Exactly one year ago, I asked if Zillow’s move into home loans was a betrayal to lenders who buy their leads, and later concluded Zillow is a frenemy.
But lead-seeking lenders may have a new best friend in Credit Karma after their $7.1 billion sale to Intuit this week. Let’s take a look.
How Credit Karma serves consumers & lenders
From the consumer perspective, Credit Karma is a place to monitor credit, do taxes and get budget and financial product advice.
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And it works famously. Credit Karma has grown to 106 million consumer members since launching in March 2008.
This number isn’t just visits to their sites and apps. This many people have their credit report data connected, and increasingly are doing their taxes there.
Of the 106 million consumer members, 37 million use Credit Karma more than four times per month.
Credit Karma has 2600+ data points per member, and they do 8 billion daily model projections to make personal recommendations to members.
So from the lender perspective, Credit Karma is a marketing machine with hyper-relevant customer data.
Or more specifically, Credit Karma is a deep funnel, exclusive lead machine.
As a lender, most leads you buy are still standard top-funnel, non-exclusive leads: a consumer fills out a quick form on a lead site, then the site sells that lead to you and likely a few other lenders.
Credit Karma leads can have almost enough data to complete a 1003 mortgage application, and their primary focus is exclusive leads.
Why? To preserve their long-term relationship with their members. If a member asks to be connected with a lender, Credit Karma would look bad if they rained referrals on that member, so instead, they focus on referring them to one lender.
Last time I asked Credit Karma Mortgage Head Andy Taylor about their lead model (on stage at a public event before the Intuit deal), and he likened Credit Karma to Match.com.
They don’t just want to introduce a customer to several lenders, they want the customer and a lender to get married. This preserves customer credibility for both lender and Credit Karma.
As such, they don’t do auction-based pricing and they focus on exclusive leads.
And it seems to be working. Credit Karma did almost $1 billion in 2019 revenue, up 20% from 2018.
We don’t know yet how much of this is mortgage leads, but we’ll get more transparency on revenue in the coming quarters now that they’re part of a public company.
Credit Karma’s sale to Intuit solidifies lead provider Intent
So let’s recap:
- Credit Karma has 106 million members, 37 million of whom are super active.
- They have 2600+ data points per member.
- They do 8 billion calculations a day to tailor advice to members.
- And they did almost $1 billion in revenue last year.
- With these numbers, they could’ve done any deal they wanted.
- They could’ve stayed independent or done an IPO.
- They could’ve sold to a bank or lender.
- Or they could’ve just become a bank or lender themselves.
I mean, what bank or lender with 37 million active customers wouldn’t totally kill it if they did data analytics like Credit Karma?
But instead, they sold to Intuit, the parent of TurboTax, Quickbooks and Mint, which help 50 million (in addition to Credit Karma’s 106 million) customers analyze and optimize their finances.
You can never rule out a possible Intuit Credit Karma bank, but it’s unlikely because being a bank just adds regulatory risk and weighs down valuation.
So for consumers, this deal creates a place where they can watch every aspect of their financial lives in real time – mostly for free, or totally free in Credit Karma’s case – and be matched to a lender based on their exact profile.
As for lenders, they get an almost-complete-loan-app exclusive lead that’s ready to transact.
Plus there’s no imminent threat of Credit Karma competing with mortgage lenders to make those loans themselves.
This “cherry picking” was lenders’ concern when Zillow added a home loans business alongside their mortgage lead business last year.
I’ll revisit my Zillow is a mortgage lead frenemy conclusion on that topic soon.
But for now, Credit Karma is looking like the mortgage industry’s best friend in the scale lead business after their $7.1 billion sale to Intuit.
