Making Money on the Net

“You must have an Internet presence in order to take advantage of available online marketing opportunities.”

It’s already a couple months into the new millennium, and you don’t have a website. Or you do, but you know you’re not maximizing your site’s potential for success and profitability. If you find yourself in either of these situations, it’s time to develop your online strategy for this year and beyond.

First you need to determine your online focus. You will either want some combination of making money, branding your website’s name, or simply having an online presence in order to generate credibility with your clients and professional relationships. If you don’t have a website, your focus should be on developing one. You must have an Internet presence in order to take advantage of the available online marketing opportunities.

Those who don’t have a website need to consider the development options. You can either purchase a canned, off-the-shelf website or you can have a site custom-created for you. The choice you make will depend on your budget and the kind of functionality you are looking for on your website. A canned website can cost you anywhere from $300 to $5000. A custom site can cost anywhere from $3,000 to $500,000. So understanding what you want first will help you determine the route that makes the most sense for you.

To fully understand the profitability of your website, you need to recognize and understand the ongoing costs involved. This will allow you to start creating a budget for the future and to look at your costs in order to increase your profits–not just as overhead.

One fixed cost is the monthly fee you pay to a company that hosts your website. Typically, the cost is under $100 for most mortgage broker websites. A variable cost is what you will have to spend money on advertising your site. Most of these sites charge a monthly fee for your banner advertisement or listing. The fee ranges from a few hundred to several thousand dollars depending on the amount of traffic you are trying to generate. The other variable cost is based on upgrading your website, which you must do from time to time.

To be profitable, it is important to try to match your variable cost to the amount of business you want to close. If the market is doing well and you want to go out and get more business, you should increase your variable cost by advertising more. If you have enough business and cannot handle any more, reduce your advertising. If for some reason your website is not generating business, you have two choices. You need to either reduce your advertising to minimize your variable costs, or increase your advertising to see if you can generate more business.

Whether your website is new or you’ve had it for a while, it’s time to take a look at what you are doing in order to assess your site’s current profitability.

Your website should have an easy to find and easy to fill out application or pre-qualification form. The site should also have your company’s contact information readily available, a feature that will encourage someone to bookmark your site, a daily market update and updated rates section, and concise content.

So now you have a website that is ready to generate leads. The first area to look at is how you are responding to the inquiries received through your site. In general, you can expect an average direct-marketing response rate of anywhere between 5 to 10 percent of all visitors. You need to make sure that you’re ready to respond quickly to these inquiries. Part of a quick response is based on a quick retrieval of leads from your e-mail box or from your website. Make sure you have a constant online connection. This means that you are ready to be notified the moment a message is sent to you. Look into providers that offer a constant connection such as DSL, frame relay, or to a fractional T-1 line. If you are able to respond quickly to your leads, you can expect higher conversion ratios from inquiry to loan file.

Early on, you need to choose an online business model. Two basic business models are the “low cost leader” strategy and the “local mortgage broker and banker” strategy.

The first option involves emphasizing lower rates and overall costs. A company that has been successful with the low cost leader strategy is ( The margins have been from 0.5 to 0.75 points over wholesale. succeeds by making it easy for potential customers to make buying decisions through its website. They do this by clearly displaying rates and locks in periods or closing costs. As a result, customers typically apply through the website.

The companies often use loan consultants to work with clients. The strategy’s focus is to recruit business people who have good credit and want to save money. It will not work as well with consumers who are not organized, who need a lot of handholding during the loan process, or with customers who have complex situations. These companies are working on a high volume and slim margin basis. They expect the customer to be organized and to provide documentation quickly on request.

The idea behind the second strategy is to target borrowers in a specific geographical area and create a local originator image. There is a greater emphasis on service than price. This can be done by advertising in local newspapers and regional websites and also by creating affiliations with Realtor partners or other related industries. A company that has been successful with the local mortgage broker and banker strategy is Dalton Mortgage at Dalton Mortgage’s site clearly explains that this is a local, family-owned business that has links to websites in the Cleveland area. The site is friendly and provides up-to-date rates, loan products, calculators, and other helpful features.

