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Going global.

US and Canada Finance

     
8:29 pm on Jan 6, 2007 (gmt 0)

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We are interested in testing the affiliate market for finance leads (mainly mortgage, home equity and refinance) in the US and Canada and have been doing some research.

Our findings so far...

The US is a more mature market than the UK, and many finance brokers are regional, dealing only in certain states. There also seems to be a huge discrepancy between prices of leads between states, for example CA pays much more than FL. Our UK merchants are all national, i.e. they deal with the whole country at one price. This seems not to be the case in the USA.

Canada by contrast is behind the UK and seems to have far fewer established programs and is therefore more ripe for opportunity.

So, my questions..

1) Are our initial conclusions accurate?
2) Have we missed anything of major significance?
3) Are there any US businesses that deal nationally, rather than just with certain states?

I should also point out that we are not talking about deals via traditional networks here, as we tend to do things direct these days, but rather wanted responses from someone with a good overview of our industry in these countries.

We would also be interested in replies from anyone with experience in Australia and/or South Africa in this market.

Please note (especially mods) that this post is not for recruitment purposes - we are asking for help from the experienced WebmasterWorld affiliate community before making a commercial decision about whether or not to enter these markets.

[edited by: Michael_Anthony at 8:31 pm (utc) on Jan. 6, 2007]

4:03 pm on Jan 9, 2007 (gmt 0)

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I can give this a whirl.

Canada is largely untapped but the market is near non-existant. I think the first thing one has to understand is refinancing is simply not big in Canada and other than home equity loans and refinance, there really isn't much value in leads (most places will barely pay for new home/mortgage leads as they are generally handled locally and are near impossible to close over the phone).

The reason why refinancing is tiny in Canada is most home owners get a rate locked in for 5 years..... and the payments are amortized over 25 years. So the short term kind of takes away from the need to refi. As for home equity, there is no benefit to carrying a mortgage in Canada (interest not tax deductable like USA) so cashing out equity makes less sense. On top of all that there is about 30M people in canada which is smaller than California alone.

AS for the US, yeah, it is a mature market and the big refi boom kind of just ended. There is still business there however, if you can provide very qualified, and exclusive leads.

There are many lenders that deal nationally for refinance and home equity. Finding one's that will buy lots of leads is not simple. I know of places that will pay a good buck for refinance in most states, but they mainly want in the below 50 a day range. Of course there are also the big aggregators like lowermybills, but, well ya know :)

Anyway, I am looking into this as we speak, some things loom sort of promising but it's a bit of a PITA.

4:52 pm on Jan 9, 2007 (gmt 0)

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Thanks Mike. We need a huge national buyer who can take 100+ leads per day in order to enter this market. In the UK we deliver quite a few per month, and the UK is much smaller, so I'm amazed that in the US you struggle to place more than 50/day.

I guess we'll have to start the way we did here, by delivering via a network, then cutting them out once we are proven to the marketplace.

Perhaps through our UK activities in shortening the supply chain we are actually ahead of the US? Find that hard to believe, but from your comments this may well be the case.

[edited by: eljefe3 at 3:32 am (utc) on Jan. 10, 2007]

5:14 pm on Jan 9, 2007 (gmt 0)

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I could deliver 10,000+ leads per day - it's just that without a network one would likely be dealing with around 30-50 smaller lenders (the large banks won;t pay much of anything and are super picky about leads)...the administration is kind of mind boggling when it gets to that point - not to mention that's many, many merchants complaining every day or at the least asking questions :)

Anyway, with proper business development, software, and administration I am sure it could be done so that you could avoid the rotten networks.

8:11 pm on Jan 9, 2007 (gmt 0)

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With the US, its not just a matter of "size" of the country.

The US is made up of 50 States; each state has its own set of Laws that businesses have to follow. A small/medium size business operating in one state may find it difficult to operate in another state because it has to comply with the other state's laws.

This is both a "problem" and a "benefit" at the same time. If one does not like the laws of one state, one can easily move to another state where the laws are more favorable. The states have a great deal of autonomy in forming their own laws.

10:09 am on Jan 10, 2007 (gmt 0)

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Maybe the answer is to treat the USA as 52 diferent versions of the UK then?

If that is the case, our work's gonna be a lot harder than expected, and will involve many more people than we currently deal with.

However, Google, Yahoo, E-Bay, CJ, etc. seem to manage without 52 separate businesses, so maybe this comment is not too accurate.

We are happy to tailor our offering to suit each country in which we operate, but I was rather hoping to avoid further divisions as suggested above.

And as an offshore business delivering sales leads, I guess that the compliance with local laws and regulations would be something that our merchants could assist with, just as they do in the UK, making sure that affiliate sites are compliant etc.

5:36 pm on Jan 10, 2007 (gmt 0)

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However, Google, Yahoo, E-Bay, CJ, etc. seem to manage without 52 separate businesses, so maybe this comment is not too accurate.

Apples and oranges.

The companies you mentioned are all INTERNET based businesses.

BRICK AND MORTAR type businesses (like banks) are subject to the state laws I mentioned.

However, if you just want to deal with the group of businesses you mentioned (instead of banks), that may solve your problem?

7:45 pm on Jan 10, 2007 (gmt 0)

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Finding and maintaining a national buyer is not an easy task. There are very few end buyers who take leads in all of the states and there are a lot of lead generators and lead brokers hammering away to get these people (spam and phone). It's a tough sell.

Especially being outside of the US I would probably go with a mortgage lead network if I were you (leadpoint, root, leadpile, etc.). Just being outside the US will make it harder for you to sell in my opinion since there is a big trust issue with lead companies.

The laws regarding mortgage leads are in flux right now. A lot of the big mortgage lead companies are getting their licenses (to be safe) whereas most mid and small sized lead companies are just not. I don't think there have been any lawsuits or shutdowns but I see it on the distant horizon (2-3 years is my guess).

5:53 pm on Jan 11, 2007 (gmt 0)

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We already deliver through lead networks such as Leadpoint, but we have our own model, including proprietary technology and a very different attitude to long term merchant relationship development, which is years ahead of theirs.

Interestingly, just today Leadpoint UK asked me if they could sell leads through our network - weird coincidence eh?

11:43 am on Jan 12, 2007 (gmt 0)

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Have you considered just buying an established US lead company? (basically just for the sales team and established relationships)
1:41 pm on Jan 16, 2007 (gmt 0)

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Larger lenders are licensed in every (or nearly every) state. We work with a parent lender and are starting to process our own stuff now. The benefit to using them is they already have license in every state that matters to us (about 40). We can focus our time on buying or obtaining the best qulity web leads and making the most bang for our buck, while not really focusing on administrative stuff.

Obviously as stated before, banking is different than other areas here- I do business in all states with 0 paperwork - just not in this area.

I find that even after paying the fees (which we can bury in the clients costs of the loan), working under a larger parent company is the best option until you become the parent company.

The big banks don't pay well at all. The small lenders/brokers cannot handle the volume. So, you get your own people to close the damn leads (they average $5000-6000 commission). Not an approach everyone can take as you need some capital, connections and a sales force, but obviously it can be quite lucrative if done well.

Sorry, a bit off topic - but I think those interested in the US market in general could also consider brokering the leads as an option. If you can tie on to a single licensed broker you dont need a license and you get a loan processor to handle all the paperwork.

6:24 pm on Jan 16, 2007 (gmt 0)

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Mike, that's great advice, many thanks. Looks like we'll be Skyping with each other lots more towards the summer, when we're ready to progress this.