Part 1 | Lead Generation Arbitrage – A Huge Opportunity
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Part 1 | Lead Generation Arbitrage – A Huge Opportunity

Part 1 | Lead Generation Arbitrage – A Huge Opportunity

Back in my mid-twenties, I did enjoy being part of the Wall Street world, but I knew something was missing.

I just felt like I didn’t have control of my life, my destiny. And I thought it was vital that I dictate my future and my values.

So, I left Wall Street and got into marketing. 

And I NEVER regret it! 

The minute I started to learn about online marketing, I immediately loved it. 

I love everything about it – advertising, being online, and having so much opportunity. I love having the control to do it online.

But, the best thing is helping people – the concept of matching those who need something with the people who offer what they need. 

It’s like putting two things together and making people happy.

Speaking of helping people… 

I also enjoy sharing my knowledge and helping you guys to learn about the business.

I get a lot of questions about lead gen arbitrage. 

How does it work? How do I do that? 

That’s why I’ve decided to explain what lead generation arbitrage is, what it means, and how to start doing something like that. 

This is the first of three episodes in which I cover the topic.

So, tune in and learn the basics of buying leads, selling leads, and making money in the process. 

And this is low-hanging fruit, I promise!

Let’s dive in!

Lead generation arbitrage is a business that has a tremendous amount of opportunity. It has a massive upside. It’s just endless. 

You can get deals with companies that need leads. If you have a business where you need leads for yourself, then you can use this as well. 

You’re not only generating leads, but you’re also the back end that will acquire the customer. 

Yet, some people just can’t build these large businesses from the start. Or maybe they never want to build the actual business or sell their product/service dealing with customer service. 

So, the chance for you to start a business very quickly is to learn how to generate leads for other advertisers, for other companies.

In these three episodes, I’ll go over all those things you need to understand to start this business.

  

Lead Generation Arbitrage – Definitions

 

Let’s start with lead generation. 

It’s defined as generating consumer interest in a product or service with the goal of turning that lead into a sale.

Every lead does not turn into a customer – not even close. 

If you see a 1% to 3% conversion rate, you have a very successful business. 

If you generate 100,000 leads, only 3,000 of them will turn into customers. That means as many as 97,000 of those leads won’t turn into customers, which is wild! But that’s how it goes. 

Arbitrage is defined as simultaneously buying and selling leads in order to take advantage of differing prices for the same lead.

If somebody is willing to pay you $5 per lead, and you can buy a lead for $4, you make $1 for every lead. In those scenarios, it’s a great deal. It’s a straightforward concept.

There’s a lot of ways you can do that. But I’m going to dive into that in one of the next episodes. 

Now let’s go briefly over customer acquisition.

Customer acquisition is simple – bringing in and acquiring new customers. 

That’s the model CPA (cost per acquisition) – the amount of money your advertisers pay you to acquire a new customer. 

 

Affiliate Payout vs. Media Buy Payout

 

We’ve said that companies have affiliate programs. They pay affiliates to generate leads, clicks, sales…

That payout is usually lower than a real media buyer would earn if they have internal buys for search or socials or sending emails… The CPA internally on those media buys will likely be higher than the affiliate payout. 

When you get started, you’re likely going to get the affiliate payout. But if you begin to scale the business and do a good job with that advertiser, you can reach a better deal. 

To determine if you can get paid higher, you must understand the advertiser’s actual value per customer.

This is especially true if you’re buying real media (on Google, PPC, Bing, or ads on Instagram or Facebook). Those are real media buys that advertisers do internally. But, if you can do that better, if you can generate real leads and customers, they’ll be willing to pay you more money. 

 

Pay on a Sale 

 

But there are a ton of advertisers that will not pay on a lead. They don’t want to take the risk of buying crappy leads that won’t convert into customers. So they only pay on a sale. And that’s very common. 

Take, for instance, a home security company paying out $750 for every person that installs their home security system. The company could be making $10,000 or $50,000 on a customer over the life of that customer.

So, if you live in a house for 20 years, you could be a customer of that home security company for 20 years. That’s what the company takes into effect when trying to generate customers. 

Sometimes it takes time to get that money back. 

For instance, if the company makes $2,000 a year on each customer and has a customer for ten years on average, each new customer that you get will be valued at $20,000 to the company. 

Can they pay you $5,000 per customer? 

If they accept, it will take them three years to get that money back and be profitable. And if you start to scale that and get a ton of customers, it can become very challenging for them. So they don’t want to do that, and it’s understandable.

 

Take Control! Arbitrage The Media Buy

 

Here is the whole concept of what we’re doing – we’re going to take more risk. But, by doing that, we’re going to get a higher reward. 

