Zillow, the popular real-estate site, started charging for mortgage lenders in 2009 and used a pay-per-lead system. At the time, mortgage lenders were unaccustomed to this method of lead acquisition, and Zillow switched to a pay-per-click system. Recently, market forces have made them switch back to charging lenders per lead according to the National Mortgage News.
In addition to showing how fickle online advertisers can be, it also demonstrates that in spite of being about a decade into online advertising, most industries are still finding their way. The reason that mortgage lenders seem to yaw back and forth between pay-per-click and pay-per-lead is that although a lot of people are looking for mortgages, a much smaller number are good matches for a lender and in a position to get a loan in the near future.
As such, in spite of being more familiar with PPC models, it eventually occurred to lenders that what they were looking for was quality, not quantity. The owner of Total Mortgage Services, John Walsh, explained it like this:
“It might take you three clicks to get a lead, or it might take you 20 clicks to get a lead. Then the lead you get from that click may be a fake lead; it may be a lead from a competitor; it may a lead with a fake phone number. So we definitely like the pay-per-lead options out there, because it is a fixed expense per lead.”
As a result of the changes, Zillow only charges an advertiser once they have an actual lead, no matter how many clicks it takes to get there. The new way of doing things means that each lead costs more than a click, but mortgage lenders are paying about the same amount for a lead at the end of the day. Although this seems like it’s a move to the side, not an improvement, the reality is that lenders are saying they don’t have to spend time tweaking their ads to try to improve the clicks they get.
This leads me to wonder if switching from PPC might provide better results to certain industries by switching to a pay-per-lead or pay-per-conversion system. Currently, AdWords allows advertisers to bid based on a Cost Per Acquisition, but it’s just a general stab at creating a maximum paid price for a conversion.
Your actual CPA may exceed your specified max. CPA or target CPA bid. This is because:
Your actual CPA depends on factors outside Google’s control, like changes to your website or ads or increased competition in ad auctions.
Your actual conversion rate can be lower than the predicted conversion rate.
Google has seen a significant uptick in the amount advertising dollars funneled to Shopping Ads, but PPC spending has been flat and trended slightly downwards. Offering better suited lead generation options to different industries could revive their flagging PPC efforts.