How Much Is Lead Fraud Costing You?

Jan 30, 2019

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Lead Fraud is costing you money. We say this unequivocally because if you are in any way involved in lead generation - and let’s face it, why else would you be here if not? - then at some point you have lost money to fraudulent data. The question is not if this happened, but how much you wasted when it did.

In this blog, we will look at what encompasses Lead Fraud and give you an idea of how to calculate how much this is costing you, personally, every year. And then, after all that bad news, we will give you some good news and say you can very simply begin to eradicate these costs on all campaigns moving forwards - for every problem, a solution!

WHAT IS LEAD FRAUD?

Lead Fraud traditionally refers to the misrepresentation of how a lead is generated or collected prior to the process of someone selling and someone buying said lead. Within this category of “misrepresentation” there exists a myriad of factors than can distort the true legitimacy and value of the lead. Primarily, though, this traditional definition of lead fraud tells a story which benefits the seller (the initiator of the fraud) and disadvantages the buyer. This perspective is too narrow and we will try and look at lead fraud in a larger sense, taking into account how fraudulent leads can be detected, eradicated and even prevented at all stages. Firstly, some questions to ask when considering lead fraud:

Is The Lead Authentic?

When thinking of fraudulent data we must begin with the authenticity of leads. This is perhaps the simplest, most obvious measure of fraud - Is there a real person behind this lead or are you paying for bots / fake details? Simply put, was the lead created by an interested person filling in a form? If the answer is no, you shouldn’t be buying this lead; you shouldn’t be selling it either!

How Old Is The Lead?

The time the lead was originally generated is a little more complicated when it comes to detecting lead fraud, especially when buying from a vendor. The thing to remember is that speed is key - as discussed in a previous blog, the 5 minutes following a submission are the most engaged a lead will ever be. After that point we face diminishing returns so we need to act fast. In this sense, the chance of a lead converting falls spectacularly the longer you leave it. Thus, paying for old leads can be entirely wasteful. The question of whether the lead is fraudulent depends on how the lead was sold. If you’ve bought a lead described as “real-time” then you are paying for those golden 5 minutes of engagement. And, to flip it, if you are the seller, then you want your leads to convert to achieve repeat business? If the lead is old, then ultimately this is lead fraud. To combat this you need a process that enables real-time validation and distribution to further protect against lead fraud at all stages.

Has The Lead Been Diluted?

Okay, in this scenario, imagine you have a lead coming in from an advertiser. This is a genuine lead with X% chance of converting. But, unbeknown to you, this lead has also been sold to 4 of your competitors thus diluting the chance of conversion to X/5. And yet, the price you’ve paid for the lead doesn’t reflect this true value taking into account the diluted quality. In this scenario you’re a victim of lead fraud and have wasted money.

This is again a relatively difficult form of lead fraud to detect and counteract as the proof is often based upon semantics in the terms of the sale. Moreover, the relative amount of leads you have coming in will naturally dictate the amount of lead fraud that goes undetected - the larger your operation the more chance of this kind of thing happening. What may be a small wastage in isolation can add up to a huge loss overall and is certainly something you should be aware of.

How Is The Data Collected?

Let’s refer back to the original definition of lead fraud that uses a narrative of sellers knowingly misselling fraudulent leads. We said this definition was too narrow, and this is partly because it assumes a degree of universal honesty by the people filling in forms. Of course, we know that not all data volunteered online is accurate. Indeed, many fraudulent leads may seem, superficially, entirely legitimate to vendors - in which case, this is not lead fraud in the sense listed in other examples. This is simply an illustration of the need for powerful validation (more later) and real-time reporting.

However, going back to the original definition, there is a correlation between the quantity of forms on a field and lead fraud. One way of increasing completion rates is by minimising the data collected - but if you need multiple fields of information, what does that mean? Essentially, one type of lead fraud involves faking certain fields of answers (ofter survey based) to maximise completion rates - the problem with this of course is that you are paying for ultimately useless information.

When Are You Checking For Fraud?

As is often the way, it is far more effective to prevent a problem than solve one after the fact. The same is certainly true of lead fraud and consequently you should employ strategies to try and prevent fraud in the first place.

Having an automated scanning system can help you to cut lead fraud before it even becomes a problem. When set up correctly, it can breeze through your servers at the same time as leads are arriving, meaning lead fraud is an issue you rarely actually come face to face with.

When you bring in a lead to your system, the biggest indications of fraud fall into the following categories:

  • Email
  • Phone
  • Name
  • Address
  • IP
  • Source
  • Time
  • Specification

Instantly checking across these categories can instantly cut over 25-35% of the fraud that you may currently be experiencing. It’s a lot smarter than cutting out fraud retrospectively and gives you more clarity into the complex ways in which fraud is pushed into your company.

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V is for Validation. Or at least it should be. Employing proper Validation software is one of the quickest, simplest and most effective ways of saving you a LOT of money. The trouble is, many people in the industry use software that overpromises and underperforms… and worst of all, you may not even realise it.

THE POWER OF VALIDATION

At Databowl we subject leads to a degree of cleansing, validation, verification & enhancement that is simply unmatched elsewhere. Leads are automatically validated against a multitude of separate criteria to ensure they are valid leads that meet client specification – in real-time, as they are received and fed into our clients with absolute transparency at all stages.

We essentially employ a triple-layered validation process that maximises the elimination of lead fraud. This involves running:

  • Lead Validation
  • Meta Data Validation
  • Self-Learning Validation through our in-built machine-learning software

We will do a separate blog about the specifics of these extra levels of validation at a later date; for now, we will simply try and illustrate the results of using this intelligent validation to eradicate wastage and improve performance.

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Before we continue, it is worth noting this is not a fine art - this a rough approximation of a possible truth based on information to hand. However, we will walk you through the calculation and allow you to calculate your own potential savings going forwards.

In 2018, 124404395 leads were passed through Databowl. Of that number, 32433184 were rejected by the software based on failing the validation. In addition, a further 11608397 were rejected by the client. None of these rejections incurred any cost at any point. Now, in order to illustrate an approximate value to this, let’s run these numbers using a mean average CPL of £1 a lead (actually probably higher but let’s round down). This means that last year we saved our clients over £43 million through validation alone - never mind the operational costs saved through not pursuing leads that won’t ever convert.

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Whatever your involvement in lead generation or concerns about lead fraud, these are figures that simply cannot be ignored. Our software detected and rejected 35.4% of all leads because they simply did not measure up to our high standards and were very unlikely to convert. Whether you apply this to the idea of converting yourself or distributing the leads elsewhere, the same principle applies - no one wants to waste money on useless leads!

If you apply the same number to your own figures, how much could you have saved? Let’s work out a rough figure using the following calculation:

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Have an empirical measure for your problem? Ready for a solution?

THE GOOD NEWS

So, following that brief overview of some of the key types of lead fraud we now happily say Databowl provide solutions to all of these problems. If you would like to learn how Databowl can help you eradicate lead fraud from your work - whilst simultaneously saving you money and improving performance - then fill in your details below and one of our experts will be in touch to start helping.

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