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| Aggressive lead generation tactics are prompting regulatory inquiry at both state and federal levels, according to a recent industry report.
The 19-page report questions the sustainability of one of the largest online lead generators, ValueClick Inc., while examining the elements that might lead to the breakdown of the tremendous growth the online marketing provider has recently experienced. In his research, Jordan Rohan of RBC Capital Markets Corp. reveals that the tactics some lead generation companies use are questionable, such as the use of the word “free” when, indeed, there are requirements to pay for products or services to obtain the “free” incentive — a possible Federal Trade Commission violation. Other times a consumer is given a lengthy survey to fill out requiring an e-mail address and does not disclose that the participant’s address would be sold, the report says. Or an opt-out process is so complex the consumer cannot opt-out easily. Trademark infringement, using popular brand name gift certificates as enticements, and the lack of fulfillment of incentives to consumers who have completed stated requirements has also raised concerns, Rohan reports. These types of inquiries may drive industry reform, he says. In addition, Rohan said, “We believe that the Federal Trade Commission, the House Subcommittee on Consumer Protection, and some state attorneys general are seeking to impose fines and legislative reforms for those companies who improperly use the word “free” in marketing promotions, and those who aggressively re-sell personally identifiable information such as email addresses without adequate disclosure. “In our view, the writing is on the wall for reform of the highly-incentivized lead generation companies like ValueClick’s WebClients,” he continued. “The timing of that reform is hard to predict with accuracy, but the ultimate magnitude could be significant.” The report notes that online lead generation is the fastest-growing segment of Internet advertising, according to the Online Lead Generation Association, and those companies that present a “white hat model” do have the opportunity to gain meaningful market share, albeit, at a slower rate. “Most players in the space are moving towards a white hat model, but this shift comes at the expense of growth and margins,” Rohan explains. “However, some lead gen companies have remained hooked on the less-than-desirable tactics, driving as much cash flow as possible. “In general, the quality of leads generated is inversely related to the quantity of leads created.“ |
