Online lead generation gets no respect. Online lead generation affiliates less so. While the sector is growing by leaps and bounds – 290 percent over 2005, according to the Internet Advertising Bureau – people like Peter Martin and Robert Jewell just seem to drag its reputation through the mud. These guys had the honor of being sued by New York State Attorney General Eliot Spitzer in March for selling the private details of up to 7 million customers to marketers when they said they wouldn’t. Spitzer called it the “largest deliberate breach of privacy in Internet history.”

“There are people that don’t do things on the up and up,” Dan Felter, chairman of the recently formed Online Lead Generation Association (OLGA), says. “Online lead generation, when done properly, can be done well,” says Felter, who is also CEO of Opt-Intelligence, a lead generation firm.

High-profile busts like Spitzer’s only give a black eye to an industry trying to police itself and keep undue regulation at the door. Last year the online lead generation machine brought in $753 million, according to the Internet Advertising Bureau (IAB), which predicts over $1 billion for the lead gen space in 2006.

Revenue for online lead gen made a healthy gain to reach 6 percent of all Internet advertising spending during the first half of 2005, according to the IAB. That’s $347 million. Go back to 2002 and it was only 2 percent of Internet advertising spending in the first half of that year, or $114 million. But that is a year-to-year increase of 204 percent, IAB figures show.

DEFINING THE SPACE

Just the phrase “lead generation” also means different things depending on who you’re talking to.

When an advertiser needs new potential customers to sell to, one method of getting names and ways to contact these people is to buy a list. This list of people is called the leads. Generally these people have already expressed an interest in the product – be it iPods, real estate, cars, mortgages or other retail goods – and have agreed to be contacted by the advertiser. This is also known as permission-based marketing and in some cases it is called co-registration.

The most popular online lead gen technique is the “opt in.” This is where a customer registers online to join a free newsletter or newspaper or social network and sees a page where he can request to receive additional newsletters or marketing from third-party companies. Generally, you check a box to say it’s okay. Interaction with that page is sometimes required to complete your registration.

Some companies also practice “double opt in,” where you check a box but also must follow a link in an email as a way to confirm your email address but also, in essence, asking you twice that you really meant to opt in. Popular opt-in trends include an effort not to ruin your surfing experience by serving you multiple pages of opt-in options and by allowing you to bypass offer pages.

Suspect practices that used to be commonplace but are now considered intolerable are “opt out,” where you are automatically signed up for other offers and you must uncheck the boxes to refuse; pages where offers outweigh content; offers of free products for forwarding the offer to others; free offers that still involve a fee; offers that require the downloading of adware or spyware; and, of course, offers that do not explicitly say they will not sell or give your private information to other advertisers.

Since there is a commission for every lead generated, it becomes attractive to enter a pay-per-lead or pay-per-sale contract with an advertiser. And with that model being very much like the affiliate marketing model, affiliates have flocked to lead gen. The flood of lead gen affiliates in the online world – like anything – breeds bad eggs and good.

POLICING LEAD GEN

Enter OLGA. Chairman Felter helped start the trade group when he realized what a stench surrounded the word co-registration, or co-reg. When describing what his company, Opt-Intelligence, does he tries to avoid the word co-reg. “If you could see the people’s faces at conferences when they finally got what I did,” he recalls.

OLGA currently has more than 25 lead gen companies as members and considers its mission to define best practices and champion transparency in the industry. Felter boasts that lead gen could become “almost as valuable as search.” However, he adds, “barriers to enter the market are pretty low.” Hence, the surge in online lead gen affiliates operating in a sometimes-ethical vacuum. “It’s the cutting corners that give lead gen affiliates a bad name.”

Felter says, early on, when opt-out was more common ,”advertisers all got burned by co-reg.”

The offers would end up on disreputable sites – such as porn – and the advertiser would essentially receive a “data dump”: raw lead information with no indication if the leads were from opt-in or opt-out and no way to measure the quality of the lead. That’s why Felter hates using the word co-reg, but also why the industry is poised to explode as burned advertisers come back to the well.

And as they return, now is the opportunity to prove that this time around advertisers, publishers and lead gen companies can all get along and share the wealth. “There is something called common sense,” Shai Pritz, CEO of Unique Leads, says. “If somebody is doing shortcuts, it will come back to bite them.”

Jim Vines, CEO of LeaderMarkets.com, agrees that it isn’t really very hard to figure out when someone on your network is doing wrong. “Having been an affiliate myself, I know the way traffic should look.” He claims to know when something doesn’t look right. Usually it is too many leads over a short period of time coming from a single affiliate. Vines says he goes the extra yard by talking to all their affiliates on the phone before sending any offers. “I have to personally see if they know what they are talking about before I send them anything.”

