The Fraud Paradox
If I told you that a company was running a business doing 90% fraud and billing more than $10k/mo, what would you think? If you were like me, you would say no way. Not today. Maybe a year ago. Maybe two years ago. If only. As one lead buyer quipped, “I’m shocked at how much fraud there is, and that it is still a viable industry.”
Compliance is the ongoing battle to not run into legal hurdles. The downsides of non-compliance are huge expenses. Fraud is the ongoing battle to insure data integrity. It is like Chinese water torture for a lead buyer.
We came across this stat below. It’s from the leading fraud monitoring company, Fraudlogix. While not 90%, fully 15% of leads are fraud. What is fraud? The problem is that fraud can be and usually is real data. It’s more insidious than click fraud, because it’s engages and wastes human capital. Data fraud is zero intent traffic. The person’s whose information is entered didn’t do it, and they have no desire to be contacted. They will pass validation software and could even score well as a lead, but the only customer they will turn into is an angry one.
The Fraud Paradox is what those who contemplate minimizing their fraud go through. They look at the above data and do the math. If they run a $100,000 per month operation, they are looking at losing $15,000. At $1.5mm per month, they are looking at $150,000 PER MONTH in lost revenue. The problem is a simple one. Lead markets are poorly optimized. If a seller cuts out 15% of absolutely non-performing traffic, they do not see a 15% bump in prices to make up for the lost revenue. They could argue for a greater than 15% bump given that there are labor savings as well. The fact is that they won’t see any bump. So, their incentive for using fraud monitoring is limited only to a last resort, where they will lose the business entirely.
The second part of the Fraud Paradox is what happens after someone actually starts to implement fraud monitoring. (The someone in this case is almost always an aggregator, and fraud monitoring, like compliance, only works when the landing pages of where the data is collected is tagged.) When someone starts to implement fraud monitoring, the fear of losing business has them only use the service sparingly…at first. It then become like a radar detector for a car. They start to realize that instead of living in fear, they can actually start to open up their marketing efforts to more sources. The net result – virtually everyone who uses these services sees an uptick in their business over time.