You can also use the same approach as a subprime broker by not putting rates on the site and by stressing that you can handle difficult situations and borrowers who have been turned down before.

To further enhance your profitability, you will want to explore different marketing strategies. Aside from the conventional online advertising avenues, such as banner ads and directory listings, there are many other opportunities available in order to generate more business to your website. Areas to consider are partnerships, permission marketing, and affiliate programs.

A number of lenders have developed unique partnership arrangements in order to expand their online business and increase their profits. For example, Chase Manhattan Mortgage Corp. recently announced its agreement with, a multilingual homeownership website. An initial pilot program will focus on both Spanish- and Korean-speaking communities in the southern California area. will help Chase Manhattan Mortgage reach a greater minority audience through the partnership program. and introduced their strategic partnership last year. It will involve creating a multi-functional co-branded mortgage center that will provide visitors of the website with online home financing services. Homebuyers visiting the site will have direct access to’s mortgage information, rate comparison, and online loan application. Links to the mortgage center are placed throughout the site.

Permission marketing focuses on converting visitors to leads. If your current conversion rate from surfer-to-inquiry is between 5 to 10 percent, instead of focusing on driving more traffic to your site, look towards increasing your site’s conversion ratios.

Seth Bodia is considered to be one of the world’s foremost online marketers. He says of permission marketing that, “Every commercial website should be set up to accomplish one goal. Your website should be 100 percent focused on signing up strangers to give you permission to market to them.” He argues that permission marketing is more efficient than interruption marketing or media advertising.

The goal is to develop and deliver relevant, valuable, and judicious information to consumers who have given you permission to do so. One of the more common ways this is done is through a newsletter or interest rate registration on a website. When someone signs up for this, you have successfully received permission from the visitor to market to him or her in the future. Your job now is to be sure to deliver what you’ve advertised. Now, your chances of acquiring business is greater because you’ve “broken the ice” by offering valuable and relevant information.

Affiliate marketing is also a powerful marketing tool. By making affiliations, you can earn money from visitors who may not ready to do a mortgage with you. You can create an affiliate program to generate traffic to your site. You can also market other companies’ products, services, and web addresses on your site and get paid based on traffic the affiliates receive from your website.

When generating traffic to your site, you want to create relationships online with business partners. You should target sites that offer similar products or that reach a similar demographic of people. Two good examples of affiliations a mortgage company can make include automobile and Realtor sites. The affiliation with a car dealer’s site could be a simple arrangement. You might place a mortgage advertisement in a prime place on their site and pay them for every visitor you receive through that ad.

You could set up the same arrangement with Realtors as you did with the car dealer’s website but, since you have more important ties with the Realtor industry, the way you structure the affiliation will probably be more involved. You could harvest relationships with Realtors by offering them a free link to their website, or by offering them a realty section on your site. The goal is to establish a strong online relationship with business partners that is a win-win situation for both parties. Be sure to follow the appropriate RESPA guidelines.

The area of affiliate marketing of product and services is showing tremendous potential. The basic premise is that not everyone that comes to your site is looking for a mortgage. A person needs a mortgage once every five to seven years, so you need to determine if you can cross-market to them while they are at your site in case they are not ready for a mortgage. If so, make sure you are cross-marketing related products.

An example of a site that uses the strategy effectively is E-LOAN ( E-LOAN offers both car and credit card loans on their site, which is a good way to make additional income from those visitors that don’t get a mortgage.

The drawback to this kind of marketing is the potential to lose business by the distraction of other offers. Don’t clutter your site with different offers. Choose products and services carefully and make sure that your competitor does not advertise on any site that you recommend to your clients.

Despite the growing competition of mortgage companies online, there are many way to run a profitable site. Pick a strategy that meets the goals of your company. Make sure your site includes the basics such as an online form and application. Respond quickly to all inquiries because your online customer expects swift replies. Understand your site’s cost structure so you can calculate your cost per lead and eventually your cost per closed loan. Find a niche in your local market including partnering with Realtors, creating affiliations with other online companies, purchasing niche advertising in mortgage malls such as or, and getting permission from visitors to your site in order to continue marketing to them. You are now on your way to running a successful and profitable online campaign.

by Lovina Worick