Truth in Advertising.

Performance means different things to different advertisers. For some, performance takes place on an audience level, i.e. showing an ad to a desired user. For others, the notion of performance goes a little deeper down the funnel to a click. For those practicing online lead generation, performance implies the completion of an action, namely users entering their data in order to learn more about a particular advertiser’s services.

The additional information can vary from the user agreeing to join a company’s newsletter to receiving a follow-up via the phone. Joining a newsletter can take place entirely online, but in the case of many financial service products, for example, the completion of the process requires following-up on the phone.

As a sector, online lead generation activities accounted for an estimated $2 billion last year. Of that money, the activity of users entering their information online with the follow-up happening over the phone accounts conservatively for 80% of that.

It’s big business, and a difficult one to get right, given that a large number of those buying media to drive these form fills do so by taking principal risk. These companies earn revenue only when a user becomes a lead, but the largest of the sector buy tens of millions of dollars of media on a non-performance basis. Doing that profitably, especially on channels where performance buyers must compete with brand buyers, such as display, requires technology, creativity, and vertical expertise, just to name a few. It also requires risk. There is nothing wrong with taking risk; the problem is how difficult it is to make money while taking principal risk.  

By and large, the pursuit of profit causes individuals and companies to run afoul. This unfortunate reality has played itself out in the alternative subscription world quite dramatically over the past six months. Like Netflix or GoToMyPC, the alternative subscription world encompasses other free-trial based, negative-option billing programs, with users staying on longer than often say they will. But unlike those two companies, too many consumers who signed up for free trial from non-branded, mostly nutraceutical, companies did so without a clear understanding of the terms involved.

While one could argue that consumers should have read the fine print better, in the eyes of the FTC and Visa, a large number of these companies, and the performance-based marketing companies who drove the conversions, engaged in fraud. Online performance-based marketing fraud falls into two distinct types: marketing fraud and consumer fraud.  Marketing fraud could also go by the name placement fraud. It involves an ad running in an unapproved and generally deceptive fashion. Consumer fraud involves end users converting on the product / service without a desire for the product. The non-branded continuity space had both in abundance.

The term “lead generation” gets applied when it shouldn’t, e.g., to describe Free iPod (now Free iPad) offers and continuity offers monetizing social gaming platforms. It’s become a catch-all instead of describing a specific layer of online advertising. The term has bounced back from the improper categorizations, but it faces a new challenge: many marketers who had made hefty sums running non-branded continuity programs have since turned their attention to the online lead generation space.

That the lead-gen conversion process doesn’t require the same type of personal information as a continuity program, does not give marketers more leeway in what they say to the consumers, though. The top lead-based performance marketers understand this, and they engage in responsible, performance-based advertising.

The actions of those that threatened almost all of the continuity space could end up threatening the online lead generation category. Proper lead generation means not just obeying laws governing marketing, but laws governing the industry being marketed. Now, more than ever, those committed to its long-term success must make sure that a handful of overly aggressive marketers does not threaten this tool for connecting interested parties with service providers and staple of online monetization. 

by Jay Weintraub
Jay Weintraub is the founder of the LeadsCon franchise, the conference series for the online lead generation industry.
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