On Friday the Federal Trade Commission will host a daylong workshop on lead generation, the term of art applied to a range of tactics for recruiting new customers. The meeting — which will feature consumer advocates and government regulators alongside industry insiders — will explore how lead generation is practiced in several fields, including education, where it’s probably most closely associated with the scrutiny given to the marketing tactics of for-profit colleges.
That makes this a good moment to check in on the complex and sometimes murky role lead generation plays in higher ed. Here’s what we can tell you:
What is lead generation?
In a description of the event, the FTC defines it as “the practice of identifying or cultivating consumer interest in a product or service, and distributing this information to third parties.” Within higher education, the practice plays out on two main fronts. The first is helping companies that offer student-related financial products, like private loans, locate potential customers. The other, which gets more attention, is helping colleges increase their enrollments.
Which colleges use it?
The term “lead generation” covers a spectrum of practices, says David Hawkins, executive director for educational content and policy at the National Association for College Admission Counseling. Depending on how it’s defined, one could argue that it’s something all colleges do. “In the admissions profession, prospective students are often referred to as leads,” Mr. Hawkins says.
All colleges seek prospective students, though not in the same ways or with the same goals. A for-profit university might try to increase its market share, Mr. Hawkins says, while an elite university might seek a very particular type of student. But one way or another, he says, “they are purchasing and going through data.”
OK, describe that spectrum of lead-generation practices.
Here’s how Mr. Hawkins thinks about it: There’s traditional lead generation, in which colleges collect students’ information directly from them or buy it from the big testing organizations. There are newer players whose business is bringing leads to higher education. There are companies that mine data across industries, including higher ed.
And then there is Mr. Hawkins’s final category: companies that create college rankings as a way to market their client institutions. (Mr. Hawkins’s association has issued a document warning reporters against taking such rankings at face value.)
What exactly is the FTC interested in?
It’s clear from the workshop agenda that the federal agency is looking specifically at companies that generate and sell leads, says Kim Taylor, a co-founder and the chief executive of Ranku Inc., a company that builds recruitment technology for colleges. In higher ed, lead-generation companies cater mostly to for-profit colleges recruiting students for online programs, says Ms. Taylor, who will be a panelist at the event.
How big is that market?
That’s unclear, partly because not everyone defines “lead generation” in the same way.
“I have no idea” about the size of the industry, says Rohit Chopra, a former official at the Consumer Financial Protection Bureau, “because the data is so sparse.” John Katzman, founder and chief executive of the Noodle Companies, which run an education-search site, estimates that the market is worth a little under a billion dollars. David Halperin, a lawyer who has written critically about some lead-generation practices and who will speak at the event, says, “I have no doubt it is a multibillion-dollar business.” What everyone seems to agree on: It’s big.
Is it growing?
Actually, it’s contracting, says Ms. Taylor, who used to work in the field. “The economics of this industry don’t work anymore,” she says. Lead generation is an expensive way to recruit students, she explains, because only a small portion of leads convert into enrollments. Enrollment has dropped at for-profit colleges, Ms. Taylor says, and most of those institutions don’t aspire to be as big as they once did. And nonprofit colleges don’t offer enough programs or charge high-enough tuition for the model to work well for them, she adds.
“Anything that’s a marketing service is a function of the market it serves,” says David Morgan, chief revenue officer of PerformLine Inc., which helps colleges and other clients monitor how their brands are presented online. Given what’s happening to for-profit college enrollments, the sector should shrink, says Mr. Morgan, who will be another panelist at the event. But he offers a caveat: No institution looking to increase its enrollment cuts its marketing budget.
Will nonprofit colleges get into this kind of lead generation?
“They are already,” says Paul J. LeBlanc, president of Southern New Hampshire University, “and big-time.” Many nonprofit institutions with online programs, he says, work with a so-called bundled service provider, a company that offers several services in support of their ability to provide online degrees. Lead acquisition is the “primary” task those providers are overseeing.
Southern New Hampshire doesn’t work with a bundled service provider. It does buy leads from third parties, but over the past few years those have become a smaller share of its overall leads, says Steve Khederian, vice president for data and analytics in the College of Online and Continuing Education. That’s partly because the university has stepped up its own marketing efforts, improving its search-engine optimization and putting ads on television. And it’s partly because companies that seek to generate leads must now compete with colleges that have improved their own efforts.
Ms. Taylor’s business works to help colleges improve recruitment on their own sites, cutting out the need for a third-party lead generator. While some nonprofit institutions turn to outside companies for lead generation, she says, that is only a small piece of the overall market.
What are consumer advocates worried about?
Marketing isn’t necessarily bad, says Mr. Chopra, a senior fellow at the Center for American Progress. But “when an adult who’s been struggling in the work force is applying for a new job,” he says, “that job should be a real posting, and not a front for a lead generator.”
And there are examples of lead generators who use such tactics, says Mr. Halperin, who has written a number of articles about those practices. “There’s no site saying, Sign up for my for-profit college,” he says, because virtually no one is looking to do that. Instead, advertisers seek out leads by inserting themselves where people are looking for things they do want: benefits and jobs. “I’m sure there are honest people in this sector,” he says, “but there sure are a lot of bad actors.”
Lead generators posing as something they’re not is one problem, says Mr. Katzman. Another is college-search sites that point people toward particular colleges but don’t indicate when their results are driven by which colleges have paid them.
Despite the government’s efforts to inform consumers, the most vulnerable prospective students “will never see the scorecard,” Mr. Katzman says, referring to the Education Department’s revamped college-comparison tool. “They will stumble on one of these sites.”
What would help rein in such practices?
“No amount of regulation, new rules, or best practices is going to stop a specific fraudster looking to make a quick buck,” says Jonathan L. Pompan, a lawyer who has represented for-profit colleges and third-party advertisers. “But that’s not what this should be about.” Friday’s event, Mr. Pompan says, presents an opportunity for regulators to learn about colleges’ and advertisers’ compliance efforts.
Mr. Katzman, of Noodle, has asked the department to tell colleges that they could be found liable for violating federal rules against misrepresentation if they engage in lead generation driven by payouts from colleges “without a prominent, easily understood disclaimer.”
The Federal Trade Commission is well placed to head up efforts to protect consumers from misleading or dangerous lead-generation tactics, Mr. Chopra says, because the practice is used across many industries. The Departments of Education and Veterans Affairs should be engaged in efforts to protect students and veterans, he adds, and the financial-protection bureau can work with the FTC on lead generation on the financial-products side.
Why is the FTC holding this event?
The agency is no stranger to lead generation, says Sandhya Brown, its assistant director of financial practices. The workshop is partly intended to raise awareness among consumers who “likely don’t appreciate that there even is such a thing,” she says.
At the same time, “we see ourselves as potentially being educated,” Ms. Brown says. The agency’s enforcement around lead generation is continuing, she says, and this event “is not signaling any particular shift.”
Beckie Supiano writes about college affordability, the job market for new graduates, and professional schools, among other things. Follow her on Twitter @becksup, or drop her a line at beckie.supiano@chronicle.com.