Threat to Debt

Debt lead generation is threatened by potential changes that will cause a drastic overhaul of the industry. This week we take a look at the threats to debt lead gen by placing proposals into context and helping you to understand the legislative and regulatory outlook for this now high performing vertical.

Trends come and go. The hot offers come and go. Just ask any who has run offers for more than a year. Everyone has their favorite stories of the hot offer. The old timers will most likely talk about the early days of True.com. When every other dating site paid $3 to $4 per sign-up, along comes this new site that no one had heard of, and they paid something like $20 for maybe 6 fields. Most people thought it was a joke or some scam. There was simply no way that someone would pay multiples greater than their competitor for basically the same information. That payout slowly retreated but ended up still hovering on the upper end of the normal band. To say that they earned some brand loyalty within the community is an understatement. All-in-all True.com had a good run, and it helped turn the tides for more than a few networks and its publishers. Many of the networks are still around, but that offer has slipped far down in the collective conscious of performance marketing. Why? The usual – it’s hard for any one offer to stay relevant and fresh especially after saturation.

An interesting and rather significant change has taken place over the past four years. Offers still undergo the same level of saturation pressure, but instead of market forces dictating their success, regulatory action has become the biggest driver. In the past, offer owners and their traffic providers played an ongoing cat and mouse game with Google and the like, that is, driving traffic one way until some tweak cuts it off, causing them to find a new angle. Those games take place largely in a vacuum with rules controlled by the company who ultimately owns the inventory, e.g., Google and Facebook. That hasn’t changed, but instead of only having to worry about pleasing the quality metrics of inventory providers, performance marketers must now take into consideration state and federal guidelines too.

Saying that marketers must now abide by state and federal rules doesn’t mean they had a free pass prior to this. Instead, it means that they operated, if not with impunity, without much concern for the rules. While a handful of companies ran afoul of the FTC, the general threat level from the FTC and overall awareness of their enforcement areas remained quite low. We could say that the situation started to shift with the introduction of CAN-SPAM. Like many laws, the potential consequences appeared much worse than the actual implementation. I would stipulate that most email marketers found themselves agreeing with the conditions laid out in the law and that it erred on the side of the continuation of commerce. It was certainly better than the patchwork of often Draconian laws passed on the state level.

For the years following CAN SPAM activity from the government remained relatively quiet. There was plenty of legislation but none aimed directly at the online advertising space, or at least none that looked as though it wanted to seriously alter how companies operated. And, I’d say the space remained relatively legislative free until 2007/2008 when the bulk of the ringtone issues came to a head. Here too, though, the issues came from a particular state with the support of the largest industry group but more importantly the carriers. With regard to ringtones, the audience, in terms of making money, is small. You want to bill the phone, you don’t deal with the consumer to get paid, you deal with the telephone companies. If they agree to changes it effectively does the same thing as if a law was passed, the main difference being that violations would result in mostly non-payment or termination as opposed to potential jail time.

This era of private company legislation will not end, but as discussed recently when talking about the education space, the greater threat to online marketing comes not from private companies but the government. And, unlike CAN-SPAM, these have potentially further reaching consequences, because they don’t look to address the needs of those on the performance marketing side. With the online education space, it is already a given that some form a regulation will pass. The unfortunate truth is that the vast majority of people who run or have run traffic for education lead generation have done so without a strong enough regard to what it means to promote education. That is not to say it’s entirely the traffic provider’s fault, but historically, they have not had to understand the implication of the representations they make to the consumer. Here, they are playing a key role in the disbursement of billions of dollars of federal aid. The schools are under a lot of pressure, which means they will put equal if not greater pressure on their providers.

A similar battle has played out in a much lower profile, its scrutiny too coming from up on high. Similar to the situation with education, as a member of the marketing community, it would be very easy to never realize anything was happening. Would someone dropping emails or perhaps buying traffic on Facebook for a well converting debt offer think twice about something like the Schumer-McCaskill Amendment or the Debt Settlement Consumer Protection Act? Yet, had the former gone into law, which it was on the verge of doing, it would have effectively delivered a death blow to the debt settlement industry and likewise to anyone making money off the space. One network was so happy, it even sent out an announcement to its affiliate base saying, "Heard about the recent Bank Reform Act in the debt settlement industry? Well Senate successfully voted it CLOSED and the debt settlement world will remain thriving so NOW is the time to pick up our debt offers!" With a declaration like that, you might think all is indeed well. Nothing could be further from the truth. Unfortunately, it’s just a temporary reprieve. For more on the threat to debt lead gen continue on to Part 2.