Cheap is Expensive in online leads (“goedkoop koop, is duur koop”)
A great saying in Afrikaans is “goedkoop koop, is duur koop“, or sometimes shortened to “goedkoop is duur koop” or similar. What it basically says is that buying cheap stuff, is expensive. For the online marketing folk among us, this has often turned out to be the case. If you are looking to buy cheap media, leads or customers, it is often an expensive and frustrating experience. Michael Arrington/Techcrunch’s attack on Offerpal Media and the immense revenue that is currently being generated by driving offers to advertisers that are at best of questionable value to consumers, of questionable quality to marketers and at worst, deceptive and fraudulent.
Niki Scevak had a great post some months ago on the “Impending Doom of Facebook Apps” that should be required reading for assessing this issue, which Techcrunch is continuing to pursue and rightly so.
I agree with Niki that a lot of this short-term revenue will and should be going away. Companies like Tatto Media getting taken to task and to court, and paying hundreds of thousands of dollars to Attornies General while continuing to running questionable mobile offers: it’s clear that this kind of fine is just a drop in the bucket to them. I’d heard from someone running the MyLuvCrush ads describe it as “crack cocaine”. Tatto has pumped a lot of that money into tradeshow booth dollars at Ad:Tech and other shows in an attempt to build a legit “behavioral marketing” business as discussed here (using Flash cookies, which are becoming a bit of a privacy third rail currently and as many companies are moving away from this technology for that reason as moving toward it). But I digress…
The quality of these kinds of leads is the same as what we saw a few years ago when the incentivized “free ipod” type of offers became prevalent — and especially for so-called “soft” or “semi-hard” offers (where there is no credit card hit which means the user is paying for an offer or as opposed to something like Netflix they can cancel before a trial period is up) like inquiries for an insurance or mortgage quote, these incentivized offers became a bad joke in the lead generation industry and caused a lot of issues for companies that bought, resold and tried to pretend these had the same quality as leads generated directly from display or search ads. Cheaper leads? Oh yes. But given that a lot of these “leads” ended up in call centers taking up someone’s time to call, they had a real cost that was a bit harder to assess directly but made them really expensive.
On the other hand – some companies don’t care since enough of the time they’re going to charge your credit card and make some money off of you. Take the example of the options for a game player in Farmville on Facebook to get more Farmcash. Lots of offers as options including the mentioned Blockbuster/Netflix ones. Or you could try this one:
A big asterisk next to the word free – uh oh? What does that mean? Well there’s nothing on this page with an asterisk, so let’s look at the next page. On the landing page it says “*Pay up to $9.95 (or $9.95 USD in Canada) for shipping & processing.” But wait, there’s more! Read on and it says:
ANY TWO of the three computer tutorial CD-ROMs are yours free without further obligation, PERIOD. Take 10 days to decide if you want to keep the complete set of CDs. After your 10-day free trial, if you decide to keep the complete Lesson Suite, we’ll conveniently bill your credit card just $189.95 USD . Simply follow the instructions in your package for your free camera. Or simply call Customer Care at 1-800-519-4110 if you decide to return any one of the discs. You will be charged nothing more, and get to keep two computer learning CD-ROMS! You can also return everything within 10 days and receive a full shipping & processing refund upon your request.
Ah so not so free eh? Well okay, so not everyone is a cheap date. Which means that people signing up for offers will tend to go for the easier to get out of, the simpler ones… and that’s the issue.
Ultimately, cheap leads and cheap media often turn out to be more expensive than companies think at first – and often it is because the path to true conversion is more convoluted, which for leads often happens off the web in a call center or during a longer cycle. And not just for the vendors – as we can see from this incident, a promising set of ideas (virtual currency, offers in exchange for money to developers) can be tainted by the stink of cheap, shitty leads that unsustainably and temporarily fuel an advertising micro-economy.