If you’re out buying leads (and no home security company is out there buying leads), it’ll be attractive to your partners to run media with you.

And if you’re willing to take that risk, and have a good partner in the back end who knows what they’re doing, then it works well, and you’ll see how it all unfolds here. 

But the bottom line is – by doing this, we’re taking control of our destiny. We’re taking control of the ability to drive good business and scale it without having to get paid on a lead. And we’re doing that by arbitraging. 

However, you need to figure out how to calculate the risk/reward factors that go into starting your own business, going into the media buy, how to take control of the media…

I’ll go over all those things in the next two episodes. 

So, join me next week… and the one after that.

If you’d like to get bonus Performance Marketer content, sign up for my SurveyDetective VIP waitlist!

🕵️‍♂️  Sign up for the SurveyDetective VIP Waitlist HERE

See you!

 

Listener Love…

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Transcript…

Read Full Transcript

Eric Beer 00:00

You're getting people to raise their hand, and you're making markets. You're, you're, you're finding people that need something. So, you just kind of just putting two things together. And I just always felt like that type of business would never go under because everybody needs leads. If you're a business and you're looking for new customers, you need leads. So, it's recession-proof.

I spent the last 17 years building my eight-figure performance business without using any of my own money, working with some of the most brilliant direct response marketers in the world today. Now I'm looking for entrepreneurs to join my affiliate army built on ethics, transparency, and good old hard work. Join me to change the perception of how people view the greatest business in the world, affiliate marketing, and follow along as I learn, apply, and share performance marketing strategies, working with some of the brightest people on the planet. My name is Eric Beer, and welcome to the Performance Marketer Podcast.

