Should I charge local advertisers per lead or take a cut of their sales?

"Every time the answer is just charge per lead. It's just that simple. Just charge per lead. And then who cares? Don't worry about it."

I've had this argument about local advertising and about insurance, and I land in the same place every time. Sell leads or sell a flat sponsorship. Asking for a cut of the deal is asking for problems.

What are the three ways to get paid?

1. Flat monthly fee. The most common. Pay me this much a month, I run your ads, and if it doesn't work, we did our best.
2. Per lead. What I know from insurance. Any lead you get, you pay for, whether you close it or not.
3. Per closed deal. Rare. It works when there's trust and a way to know when deals close.

The third one can work. I know an insurance agent who paid his lead source $100 every time he closed a deal, knowing he made at least $140 on each. He ended up best in his company out of 10,000 agents. But most people can't make that trust work.

Why not take a percentage of the sales I drive?

Because you can't see their sales. Revenue share means trusting the advertiser's CRM, and access depends on which CRM they use. Even with access, it doesn't solve anything:

"If somebody wants to be shady they can just take it out of the CRM."

There can be legal reasons too. My realtor sponsor pays a flat monthly fee, and I get nothing extra when she closes a deal. I don't have a real estate license anyway. I'm not a lawyer, so check your own rules.

Price the event on your side of the wall instead. A lead from your form or your survey is something you can count without asking anyone.

Why would a business agree to pay per lead?

Because it takes the risk off. With a $250 or $500 ad, they pay before knowing if it works. Per lead, they only pay for success.

My pitch: if I don't get you any leads, you're not out anything. You're already paying $20 a lead somewhere else. Pay me $20. If I'm bad, stop after the first one. And your brand still gets shown to a bunch of people every day.

On our newsletter offer pages, a legitimate offer can go up for free and the business pays only when someone claims it. The page is exposure on its own. My example math: about 50 new subscribers a day, roughly 70% going through the page, so around 35 people a day see it. The offer has to be real.

Early results look good. In one two-week test, a golf simulator business was closing 60% of the leads a partner's newsletter sent him, on a $200-a-month membership. That partner may not even be charging yet. What you charge per lead is between you and the business: maybe $1 for a restaurant, $100 for a med spa or estate planner.

How do I make lead billing trustworthy for both sides?

Build the lead form yourself: name, email, phone. Have it submit to you and the advertiser at the same time. Then apply one test to any performance metric you want to bill on: the only way they know about it, you know about it too. Attribution stops being a trust exercise. That's how I'd set it up.

Even a Google form works. The link goes to your form, the form emails them, and you have the record because it's yours.

I'm wary of deals where you only get paid when someone redeems an offer. If you only get paid when somebody uses a coupon inside the business, you can't track redemptions, and you're back to trusting their count. With restaurants, you'd be relying on employees to log every redemption.

My suggestion to a partner who wanted to bill per redemption: charge for the slot regardless, around $200 a month, and take a prepaid balance you draw down per lead.

Should advertisers prepay?

I think that's probably the best answer. Multiple really good salespeople have told me that's what they do.

Instead of "pay me $10 per lead, and we got 30 leads, so give me $300," it's "give me $1,000 now, I deduct $10 per lead, and you don't pay again until the balance is gone." You don't chase invoices, and it creates buy-in that they're serious.

It's exactly how insurance lead companies work. You pay up front, you get a tracking dashboard of the leads they sent, and if they send a bad lead, they investigate and refund it.

Ken Jee told me on my podcast that his newsletter sold early sponsorships as about $200 prepaid and ran the ad until the clicks were used up. He said it was good early cash flow that funded growth.

When is a flat fee better than per lead?

• When lead quality becomes an argument. A realtor felt leads from a market-report offer were low intent, since readers just wanted the PDF. The fix I floated: $1,000 to $2,000 a month for whatever leads come. A slow month is a slow month, a big month is a great deal. It's like rank-and-rent lead-gen websites, except the asset is a newsletter signup page. And if they pass, you can sell it to their competitor.
• In the welcome email. Few people act on a realtor or insurance pitch there. It's a billboard, so charge at least a flat rate. In a signup survey, take rates are high enough that per lead is fine, even if only one in 50 or 100 says yes.
• For brand-awareness categories. Roofing, insurance and real estate get most of their value from people seeing them ten times, then calling when something happens. They won't trace that back to a click. Nobody promises sales from a billboard either.
• As a test. Charge an agent $1,000 to $1,500 a month to sponsor the real estate section and get every lead. Run it three months in one location and count the leads.

If the leads are bad, they stop paying, and that's fine. You adjust the offer or find another plan. Nobody argues over an invoice for leads they both watched arrive.

Help the advertiser do their own math out loud. In insurance, you pay for the form whether or not the person answers the phone. If a business closes 25% of leads at $10 each, that's $40 per customer. Against the $3,000 to $4,000 a med spa customer might be worth (a number ChatGPT gave me), they should pay a lot more. Insurance leads run from about $12 to $100 or $150. The buyer has to know their own conversion numbers.

When does pay-per-lead make the most sense?

• Short buying windows. Christmas light installation is one of the few cases where per-lead works really well. It only matters in November, and good providers are hard to find. I've literally gone looking for one myself.
• High-value services where one customer pays for many leads: realtors, insurance, med spas, home services.
• A big offer. 50% off a first visit gets action. 5% gets forgotten. An idea I haven't tested: pest control offering a free first visit, because they know they'll close a lot of those people.
• Partnering instead of starting a business. Instead of launching a service company, partner with one and take a referral fee per lead. There's no cost to them if you fail.

For brand-awareness buyers, I still sell the slot. Per-lead works best as its own product. See how much to charge per lead.