Chances are you have been asked to submit your personal or financial information in order to find out about a particular product or service you searched for online. However, you may not have realized that your personal and financial information may have then been shared with a number of online marketing companies before it reached the business offering the product or service you searched for. This process of collecting personal and financial information online and sharing it with relevant companies is known as online lead generation. But, because online lead generation tends to be a behind-the-scenes industry, consumers – and many businesses – don’t know much about what lead generators do and how they do it.
FTC Hosts Online Lead Generation Workshop
In order to shed some light on online lead generation, the FTC, in October 2015, hosted a workshop, titled “Follow the Lead.” The “Follow the Lead” workshop explored online lead generation across several different industries, including lending and education, bringing together industry representatives, consumer advocates, and government regulators. The workshop consisted of five panel discussions, which explored the basics of lead generation, provided case studies in the education and lending industries, and highlighted consumer protection concerns now and in the future.
FTC Issues Staff Perspective on Online Lead Generation Workshop
Now, the FTC’s Bureau of Consumer Protection has issued a staff perspective recapping the FTC’s October 2015 workshop on online lead generation. According to the FTC’s press release:
The Staff Perspective recounts important themes arising out of the discussion by panelists at the full-day workshop. It discusses the mechanics of lead generation and how it functions in the modern economy. The paper describes who collects leads and how they are used – in particular the process by which companies that collect leads sell them to companies seeking them. The paper also addresses lead generation’s potential benefits as well as the consumer protection issues it might raise.
At the outset of the staff perspective, the FTC notes that it “has broad authority over lead generators, whether they are generating leads for a lender, an educational institution, or a company offering another good or service.” Pursuant to that broad authority, the FTC has brought several enforcement actions against those involved in the lead generation industry, including actions against “lead generators that lured consumers with promises of extremely low fixed rate mortgages or free refinancing, but then sold consumers’ information to entities that did not actually offer these deals.” Additionally, the FTC brought an enforcement action against “payday loan lead generators that sold consumers’ sensitive bank account information to non-lenders who simply debited charges directly from consumers’ accounts without authorization.”
What is Online Lead Generation?
So, what exactly is online lead generation? “Lead generation is the process of identifying and cultivating individual consumers who are potentially interested in purchasing a product or service,” the FTC’s staff perspective states. The primary aim of “lead generation is to connect companies with those consumers so that they can convert ‘leads’ into sales.” According to the FTC, a “lead” can be any consumer who indicated his or her interest, whether directly or indirectly, in buying a particular product or service. During the “Follow the Lead” workshop, the panel discussions focused primarily on consumers who voluntarily submitted their personal and/or financial information online, typically through a website form. In those instances the “leads” can consist of anywhere from just the consumers’ name and contact information to more detailed sensitive information like social security numbers or bank account numbers.
Who Collects Leads?
Now that we know what online lead generation is, let’s explore who collects the consumers’ personal and financial information and where that information goes after it is collected. Generally leads are gathered by what are known as publishers or their affiliates. “Publishers are the consumer-facing marketers in the lead generation ecosystem that promote products or services online.” These publishers “encourage consumers to submit additional information about themselves to learn more and connect with merchants or advertisers … that can sell them the products or services they are seeking.” A publisher’s website usually consists of certain marketing claims, as well as a web form asking requesting personal and/or financial information from a consumer. In certain instances, the publisher’s website will identify the companies to which the publisher will sell their leads; however, others do not, instead making much more generic marketing claims.
Oftentimes, publishers are smaller companies, which summarily collect consumer information through their online lead generation practices and pass it on to larger third parties. As an added layer to the online lead generation process, many publishers utilize a network of sub-publishers and/or sub-affiliates, who the publishers contract with to create marketing websites and web forms. These sub-publishers and sub-affiliates obtain leads and then feed them to the publishers.
Where do Leads go Once They are Collected?
Once a lead is collected a variety of different things can happen, including that the lead may be sold directly to the merchants whose products or services fit the interest of the consumers. In cases where leads are sold directly to “end-buyer merchants,” the merchant itself contacts the consumer “to provide additional marketing materials and more specific information about a potential transaction.”
In other instances, publishers sell their leads to “intermediaries like lead aggregators that are less visible to consumers.” These aggregators collect leads from a number of different publishers, and then sell those combined leads to their clients; usually under the terms of a contract between the aggregator and its client. In addition to collecting leads, aggregators are tasked with identifying which leads will “be most valuable or relevant to their clients.” The aggregators then package those leads accordingly. Unless an aggregator chooses to maintain its own website or engage in consumer-facing marketing, the FTC says the aggregator’s role is largely concealed.
Information is King
Given that online lead generation is all about collecting information from consumers about particular products or services a consumer may be interested in, publishers, aggregators, and merchants alike will often seek more information from consumers. This means that a publisher, aggregators, and/or merchant may directly contact a consumer “to verify the accuracy and validity of the information consumers provide in web forms, to supplement consumer leads with additional data for a fuller picture of a consumer, or to score leads based on their potential qualifications or value.” According to the staff perspective:
Industry representatives at our Workshop stated that companies involved in lead generation most frequently use data brokers merely to verify the information consumers submit. It remains unclear, however, the extent to which lead buyers and sellers may also use data brokers to supplement leads with additional pieces of information consumers did not provide in web forms. As detailed above, between the time consumers first fill out online web forms and the time they are contacted by a merchant (often only a matter of seconds), their personal information can pass through a number of hands and undergo supplementation.