What's up, everybody? Eric Beer here. And today, we have a little treat. I'm answering to all of the people in the Performance Marketer nation who keep on asking me, practically begging, just lead gen arbitrage. How does it work? How do I do it? Like, explain it to me… And I get questions like this all the time. And I figured rather than me just go and tell one person, one at the time, that I could just do it all together. On one time with the, with answering the people in my text community, answering people in my Facebook group, answering people that see me on the street, people that want to understand how you can earn a living by generating leads. So, today, we're gonna go over what lead gen arbitrage is, what it means, and just a very high-level overview on how you would go about doing something like this. Right?
I've been generating leads for… for years. Jeez, it's got to be over… almost like 20 years now. Holy! Wow! You know, but I mean, you know, the minute I found out about like, the lead generation world, I just got, I got so excited. It was at a time of my life where I just I was my, my early 20s, mid-20s. And I was on Wall Street. I was trading, I was out in the market, just, you know, living it up loving it, right? High stress, but high, high opportunity, high risk, but high reward. I loved it. I loved everything about it a lot. I love that I was part of the Wall Street world for a few years, I loved being on a desk, I loved being part of a hedge fund seeing a hedge fund works, seeing how just like this big money, like what they're doing with it, how they operate, it really was a useful learning experience for me personally. So I feel lucky that I had that. But there was something missing. You know, I just felt like I didn't have control of my life, my destiny. And I thought it was really important that I dictate what my future is, I dictate what my value is. And I just, I felt like emotionally, it was, you know, could be a good trader, you could be analysis, you could do all these things. But there's a lot of other things that go into whether you're successful or not, including what's going on in the world. So I left and got into marketing. And the minute I started to learn about online marketing and lead gen. I immediately just, I loved it. I love everything about it. And the reason I think most importantly was because I love marketing, I love the advertising. I love being online, I love having control to do it online. And it was just there was so much opportunity not to mention that you're helping people. Because at the end of the day, you're you're just you're getting people to raise their hand and you're making markets, you're you're you're finding people that need something, so you're just kind of just putting two things together. And I just always felt like that type of business would never go under. Because everybody needs leads. If you're a business and you're looking for new customers, you need leads. So it's recession proof and The ability for you to control it yourself was what was very exciting to me personally. So I got into this world.
I appreciate you guys being here, I appreciate your time, I appreciate you listening, I appreciate you watching, it's really important if, if you like this, like it, share it, show it to some of your friends, anybody think might get some value out of this, it's really helpful for me, it's helpful for any of the algorithms based on the platform that you're you're watching or listening to this on. So in in that respect, I appreciate it. And hopefully, it's helpful for you, and you learn something.
But so lead gen arbitrage is a business that has a tremendous amount of opportunity, right? It the upside on here is is just endless, right? You can get deals with companies that need leads, right, if you have a business where you need leads for yourself, then you can use this as well, right, you're, you're out in the market, you're generating leads, but then you're the back end that's going to go and acquire the customer. So whatever that process is, on the end, after the lead is generated, right? It's the same concept. Yet, there are people that just don't have the ability to build these huge businesses from the start, or maybe they never want to get involved with building the actual business, or selling that product or service dealing with the customer service, there's a lot that goes into it manufacturing, there's a lot of things that go into that, right. So, you know, a simple, low hanging fruit, the ability for you to start a business very quickly, is for you to learn how to generate the leads for other people, for other advertisers for other companies. And there's two things that are great about that. One is you're learning on somebody else's dollar. So that if you want to choose to start a business down the road, where you're selling your own product or service, you already know how to market and find customers find leads that turn into customers, right. And two is you can start a business very quickly without using any capital whatsoever, you don't have to go and ask people for money to start a business, like the whole point of like a lead generation. arbitrage is that there's there's cash flow, right? The concept here is that you're going to be going out to the market generating leads for companies, and you're going to be receiving more than what you pay for those leads. I think that's really important. But you need to figure out how to calculate the risk reward factors that go into starting your own business, going into the media buy, how to take control of the media. And there's a lot of things that you need to understand that I'm going to go over today with you. But I think that's something that I really want you to understand here today is that there's huge upside. But you also need to be smart about how you go about doing this.
So let me start off with lead generation. Okay, I'm going to define this for you up here, you can see it, hopefully you can see my screen. So lead generation is defined as finding somebody who's interested in some product or service. And the whole goal of that is, like I said earlier, that lead, hopefully will turn into a customer for the end buyer. Right? Every lead does not turn into a customer. Not even close, as a matter of fact. You know, there's, there's a lot of businesses out there that will generate leads, and like a credit card sale on the internet. If you see one to 3% conversion rate, then you have a very successful business. Which is funny, right? When you think about I was saying I always think, well, if you're generating 100,000 leads, and they're going to convert 3,000 customers, that means 97,000 of those leads don't turn into customers. It's wild, man. It's really wild. But that's it. That's how it goes. I mean, depending on the business that you're involved in and what the value of a customer is to the advertiser will determine all of the metrics that start from the value of the customer all the way down. But the whole idea here is that you're generating a lead and that lead is going to buy that product or service from the end buyer right?
Arbitrage is ultimately the buying and selling of the leads and order for you to take advantage of the different prices from the same lead, so different prices in the marketplace. So, there's a lot of ways that you can do that. And I'm going to dive into that a little bit later. But the simple thing would be that if somebody is willing to pay you $5 per lead, and you can go and buy a lead for $4, it's really simple, right? You make $1 for every lead. So, in those scenarios, it's a great deal. Very simple, it's not complex, where you get really, really savvy is when you're able to take the customer payout, and convert that into a lead on your end and go out and buy leads, right? The ability for you to go and buy leads, even when you're not getting paid by a lead. And that's where it gets really sexy. And the people that do well can have a really, really successful business. So, I'm gonna get into that. That's the whole point of what we're doing tonight. And we're gonna go down that road.
