Lead Quality: Click Fraud vs. CPA Fraud

I picked up the recent copy of Business Week that had a cover story on click fraud and quickly scanned it last week. Now is it just me or can none of the major business magazines in this country resist doing a story on this topic without including the prerequisite stock graphics of a computer screen filled with question marks and a runaway computer mouse? Not to mention the rehashed interviews with the mid-western stay-at-home moms that commit click fraud for a few extra bucks in their spare time. It made me wonder how the online lead generation industry would be portrayed when the time comes for its first showcase article.

Will it be a hit-piece focusing on the angry consumer that didn’t receive his free iPod? Or will it be with the Chief Marketing Officer of a major financial institution talking about how online lead generation provides the ultimate in quantifiable ROI for their advertising campaigns?

I am not sure of the answer, but I am sure what will drive us to it— the state of lead quality in the industry.

There is no greater threat to the growth of online lead generation than poor lead quality. Everyone in the industry has heard stories of lead campaigns run amok because of terrible lead quality—disconnected phone numbers, duplicate records, obscenities, leads that had been sold and resold multiple times, etc. Some quality issues are to be expected with any nascent industry going through a period of explosive growth. But up until about a year ago, there were only a handful of online lead generation companies that were attempting really thorough quality control efforts.

Instead, the standard mea culpa response was: “We just give a 10% credit every month, because we know that some of the leads are bogus.” Can anyone email me another industry where this is seen as the best practice for quality control? Can you imagine a pharmaceutical company or automotive manufacturer trying to use this policy? To the lead generators credit though, they were trying to alleviate some of the financial pain for their buyers, but unknowingly started a vicious cycle instead.

Many unscrupulous lead buyers knew that they could now return 10% of their leads… regardless of quality. The lead buyer would work the leads for four or five days and then return not only the bogus leads, but also a portion of the leads that they just couldn’t convert. After a while, the lead sellers caught on, but there was no recourse other than to stop working with the client. The net result was a growing amount of justifiable distrust on both sides.

While Google has also faced a growing amount of distrust from its clients based on quality issues, they have steered clear from offering any proactive discounts to offset potential incidents of click fraud. Instead, they have focused on improving their solution and the value of their clicks. The results have obviously spoken for themselves.

That being said, there is only so much intelligence that can be gleaned from a click. And in my opinion, this is where the promise of online lead generation shines so brightly.

A perfectly calibrated lead generation company, one that has married sophisticated lead quality controls with great volume, would be able to show a much clearer Return on Investment then any Pay-per-click (PPC) model ever could. It seems clear to me that a growing number of firms in the lead generation industry are now pursuing the coupled quality and quantity mix vs. the ways of old. Instead of just focusing on volume, the top lead generation firms are now investing in new technologies and services such as lead management platforms, real-time consumer data verification and outsourced call centers to further maximize their lead quality. These investments are already starting to pay off for a number of these lead generation firms. Eventually, one or two firms will solidify a more dominant market position in the lead generation industry as a result. And they will have their shots to be on the cover of Business Week.

Dave Wengel is General Manager of Interactive Markets for TARGUSinfo. He helped create the On-Demand Lead VerificationSM solution now used by many in the online marketing community to improve the data quality of leads being purchased and sold. He is also DM Confidential’s newest columnist focusing on lead quality issues facing the industry. Feel free to email Dave any of your thoughts on the current state of lead quality in the industry, and solutions that may improve it, for potential inclusion in future DM Confidential articles to [email protected].