Let's say you want a home loan, and you take a few minutes to fill out one of those annoyingly ubiquitous Web mortgage applications from LendingTree (IACI) or LowerMyBills.com. All that personal data you just provided to those middlemen? It's now a lead, a valuable referral to a prospect (you) who is primed to respond to an offer. And it's worth up to $75 to mortgage providers seeking new customers. Your data. Their money.
Seth Goldstein thinks something's wrong with that. His New York startup, Root Markets, aims to turn marketing and advertising inside out by giving you the power to control your online data -- including what you pay attention to as you traverse the Internet. "Your attention has literal value," says Goldstein, Root's founder and chief executive. "Consumers, based on their attention, are creating more and more of the value on the Internet." He notes that Google Inc.'s (GOOG) $115 billion market value is largely based on its ability to divine when a searcher intends to buy something and run a relevant ad next to search results.
For starters, Root helps consumers track their online activity. Using an add-on to the Firefox Web browser called Attention Recorder, you can track your searches on Google, all the sites you click on, and more. You store it all in a private online "vault" that you'll be able to share selectively with others -- such as marketers. A mortgage provider, for instance, might pay you a nice sum if you let it know you just ordered Home Buying for Dummies from Amazon, signaling you'd be open to seeing a loan pitch. The upshot: Soon you may be able to turn your digital bread crumbs into real dough.
You could, that is, if there were an easy place to offer up those bread crumbs to marketers. So Goldstein, the founder of the early online ad agency SiteSpecific Inc. and most recently co-founder of boutique research firm Majestic Research, last year formed a service he calls the Root Exchange -- the first marketplace for trading Internet leads. The executive chairman and a chief investor in Root Markets, to the tune of $5 million, is Lewis S. Ranieri, who created the now $5 trillion market for mortgage-backed securities. So, not surprisingly, Root Exchange is currently focused on mortgage leads, using a lead-generation company Root Markets bought last year. Root takes a 5% sales commission on each lead. Goldstein also plans to move into other leads, such as for auto loans and insurance.
Eventually, Goldstein hopes to help consumers, in return for money or better deals, offer up more of their own data to create better leads. But some players already like what they see. LoanWeb.com, for instance, now sends up to 8% of its daily volume of several thousand leads to Root Exchange, paying much less to reach lenders than it costs to do so via Google ads. Lead buyers such as SCENA Mortgage Group of Aliso Viejo, Calif., find it cheaper to order leads from the exchange than to go to several middlemen. "Root Markets has revolutionized how we reach customers," says Brian Hendricks, SCENA's vice-president for marketing.
Now, Goldstein is about to push the concept even further. On Sept. 15 Root will join with the Chicago Board of Trade, which will invest $1 million in the company, to generate investment products from the trading activity on Root Exchange. Starting next year, in much the same way Ranieri packaged bundles of mortgages themselves and sold them as investment vehicles to institutional investors, Root Markets and the CBOT aim to create futures markets based on consumer Internet leads. "We see a very interesting product opportunity in a whole variety of sectors," says CBOT CEO Bernard W. Dan. In other words, they literally intend to create new markets out of consumers' online attention.
If all that sounds audacious, it is. Explaining to Web shoppers how and why they should keep track of their online travels, let alone how they could make money from that, won't be easy. "It's going to be difficult for consumers to understand," says Brad Strothkamp, an analyst at Forrester Research Inc. (FORR) And it will be even more difficult to get them to take the trouble -- even for a little coin.
By Rob Hof