But so, performance marketer, right? We’re all, we all listening to this are performance marketer. Our lives are performance driven, we’re results driven, right? We, we want everything to be measurable. That's what lead generation is. It's measurable, right? It's result driven, you're driving leads that are going to deliver a result of new customers, right, and the ability for you to measure what the cost of that lead is to you, or what the value of that lead is, to the end buyer is all measurable. It's all done generating 100,000 leads getting 3000 customers, that's a 3% conversion rate, right? How much money did they make off of those 3000 sales? Right? That's the value. That's the value that you get from the customer, you can back that into value on a per lead basis, you can back that out into value on a per click basis, on a impression basis, you can back it out into all these different metrics that allow you now to get creative on you taking control of how you're going to go out and run your business. And if you do it in a way where you do something that no one else does, then that's an edge that you have, that allows you to be successful, right. And that's all about risk reward.
Customer acquisition is simple, right? Bring in and acquire new customers. So again, we're all result driven CPA, in the market, that's the model CPA cost per acquisition, it's new out of money, your advertisers going to pay you to acquire the new customer. So if you're talking to, you know, a home security company, and they tell you that they'll pay you for every person that installs their home security system, then they'll pay you $750 for every sale. Well, that's the CPA, an example here of $100. CPA is $100 cost per acquisition, I think it's important for you guys to understand when you're out and you're talking to advertisers. There's a thing where there's the affiliate payout versus the media buy payout, the media buyers, it's a different payout. It's different value, right? companies have affiliate programs, they pay out to affiliates to generate leads, click, sales, what have you, that payout is normally lower than whatever a real media buyer would get the real allowable that they have, if they have internal buys for search, or social like on Facebook, or sending emails, the cost per acquisition, internally on those media buys will likely be higher than the affiliate payout. So in a scenario where when you get started, you're likely going to get the affiliate payout. But if you start to scale the business and you're doing a good job with that advertiser, you definitely want to have a conversation with them. You want to understand what their actual value per customer is. So that you can determine if you can get paid higher, right, especially if you're out and you're buying real media, you know. And what I mean by that is, there's there's somebody brokering something and going and giving it to somebody else, versus you having a real buy on on Google on PPC, or Bing right? Or buying ads in Instagram or Facebook. Those are real media buys that they're doing internally. And if you could do better than they can, they'll be willing to pay you more money if you can generate real leads and customers and you can scale it. So just keep that in mind. I thought that was important for you to understand because at the end of the day Depending on what you get paid out, is going to determine what the value per lead is to you. Okay. And what we're looking to do here is we want to go out and buy leads, we want to generate leads, and then we want to then get paid by the advertiser in leads. But there are a ton of advertisers that will not pay on a lead. And most people are like, Alright, well, Dan, I'm not getting paid on a lead by my advertiser, they only pay me on a sale. Right? And that's very, very normal. They don't want to take the risk, right, we talked about risk reward. Advertisers don't want to take the risk to go out to the market and buy leads, maybe because they don't have the back end, to convert the leads, maybe because they have the back end. But they still want to make sure that they get the sale, before they go and pay out on that media. Because they've gotten burned, there are times where guys will generate crappy leads, and they won't convert those leads into customers. And then they go out and pay for 5000 leads, and let's say pay $2, a lead. So it's been 10 grand, and then any customers, and they're all pissed off. And that, that makes sense. totally get it all right. risk reward, right? When you go out and you're buying on a sale, there's certain types of, of lead gen companies, any kind of media buyers, that will run your offer on a cost per sale, right, because it's more risk for them and less risk for the advertiser. If you want to go and pay for the lead, well, then the advertisers taking on more risk. And you now can go out and just generate that lead, which is exciting. Most advertisers that have an unbelievable back end process, where they know that if they get the right leads, that they're going to close, will go out and buy in a lead basis. And when they do, then that's where the business can get really, really scalable. And there's really no budget at the end of the day, when you're backing it out into whatever their cost per acquisition allowable is, right. So if they're making that home security company that's paying out $750 for an installation, they they could be making a customer, you know, over the life of that customer $10,000 20,000 $50,000. Right. Think about it, anybody that installs a home security system into their home, usually is either moving into a new home and needs to install home security system, or they didn't have a home security system. And then all of a sudden, there's there's all these, these break ins and are really, and things are happening in town and they got scared. So there's going to go and install something because they're scared for their safety, or they are working with a company where the product just didn't work. You know, they didn't like the product. They don't like the service and they want to switch, right. But then after that, that customer keeps that home security system pretty much until they, they they leave that house, right. So if you if you live in a house for 20 years, you could be a customer for that home security system for 20 years, once you install, it's in your house, it's a pain to change it. Right? So when they're out and they're generating these customers, they're taking into effect, how long is this guy going to be a customer of mine, and they do it on like a lifetime value. And there are some averages, and sometimes it takes time to get that money back. Right? If they're gonna make, let's say they make, let's say $2,000 a year on each customer. And they, on average, have a customer for ten years across all their businesses, right? All their sales. There are people on average that stay in their house, and they have about ten years. That works out times $2,000. That means each new customer that you get will be valued at 20 grand to them. So can they go out and pay? Pay you $5,000 for the customer? I mean, hypothetically, yes. Right now, we're also modeling this out after ten years. So there's a cash flow issue there, right? If they're making $2,000 a year, right, for them to pay out $5,000, it would take them three years to get that money back and be profitable. Right? And if you start to scale that and get a ton of customers, then it can be very challenging for them. They don't want to do that. Right. But so just you understand that. That's the whole concept here of what we're doing is we're going to take more risk. But, by doing that, we're gonna get more reward because most people like for that, for that home security company, if we're out buying leads, no home security company is out there buying leads. So it's gonna be very attractive to your partners to run media with you. And if you're willing to take that risk, and then you have a good partner in the back end that knows what they're doing on how to close. It's, it's sexy, man, it's really, it really, really works well, and, and you'll see how it all unfolds here. But the bottom line is, by doing this, we're taking control of our destiny. We're taking control of the ability for us to drive good business and scale lead gen business without having to get paid on a lead, right? And we're doing that by arbitraging. Right? We talked about what arbitrage was earlier. Arbitraging the media buy, right? So, we're out there looking to go and find placements, find media placements, buy media, where we can generate a lead for less money than what the value per lead is that we're getting.

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