Wednesday, September 23, 2009

Ethics Rules v. Hot Startup: What Makes Sense for Consumers and Lawyers?

I've been following a couple of developments in the local/legal Internet advertising market that seem to highlight the disconnect between product innovation and lawyers looking to leverage these innovations to build their practice.
  • The first involves an ethics complaint filed by a Connecticut attorney who seems annoyed by the pay-per-lead advertising model used by Total Attorneys. This attorney is categorizing this advertising model as an illegal referral agency.
  • The second involves the winner of the TechCrunch 50 contest, a new company called Red Beacon. Red Beacon, started by two former Google product guys, sets consumers up to "Compare prices and book an appointment for any local service." Red Beacon takes performance-based advertising to the extreme - they only get paid (10%) if the local professional gets paid.

As we sell online advertising to lawyers every day, I'm acutely aware of the general disdain that many lawyers have for referral services. Their disdain is understandable - traditional referral agencies take anywhere from 25-33% of the total fees collected as compensation for qualifying a potential client and making an introduction. That's a healthy chunk of change.

However, the aversion to referral agencies is not just economic. I remember speaking to a friend of mine about legal marketing. My friend is a lawyer (and a successful internet advertising exec) and he told me that he was trained that lawyers should not "sell." Rather, they were members of a "learned profession" doing a "public service" by performing legal services for clients (at $500/hr).

Put those two traits together and you can understand the scorn towards the lawyers operating referral agencies. Typically, they are perceived as the "hustlers" and "ambulance chasers" that cause their profession to lose its prestige. But, is that really what is going on at Total Attorneys when they charge you $65 for a bankruptcy lead? What about Red Beacon when they charge you 10% of what you collect and ask you to compete for the consumer? Seems more like they are looking to make the advertising more performance driven . . .

Not sure where the ethics committees will weigh in on the Total Attorneys case . . . but one thing is clear: the Red Beacon product is a non-starter in the legal field (for now). Last week, an attorney told me that she was "not going to run to the phone and compete for the client like she was a house painter or general contractor." So, I'm spending $5,000-10,000 getting my house painted and those guys should be price shopped. But, not an attorney charging anywhere from $2,500 - $10,000? Does that make sense to you?

The funny thing is that consumers want businesses to compete for their business. That's why Red Beacon was so intriguing to the Tech Crunch guys and the venture capitalists.

5 comments:

  1. One thing to note is that Redbeacon only charges 10% of the hourly rate, up to the first 5 hours. So if a lawyer was charging $300/hour, then the most Redbeacon could charge would be $150 (10% x $300 x 5). That's not too unreasonable on a $10,000 case.

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