For any business, generating new leads is almost always a major concern. To help achieve lead generation goals, many companies use online marketing. Part of the reason for this may be the high cost of “traditional” marketing—which has an average cost per lead of $619 compared to an average cost per lead of $58 for social media advertising or $38 for programmatic display ads (source: Linchpin SEO).
According to data from Insider Intelligence, “Total digital ad spending will reach $455.30 billion” in 2021, and is expected to reach $645.80 billion by 2024. The large number of businesses turning to online marketing has created an opportunity for fraudsters to make money illicitly. In fact, according to an article by Entrepreneur, a “group of Russian hackers made between $3 million and $5 million a day with an elaborate digital ad fraud scheme.”
Even large companies (such as Uber and eBay) have been subjected to lead generation fraud that cost them millions of dollars individually. If a big-name company can fall victim to fraud, then how much could fraud be costing you?
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What Are Fake Leads Costing You?
Fake leads created as a part of lead generation fraud can be prohibitively expensive for any organization. The exact cost of bad leads from fraud will vary depending on factors such as:
- The size of the lead generation campaign;
- How long the source of the fake leads goes undetected;
- How much time sales representatives spend pursuing bad leads;
- Potential legal fees or Telephone Consumer Protection Act (TCPA) violation fines; and
- The percentage of leads that are fraudulent.
For example, say that you have a $500,000 online marketing campaign budget that uses a cost-per-lead (CPL) revenue model. If the CPL for this campaign is $50, you would get a total of 10,000 leads. However, approximately 25% of the leads generated by the campaign are fraudulent. Just from the direct costs, that would be a loss of $125,000.
Unaware of the fact that those 2,500 leads are fraudulent, sales team members start trying to reach out to them, only to get confused or angry responses from people who don’t remember "opting in" to receive communications.
This violates TCPA restrictions, which could result in fines of $500 to $1,500 per incident. Across 2,500 leads, that’s a maximum possible cost of $3.75 million should each lead be contacted a single time (although this is only if regulators determine that the violation is intentional).
It’s harder to quantify the cost of sales team labor spent pursuing fraudulent leads since the cost of labor and time spent on each lead can vary.
The time wasted on fake leads can also delay sales from reaching out to legitimate prospects. As noted by Podium, “50% of leads go with the vendor that responds first, so answering promptly is essential.” A delay in response between getting a lead and reaching out to them could cost you that lead’s business.
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How to Identify Fake Leads
So, how can you tell fake leads apart from the legitimate ones that you generate from your marketing efforts? There are a few potential tells that you should watch out for to identify lead fraud:
1. Large Increases in Ad Spend without Similar Increases in Deals Closed
When using a cost per lead revenue model, you might expect each lead generated to translate into a new customer. At the very least, it’s normal to expect that if you add 20% more leads to your sales funnel, then you should get roughly 20% more closed deals—even if some new leads don’t convert to customers.
So, one of the warning signs of lead generation fraud is if you increase your digital ad spend to generate more leads but don’t see an increase in business.
Alternatively, if you cut your online advertising spend and don’t see a change in the number of leads generated, that could be an indication of misattribution fraud in an affiliate marketing campaign—wherein fraudsters claim credit for leads brought in by other affiliates or from random organic visitors (often by using cookie stuffing techniques). This was how Uber discovered it was wasting nearly $100 million on ad fraud in 2017 alone.
2. An Increase in Complaints from Prospects
Fraudsters often fill their forms with information from real people. This helps to “prove” that the lead is a real person to the vendors they rip off. However, though the data used might be from a real person, that person will not have actually consented to receive communications from you.
So, when you (or your sales team) reach out to the contacts your advertising/marketing partner has supplied, you may get complaints like: “I never signed up for this” or “don’t call me again!”
If a large number of new leads complain about not opting in to receive communications from you or ask you to never call them again, that could be a strong indication that you have fake leads.
3. Contacts Having the Same Information
One warning sign of fake leads in your campaigns is if multiple leads all possess the same contact information (such as addresses or phone numbers) when they aren’t part of the same company. For example, if five contacts all have the same phone number, but have different addresses and work for different companies, then there’s a strong chance that they are fake leads.
More sophisticated fraudsters will use bots, malware, or human fraud that avoid repeating the same contact data for multiple leads—often by using stolen contact information from real people.
