, please promote the kinds of teaser programs that caused the huge subprime mortgage mess which in turn pretty much destroyed your company and lost you (and the American taxpayer unfortunately) over $50 billion in 2008. Cognitive dissonance is alive and well, and living in financial America.
“Smart solutions that make the most of your total financial situation – that’s the Merrill Lynch Advantage.”
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