Lead generation is simply the use of your website or other marketing tools (e-mail lists etc) to generate enquiries for another business. For example the owner of a finance newsletter and online forum might host a form along with a mortgage calculator. This form would ask for sufficient information to sell to actual mortgage advice firms. The finance forum would be said to be generating leads for mortgage advisers.
A number of approaches are taken to monetising these leads. Most often the destination firm will simply buy the leads from the marketing firm for a fixed price. In some cases there will be other performance elements, bonuses or profit share agreements as part of the lead generation. Sometimes refunds will be impossible, in other cases the two firms will have a set refund policy where low quality leads can be returned for a replacement or refund.
Lead generation is most commonly seen in industries dominated by a vast number of very small firms that are unable to easily rank for their highly competitive search terms alone (mortgage advice, debt advice, insurance etc). Large lead generation sites supported by the revenue gained from supplying leads to hundreds of these firms together are big enough to rank in these highly competitive terms – Internet marketers will also design sites much more likely to rank well than small local advice firms. This often results in a situation where due to efficiencies shown by the marketing firm, the cheapest and best way for the destination firm to acquire enquiries from the Internet is buy purchasing leads rather than by improving the ranking of their own website.