4. IP Address Oddities: Shared IP Addresses for New Leads and Out-of-Geo IPs
Tracking IP addresses for new form submissions from leads can help to identify potential fraud. As noted by Daniel Foster in a LinkedIn article about lead gen fraud, “If you notice multiple conversions… from the same user or IP address within a short timeframe, there’s a good chance something is off.”
For example, a hundred page visits from one IP address in under an hour could be indicative of a bot, malware, or human fraud visiting that page to fill out the form over and over again. While more sophisticated fraudsters may use proxies, virtual private networks (VPNs), and data centers to disguise bot, malware, or human fraud traffic, looking for repeat IP addresses can still help spot more basic fraud attempts.
Additionally, leads having IP addresses from outside of your targeted geographic range can be another indication of lead gen fraud. For example, let’s say that your business operates exclusively in California and your targeted ad campaigns are only supposed to run in California. However, the IP addresses for your leads keep indicating that they’re coming from Florida, New York, or a foreign country like Taiwan.
This could indicate that your marketing partners are either ignoring your geo restrictions (wasting your ad spend on leads that won’t be able to convert) or are bringing you fake leads.
How to Stop Lead Generation Fraud
Now that you know about the potential cost of lead generation fraud and some of the warning signs of fraud, what can you do about it? If you’re wondering how to stop lead gen fraud, here are a few tips that you can follow:
1. Carefully Vet Your Affiliates and Marketing Partner Agencies
Before adding an affiliate to your network or entering a partnership with a marketing firm, take some time to investigate them. Try getting answers to questions like:
- How long has the affiliate/marketing partner been around?
- What results have they generated for other companies?
- Do their clients include any companies I’ve heard of before?
- Are they buying their followers (do they have a lot of followers but little engagement with their content)?
- What companies does the affiliate network put their ads on? Are they suitable for my brand?
Some careful review of a marketing partner or affiliate can help you avoid the con men who engage in fraud. However, more sophisticated fraudsters can be more difficult to identify, since they have experience in creating a reputable-looking front.
2. Regularly Check the National Do-Not-Call Registry
A lot of fake leads use the stolen data of real people. This helps make the fake lead look more real. However, when people get repeated calls from telemarketers who received their stolen information, they often add themselves to the National Do-Not-Call (DNC) Registry.
Companies can check the DNC registry to see if their leads’ phone numbers are listed in the registry. If they are, there is a chance that those leads are fakes that were made using stolen identity information.
Regularly scrubbing contact lists for DNC-blocked numbers can be a reliable way to avoid reaching out to fake leads—potentially avoiding TCPA violations and fines.
3. Trace Fake Leads to Their Point of Origin
If you notice a large number of fake leads in your contact database, tracing those leads back to the affiliate or marketing network that generated them can be incredibly useful for identifying fraudsters.
For example, say that you have identified nearly 3,500 fake leads in your database. On checking the affiliate tracking identifiers attached to these leads, you find that they all come from the same affiliate or advertising partner—and that partner has brought roughly 3,500 leads in total. That’s a very strong clue that the partner is a fraudster and should be removed as soon as possible.
4. Keep an Eye on Your Marketing Metrics
Keeping track of your marketing performance metrics, such as total number of leads generated, lead-to-customer conversions, and marketing spend can help you spot fraud. For example, if your marketing budget increases or decreases significantly, but your lead generation doesn’t change at all, that might be an indication of fraud.
Alternatively, if you start generating a lot more leads, but your total lead-to-customer conversions don’t change, that could indicate that you’re being given fake leads.
5. Use an Ad Fraud Solution to Screen Your Lead Generation Efforts
Instead of waiting for fraud to drain your advertising budget and reacting after the fact, it helps to be proactive and use an ad fraud solution to find and eliminate fraud as it happens.
For example, Anura’s ad fraud solution can check visitors to your website in real-time catching the most sophisticated fraud so you can deal with them in real-time. Anura accomplishes this by checking hundreds of data points for every website visitor. It also validates rules and heuristics against real conversion data to sort the fake leads from genuine opportunities.
Once fraud is verified beyond all doubt, you’re presented with all of the data you need to pinpoint where the fraud came from so you can cut it off at the source.
See How Anura Helped Stop Ad Fraud: Download the Quinn Street Case Study!
If you’re ready to eliminate fraud, reach out to Anura now! We have the experience, passion, and tools to help you stop paying for fake leads.