It was a corporate sales gathering like any other, with the requisite swapping of business cards and hawking of products in the vendor hall. But LeadsCon, a conference held in New York in July, served a growing ecosystem of companies that fuel the marketing of for-profit education. Like for-profit education itself, these companies increasingly find themselves the target of criticism of their activities.
The conference was a meeting of “lead generators": marketing companies that provide to their clients batches of prospective customers—or, at this conference, potential students. The education sector of this industry has grown significantly over the past decade, just as online and for-profit colleges have expanded. Some nonprofit colleges, especially those with online offerings, use lead generators as well, but the bulk of the industry supports operations at for-profit institutions.
Higher-education lead generation involves an estimated $500-million to $1-billion in spending each year, says Jay Weintraub, who first convened the semiannual LeadsCon event in 2008.
Since lead generation is one of the main engines behind the marketing efforts of for-profit colleges, it is also an industry facing increasing scrutiny from members of Congress, state attorneys general, and federal agencies.
A Senate committee report on for-profit colleges, released this past summer, found that they were spending, on average, roughly a quarter of their revenue on marketing. Some of the most profitable spent more per student on marketing than they did on instruction. Critics of for-profit colleges said that was evidence that the institutions were focused on shareholder returns at the expense of students’ educational outcomes.
Sen. Kay Hagan, a Democrat from North Carolina, this year introduced legislation that would prohibit all colleges from using any federal dollars for marketing purposes, including lead generation.
The legislation is stalled in committee and is unlikely to gain Republican support in the lame-duck session of Congress. But the scrutiny is unlikely to recede.
The lead-generation process generally starts when a college or university hires, either directly or through a third-party agency—a marketing firm that specializes in gathering contact data for prospective students. That firm uses Web portals or other advertising to find potential leads to sell to its clients.
The lead generator may also form partnerships with “affiliate marketing” sites, which are often more narrowly targeted, attracting students interested in just nursing-related fields, for instance. Those sites may drive traffic to the lead generator’s sites or cultivate leads of their own, which they sell to the lead generator.
Institutions usually pay $10 to $150 per lead, according to the Senate report, a range confirmed by several people in the industry. Two of the largest education-lead generators are QuinStreet and Education Dynamics, but there are dozens of others.
The Senate report found that the 30 for-profit colleges it examined had contracted with 62 lead-generation companies. Those, in turn, own many Web sites where they can attract a large number of prospective students and then funnel them to their client colleges.
For example, in 2009, Rasmussen College, an Illinois-based for-profit institution, signed a contract to purchase 50 leads (at $37 each) from the lead-generation company All Star Directories, according to documents provided by the college to Senate investigators. Prospective students who entered their names and contact information on AllCriminalJusticeSchools.com, would have their information transferred to Rasmussen, which could begin recruiting them right away.
‘Aggressive and Misleading’
Critics of lead generators in higher education argue that the process is not sufficiently transparent and is ripe for predatory marketing to students.
The Senate report found that “lead generator Web sites generally direct students only to schools and programs that pay them, and have a history of engaging in online marketing using aggressive and misleading methods.”
For instance, a search portal on a lead-generator Web site may appear to provide results for a wide range of programs, when in fact, the site displays only its client’s programs as results.
The report also said that some of the sites focus on promoting how quickly and easily a person can complete a degree, but do not fully disclose the costs of the program.
Noting that while some for-profit colleges appear to have put in place new controls for their lead generators, “in general, these marketing efforts continue to be a serious cause for concern,” the report said.
In June, QuinStreet agreed to pay $2.5-million to resolve allegations that it had run “false, misleading, and deceptive” Web sites aimed at recruiting military veterans to enroll in mostly for-profit colleges. The marketer entered into a settlement with 20 attorneys general, agreeing to give up ownership of GIBill.com and to add disclosures to the hundreds of other sites that the company runs. QuinStreet denied wrongdoing and said the settlement would not have any material effect on its finances.
Still, the increased scrutiny on for-profit education and its marketing has begun to affect QuinStreet’s business. In its annual report, released in August, it attributed a 12-percent decline in its education-related revenue to its clients’ purchasing fewer leads “due to uncertainty surrounding new regulations affecting for-profit educational institutions.” In the previous fiscal year, QuinStreet’s revenue from its education clients, roughly half of its business, had increased by 15 percent.
In September four Democratic senators wrote a letter to the Federal Trade Commission, urging it to be more aggressive in investigating problematic education-lead generators and to update its guidance about marketing of online education programs, which were last changed in 1998.
“Lead generators have become a key part of the aggressive recruiting strategy for many for-profit colleges,” says the letter, signed by Dick Durbin of Illinois; Tom Harkin of Iowa; Frank Lautenberg of New Jersey; and Barbara Boxer of California. They added that “many” for-profit colleges have formed partnerships with lead generators to “deceive consumers to obtain personal information by misrepresenting their affiliation with for-profit colleges, as well as concealing how and by whom their information will be used.”
Many in the industry argue that the reality of the lead-generation landscape is being misrepresented. The entire industry shouldn’t be demonized as a result of several nefarious actors, they say.
“The responsible advertisers and schools are just as concerned as anyone when they see unsubstantiated or outlandish advertising, but to paint the entire form of advertising with a negative brush is unfair,” said Jonathan L. Pompan, a lawyer in Washington who represents third-party advertisers and for-profit colleges.
Mr. Pompan said he and others have recommended that the higher-education lead-generation sector form an organization to self-regulate the industry, with the authority to punish bad actors, which he said has been successful in similar advertising fields.
“There’s a real opportunity for schools and third-party advertisers and marketers to work together and form a self-regulatory program to address and minimize the concerns that have been put out there,” he said.