Lux Absio Bervatum

Wednesday, June 25, 2014

Why Lead Generation Services Are Awful

I got a call from one of these "lead generation service" places today. ( is an example of a lead generation service, though it's not the one that contacted me.) These things are awful and here's why:

Most of the schemes I've seen involve them advertising your business a whole bunch, but instead of your business's contact info they give a phone number that routes to your main phone number. And "best of all" they don't charge you anything; instead, they take a percentage of the initial fee charged to each new client obtained through their phone number.

Ostensibly, the phone number routing is just a way for them to collect stats about how effective their ads are. So it's all mutually beneficial and benign, right?

Of course not. "Lead generation services" are filthy leeches. Their stats are unverifiable, their practices opaque.

Here's the thing about that phone number: They get it out there. They probably even do a good job of it. (Not that it's anything you couldn't do.) That phone number gets saved to people's contacts, written down, printed on stuff people stick on their fridge, etc. But you know who owns it? They do. Every time I've looked into one of these schemes, I've asked them what happens to that number if we decide to terminate our relationship. Oftentimes they tell me something like, "Well you can keep it, you just have to pay us a monthly fee for it." Mind you, that's not for the phone line to your business. Their number just redirects to the phone service you already pay for.

And this is where they get you. They work hard to associate your business with that phone number. Which they own. In every case I've seen, they will not give you ownership of that number. Maybe there's an ethical service out there where you can buy it from them for a reasonable fee if/when the contract terminates, but I have yet to see that.

As long as they own that number they can do whatever they want with it. Maybe they'll decide that they want 10% of all the fees generated from new clients over the first five years of their relationship with your business. Maybe if you quit the service they'll redirect that number to a phone sex line. Maybe they'll just play a recording saying the number is no longer in service, letting clients think you've shut down.

So that's it in a nutshell: Lead generation services co-opt your connection to clients and potential clients. Then, if you ever want out, they hold you hostage. It's an avenue for extortion, only it's legal.

This isn't to say they don't work. I'm sure they prefer being a middle man to being a protection racket, so they do want you to succeed. But you should be very selective about who you give up control to. An intermediary that's also an advertising agency can have mis-aligned incentives. It's like a funeral home being run by a hospital; in theory, the hospital is trying to keep you alive. But they're also making money off you if you die. If the funeral home profit margin grows larger than the healthcare profit margin, it's conceivable that the hospital might not try as hard to keep you alive. If the funeral home profit margin sufficiently dwarfs the healthcare margin and the operators aren't ethical it's possible they might try to kill you.

My suggestion: If you want advertising, go buy advertising. It's not hard. Don't pay someone to go buy advertising for you.