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.

Today, at almost every organization large and small who spends money online, you will find if not an entire team dedicated to search, then certainly at least one in-house expert focusing on it. For those working in the online space, that wasn’t necessarily the case three years ago, and it certainly wasn’t common five or more years ago. That such a role has developed and become both commonplace and essential is one of the many neat developments that have transpired as the internet has evolved. The same holds true for social media experts. More and more companies need them, but there isn’t a

In online lead generation space, a new such role is starting to exist – that of a lead quality expert. We haven’t quite hit the point yet where companies will think of having a Chief Lead Office, but it wouldn’t come as a surprise if one came to exist in the near future, especially at companies whose main source of revenue comes from either the generation or purchase of leads. Until then, we are starting to see the seeds of its predecessor, a role that for lack of a better title could go by Lead Quality Expert, Lead Quality Guru, or what I suspect will take shape, Lead Quality Manager.

David Rodnitzky wrote about the need for a Lead Revenue Officer in his Quick Hits piece on LeadsCon, saying, “‘Lead quality’ is just a metaphor for ‘revenue from leads.’” I think David’s correct, but perhaps his view is a little too advanced. The majority of people understand the need for quality, but they cannot separate out in practical sense the notion of quantity from revenue. When you talk about making more money, the knee-jerk reaction is still to look at that from a volume perspective. If viewed more holistically, though, making more money off leads would span not just quantity metrics but quality as well.

A talk of quality is nothing new, but that doesn’t mean organizations have truly aligned themselves towards acting on it. Actions of quality mean having treated lead quality just like any important function in the business with a combination of technology, expertise, and process implementation. That can’t happen until someone at the company lives and bread lead quality. To date, it is generally someone who takes on lead quality as an ancillary function to their current job, or  a developer handed Targus Info or eBureau technical documentation and expected to make it happen. You wouldn’t find that at a company who spends meaningfully (to them) on search has their search spend handled by someone whose job function encompasses more than search. And, so it should become the same with online lead generation.

There is too much money to be made, and there is already too much money being spent, for companies who aren’t currently aligned to maximize lead quality and thus revenue not to. In slightly easier to read English, if a company spends more than a full-time person’s salary buying or selling leads, it such consider having a full-time resource dedicated to maximizing quality. This is especially true for companies who spend hundreds of thousands of dollars and millions of dollars per year in online lead generation.

For those with an analytical mind and a technical enough bent, this is a great chance to craft a role that doesn’t have any prerequisites. You get to be a pioneer and becoming an expert in this will pave the way for countless opportunities that we can’t imagine today. Not to mention, you”ll help make the industry that much better.

Ask almost any advertiser who has at least a modicum of experience in online advertising, and growing volume while maintaining quality will rank high among their challenges and frustrations. It is a problem old as time in the performance marketing sector, and the unfortunate truth is that after a certain point, quality starts to degrade. Let’s use an auto insurance offer running on a cpa network in order to better illustrate the challenge. The offer looks to get users to enter their information to see if they could lower their auto insurance payments. When a user enters their information, the network receives credit and they then credit the appropriate publisher. The person buying the lead receives no money from the user filling out the form only from the percentage of users who then go on to purchase a policy. The higher that conversion rate from lead to policy, the higher the quality, with quality as defined here and price the buyer can be being highly correlated. If more people convert from lead to policy, the lead buyer can afford to pay more. If fewer people do, then they will have to lower the payout in order to continue covering the cost of buying the leads.

In the optimal scenario, conversion rates start out profitably and even increase over time as both sides optimize. At a point, though, especially in the optimal scenario where the advertiser sees good returns with good volume, they will want more. Two things start to happen at that point. The first is often counterintuitive for the advertiser, and I called it the price fallacy in lead generation, namely that more volume comes at a higher price per lead. What the price fallacy fails to capture, tough, is what more often than not happens to quality. Almost invariably, once buyers and sellers work on capturing incremental leads, they end up succeeding but at the expense of the initial quality. Here’s an illustration of what happens:

As the above shows, the optimal phase sees volume growing with quality remaining above the break even for the lead buyer (where break even is an internally designated metric representing an acceptable spread between the desired cost per transaction and the actual cost per transaction). When the two parties switch into the forced growth phase, volume continues to increase (often at a slope higher than the initial growth), but quality starts to slip. More quickly than either expect it goes from the advertiser having a positive yield to a negative one.

Quite a few explanations exist for the quality-volume divide. One of the more straight forward revolves around intent. Only so many people have a given interest in a product. B2B marketers deal with this issue all the time. For some high dollar, super complex sales, e.g., a multi-million dollar database configuration, there just aren’t that many people who could be buyers. With auto insurance, the number is fortunately much higher, but it’s not infinite. Different traffic channels have different levels of intent – search is not surprisingly higher than co-registration. But for many verticals, there are only so many keywords available. To get in front of more users it means trying other avenues – longer tail terms, coreg, email, display, contextual ads, etc. Each one of those will have its equivalent of head users and tail users – sites / placements where users who click will have an interest as opposed to someone who places an ad on facebook saying, “Find out how much it is to insure a Ferrari.” Each incremental step works in obtaining more traffic, but without without additional technology / processes comes at the expense of the intent of the person who views / clicks / converts on the ad. Here is what it looks like plotted.

Saturation too plays a role. At some point, an advertiser will simply have reached the vast majority of potential users for the product. That of course doesn’t stop them from still wanting to grow. They don’t want to settle for the same amount, and it pushes them to continuing trying even at the detriment of their quality. It’s not that higher volume and good quality can’t go together. It’s all about the incremental lead in the growth phase. In the forced growth phase, instead of the next lead converting at or near the previous lead, it keeps slipping. Good leads still exist, but they get lost among the lower quality ones. It’s a problem, if solved, will mean incredible gains, but it currently falls outside the skill set of both the lead buyer and lead seller. Each can get better – they can implement various levels of verification (quality, scoring, call centers), but to get really good means each getting away from what they do best. Buyers and sellers get closer, but they will never close the divide fully. It’s too complex, too distracting, and not urgent enough for them. All of which means one of two things will happen. The divide will come and bite everyone in the behind and/or someone else will come along, solve it, and do very well. A note of warning though, there is another reason why no one has done so to date. It’s anything but easy.