It might stand to reason that an industry that requires so much policing is inherently ineffective. “There is nothing wrong with the tool but how you use the tool,” Vines says. He adds that policing just comes with the territory. At least to Vines, the fun of it all is the personalization. “Leads are just the icing on the cake,” he says. “Whenever an affiliate calls, we know them. Our job is to help our affiliates find the campaign that is working the best for them. We can help them figure out what list is best for them.”

GOOD LEADS

Matt Hill, CEO of eForce Media, says they apply technology and science to matching leads to clients. Others, he says, create leads by traffic driving – but so many requests go unanswered because there is no matching. A guy looking for a mortgage deal ends up getting a thousand calls by mortgage brokers, Hill says. Or leads come but no calls are made because the company can only afford to buy so many leads per day. “Most companies in this space only sell about 50 or 60 percent of their inventory,” he says, “so it doesn’t matter if leads fall on the floor.”

Pritz at Unique Leads also aims high, which is why he runs a closed network. “The affiliate managers will say what offers they want and we create the links for them,” he says. “The control is better that way. There are human beings involved; we do what we can to make sure the system works.” Unique Leads likes to see website screenshots and have an understanding of UI experience of each site they sign and they always make the users sign privacy policy forms.

“Like every industry on the Internet there are black hats and white hats,” says Hill. “It’s a business that’s been around longer than the Internet. But since the Internet, it is becoming more sophisticated.” He says his lead gen company’s mission is to find the most perfect match between leads and clients. He says there are still some big companies who do opt-out co-reg because the volume they get is so big it cannot be ignored – but in the end, he says, “those companies will weed themselves out.”

“Some websites say, i

f I throw a few opt-outs on my page I make 20 cents more,” says Felter, adding that the websites figure a few opt-outs won’t be noticed. And some companies will turn a blind eye to it all because the sheer numbers of leads (regardless of their quality) are meeting their quotas.

Chris Jeffers does B2B lead generation as CEO of netFactor and says that his buyer is a marketing executive. “They are frustrated because less than 2 percent are converting and completing online registration,” he says. “This is critical for sales – sales says, ‘give me quality’ but marketing is rewarded for providing tonnage.” This means sales and marketing are effectively operating against each other. Quality leads can help close the gap.

GUIDELINES AND BEST PRACTICES

That is another aim of OLGA: to define the best practices for the whole industry. The founding members of OLGA include Felter; Stephan Pretorius of Acceleration eMarketing; president of Feedster, Chris Redlitz; and Kitt Collier Odukoya, director of marketing at EarthLink. Member companies include Active Response Group, CoReg Media, eForce Media, Flatiron Media, Innovation Ads, LeadVerifier, MediaWhiz, Monster Worldwide, ON24, SendTec, Unique Leads and WiseClick Media.

Initial guidelines that OLGA endorses include that advertisers always know where their offer is being placed; that advertisers clarify that they are buying an opt-in only; that the leads did not come from offers “forced” onto customers via opt-out or opting in as a requirement of registration; that it is easy for customers to bypass all offers if they prefer; that the registration process in general is about the content and not all about signing up for offers; that an auto-respond email include opt-out and unsubscribe links; and that it is always clear what exactly the customer is signing up for.

If trade associations and policing succeed there is no doubt the industry will grow even more than it has already, provided there are no more high-profile debacles that could trigger a call for federal regulation. No one wants that. “We need to keep rules flexible so that people can operate their businesses,” says Sujay Jhaveri, CEO of Flatiron Media. He says “pro-business people in the business world” will take care of tempering regulation. He notes that the CAN-spam legislation passed in California was much stricter than a version that went federal. Testing the limits of regulation will probably continue. “You are dealing with a marketplace that is very profitable,” Jhaveri adds. “Online multilevel marketing will mimic off-line eventually.”

Other events to look forward to in online lead generation will be consolidation. Hill of eForce says there are many lead gen companies that have maybe 10 employees who are operating in niche areas that are ripe for acquisition. In fact, eForce just completed funding for that very purpose, he says: to add companies’ expertise to what they do. And, he adds, the transitions are very easy since the employee counts are so low; you see an immediate profit increase by applying the traffic you acquired.

Vines of Leader Markets says being a former lead gen affiliate helped him be a better president of a lead gen network; that is, he wants to remain small. “Some affiliates can do six figures of traffic per month,” he says. “They don’t want to feel like they have come to a cattle call.” That’s why he wants to keep it personal with his network. “I’m not looking to become the next CJ or LinkShare,” adding that while the challenges are many, so are the rewards. “If someone is gun-shy, they probably shouldn’t be in it,” he says.

OLGA’s Felter says the key terms are transparency and awareness. “You’ve got to watch your metrics. What are you getting and is it valuable?”