Potential Benefits to Consumers and Competition
Having now understood the process of online lead generation, what benefits to consumers and competition does online lead generation offer? During the workshop, online lead generation representatives set forth several potential benefits online lead generation could have for consumers, including that: lead generators “have special expertise that connects merchants and interested consumers quickly and cost-effectively”; by employing a large number of publishers, “merchants can maximally and efficiently reach potentially interested consumers in the marketplace”; and lead generators can connect consumers “quickly with multiple merchants, and their associated offers, that consumers might not find as easily on their own.”
As it relates to competition, lead generation industry representatives said online lead generation can benefit competition among merchants. For example, one panelist presented a study that showed that, in the mortgage lending context, “the ability to sell potential borrowers’ personal information from loan applications to third parties resulted in lenders offering cheaper loans to consumers.”
Why Does the FTC Care About Online Lead Generation?
You must be saying to yourself by now, “If online lead generation is so wonderful, why would the FTC host a workshop over it?” Well, the answer is, online lead generation, while it can serve as a way to connect consumers to merchants quickly and effectively, it is now without its problems.
Complexity and Lack of Transparency Plagues Online Lead Generation
One of the primary gripes about online lead generation is that it is increasingly complex, with many players being involved. This complexity usually means a lack of transparency, which lack of transparency has attracted the FTC. So what about the online lead generation process is unknown to consumers? The FTC says that “consumers who fill out web forms may not realize they are operated by lead generators and instead assume that they are submitting information directly to a merchant or other advertiser.” The FTC says that “[e]ven if consumers understand that they are submitting their information to a lead generator, they may not know that this information can be sold and re-sold multiple times – and further that, as a result, they may be contacted by numerous marketers that are unfamiliar to them.”
Furthermore, consumers may be unaware that lead generators are selling their leads to the highest bidder as opposed to the merchant who might not necessarily be the merchant that best fits with the consumer’s interests. The FTC says that “[c]ompanies should disclose this type of information to consumers clearly and conspicuously to add transparency to the lead generation process, and allow consumers to make informed choices about when and how to share their personal information.”
Aggressive or Deceptive Marketing
Another potential problem with online lead generation is aggressive or deceptive marketing. Panelists during the workshop said they were concerned that lead generators were engaging in “aggressive, or even deceptive, marketing techniques to entice consumers to fill out web forms.” Among these aggressive or deceptive tactics are claims that the lead generators can connect consumers with jobs or government assistance as it relates to postsecondary education opportunities. Interestingly enough, after the online lead generation workshop, the FTC announced an enforcement action against Expand, Inc. and its CEO for misrepresenting to consumers that they were applying for job openings when in fact defendants were selling consumers’ personal information – for up to $125 per lead – to schools and career training programs.
A lead generation expert on one of the workshop’s panels said that the complexity of online lead generation, when coupled with the multiple actors involved in the process, creates a certain level of separation between the lead generators and the end-buyer merchants. The expert said that as a result of this separation, lead generators may feel emboldened by this lack of transparency to make questionable claims. This means that end-buyer merchants would do well to make sure that the leads they purchase come from well-supported and truthful marketing. Otherwise, those merchants may find themselves having to answer for the deceptive practices of their lead generators. Additionally, lead generators should ensure they are not making deceptive marketing claims, even if they believe the complexity or lack of transparency within the online lead generation industry will protect them.
Fighting Back Against Aggressive and Deceptive Lead Generators
In order to root out deceptive lead generators, “lead buyers are increasingly making efforts to discover and reject leads obtained through deceptive or other problematic marketing practices, in part because these consumers are less likely to actually purchase their products or services – and are thus less valuable as leads.” In fact, “some merchants and lead aggregators employ technologies that identify and monitor the publisher websites that are collecting their leads or marketing their products or services.”
BBB Goes After Lead Generators
Beyond the efforts of lead buyers, the Better Business Bureau’s Electronic Retail Self-Regulation Program (ERSP) has also attempted to curb such practices by some lead generators. According to the FTC, “[t]he ERSP receives complaints from both members and non-members, and also independently monitors advertisers and merchants for deceptive claims. ERSP conducts investigations and may issue findings when it determines that advertising claims are unsubstantiated or false.”
FTC’s Final Thoughts
In conclusion, the FTC’s staff perspective sets forth that:
Although online lead generation is very common in the modern marketplace, many companies and consumers lack an understanding of how it operates, and the types of benefits and concerns it presents. Through the FTC’s “Follow the Lead” Workshop and this Staff Perspective, we hope to promote a greater public understanding of these issues, continue our dialogue with experts and stakeholders associated with this industry, and inform our ongoing law enforcement work to protect consumers from unlawful conduct.
Companies engaged in online lead generation, or those merchants purchasing leads, should heed the best practices set forth both in the panel discussion from the workshop and in the staff perspective. Most importantly, lead generation, while effective and efficient, poses problems related to transparency, deception, and misuse of consumer information. Each of these potential problems falls under the FTC’s consumer protection realm.
Photo Cred.: megalytic.com