How do online universities end up with students? They often hire “lead generators” to round up possible taxpayer-funded pupils on the Internet and to deliver them to the university. Some of the tactics by these firms have been sneaky, shady, soulless and even sinister. Their business has taken a bump from new rules from Washington. WiredAcademic managing editor Paul Glader accepted an interview with Vergo Interactive chief executive Don Fiorentino to discuss the trends in the industry and learn more about the state of lead generators. We appreciate his candid answers. We think his firm and others like it could still be more transparent with students in the recruiting process. It still bears too much resemblance to the sub-prime mortgage industry for its profit motive to funnel people toward products that may not be best for them. But we do see Vergo making efforts to improve their business and the quality of their “leads,” such as their product “Lead Peep,” which uses an audit trail to eliminate fraudulent data in student leads. The interview has been edited for clarity and brevity. Please share your thoughts in our comments section.
WA – Tell us about yourself and your firm.
DF – I am CEO and President of Vergo Interactive. This is an agency (my wife) Debbie started 5 years ago. It has been in the lead generation space 3.5 years. It started as a standard agency. It evolved into lead generation… it was a lead generation source for Grand Canyon University for high school seniors. The program was successful and they moved into lead generation. I moved into the CEO role in August of this year and Debbie moved into the chief marketing role. That’s where we are now. We service 150 schools as clients. Somewhere in the neighborhood of 30,000 programs those schools offer. We keep contacts in our database of people that we have been in touch with in the last three years. We are well above 1.5 million records of people we have touched.
WA – How did you find these leads in the past?
DF – Because of regulations that hit the industry, particularly the Gainful Employment Act, we developed tools to better understand the system. Ledes come in three ways 1) Ad campaigns on the internet through Google, AOL or other major sites out there. Those are really organically-generated that drives traffic to a web site we may have for programs, criminal justice, health care or other for a school or subset of schools; 2) We also generate leads through affiliates. Those carry banner ads for us or our programs. When someone clicks through this it goes to our affiliates; 3) We purchase leads through publishers. It was pretty much the way to get leads in the past.
WA – And where do most leads come from now?
DF – 25% of leads now are through publishers. 75% are self-generated now. With the gainful employments rules that came out, we developed proprietary technology so when someone clicks through a lead, we capture the information on the landing page to know when they came through and where they came from. We can tell what the advertising is in the background to ensure the advertising is within the guidelines to ensure it didn’t offer someone a chance to win a free iPad or earn a million dollars when you go to school.
WA – How do you think you rank compared to other lead generation companies?
DF – In the scale of the agencies, we are relatively new in the space. In the lead generation space, we would be considered mid-level. Small to mid-level. If mid-level was 50%, we would be 40% to 45%. I don’t want to say boutique but we are a medium side lead generator.
WA – Grand Canyon is a Christian university. What technique did you use to target that market?
DF (Debbie) – When we started working with Grand Canyon back in 2007, we were focused on assisting them with ground campus enrollment, not their online enrollment. Their objective was to increase brand recognition in the state of Arizona (among high school students) who were graduating. They wanted them to consider enrolling in GCU. At that time, the faith-based element was not relevant. They were not looking to brand it as a faith-based school or Christian school. They were kind of moving away from it at that time in the state of Arizona. It already had a reputation in the valley as a Baptist school. They were trying to move away from that as they repositioned it… They do want to start focusing on that now and getting that message out. We work with a couple of other faith-based schools online. We do target portals and social networks and communities that attract those individuals who are making a decision about faith or lifestyle.
WA – What percent of your revenues are from education compared to other industries?
DF (Debbie) – 100% of revenue is from higher education. Not 100% from lead generation. We also offer other agency services. We will manage schools’ Facebook or YouTube or Twitter accounts… The other web portals (we own) are not revenue-producing portals. Classroom Chuckles and Daily Dose…. teachers are a big market segment for a lot of the schools we work with, who are looking to continue their masters degree. Nurses daily dose is a community of nurses… those two properties are about driving traffic.
WA – What did the Arne Duncan rules do to your business? How did they affect the business side of lead generation as well as the moral/ethical side of the business?
DF – We are fully behind the regulations and consider the regulatory environment something that we embrace. The Internet is a relatively new medium and a new way to contact potential customers. It’s certainly a new way to directly connect a client with a potential customer. As a result, like with anything that’s new, there has been or will be … less than scrupulous behaviors in that environment. That existed in the education space. It is something that not only affected the potential customer purchasing education but also agencies like ourselves. We generate leads for schools in three categories – one where we do it directly ourselves, one with affiliate networks and one where we do use publishers. The industry started with people in call centers or who use publishers. There was, for lack of a better term, a lot of people who were fraudulent. We bought business we didn’t like. That forced us into our own lead generation – 75%. After the regulatory environment changed, the business slowed dramatically in the first six months. We saw schools take a wait and see approach on their marketing spend. They cut back dramatically on their marketing spend. It put a strain on our business in the first few months of the year. After June, it got better. Now, we see schools advertising budgets increasing and clearing up. We also see a lot of the bad actors in the environment falling by the wayside. We now see a much better playing field between us and our competitors. It’s a much better environment for us to operate in. Schools used to want volume… now they are more interested in quality of the student according to metrics they provide.
WA – Sen. Tom Harkin and others don’t want this industry to act like the sub prime mortgage industry, preying on the poor or members of the military. How do you avoid doing that?
DF – All these stories have more than two sides. Education in the military is really interesting. Each (military) base has an ESO who is responsible for helping the service member if they chose to continue education to help them continue with their education. There are programs on bases where the officer in charge points them. In many instances, they (military students) are unclear about the VA benefits and how to implement them and what they are able to use. We support that and attempt to point them in a direction where they can get answers to those questions. On the other side of it, what we also find is what looks to be a very lucrative base of customers for education students because of VA benefits associated with it. We also see the closure rate (in the military) – people who go for continuing education – is significantly lower than the general public that does the same. I am aware of the notion that service members are being pushed into utilizing benefits to continuing education. But, frankly, I am just not seeing it and neither are the schools… the schools we do business with are telling us the same thing.
WA – What is your education background? And how do you view the moral component of this industry? What happens if American gets this education business right or wrong in the future?
DF – I am a product of traditional education. After graduating public high school, I started at the University of Notre Dame that same year. I graduated in four years and went to work after graduation. While I was employed, I went to school in the evenings for an MBA at another private university. My daughters both went to four-year private colleges on campus and graduated in four years… My view of the world prior to being in this job has always been campus-based education. That’s my background. When I look at the trends and what goes on, there are many different levels of secondary education. My belief is that, as a society, we are not as well-educated as we can be, need to be or should be – for many reasons. Aside from being less educated than our peers in the industrial world, I think it changes our worldview. It inhibits our economy from growing in the way it needs to. There are many forms of secondary education. Career colleges have a place in our higher education. … the students who are enrolled in those schools are not dependent on a parent or guardian. They tend to be of lower income and want to enhance their place in the world. The majority have parents with less than a college education. So these are first time buyers and users of secondary education. The % of minorities are significantly higher in career education. 38% of graduates of career colleges are minorities, compared to 20% of public universities and 15% of not for profit private universities. When you really look at access to education and higher education, I am not so sure in our current government revenue and tax environment, that we would be able to pay for and support that number of students filtering through the public university system. When you look at the cost of career college students coming through, the highest cost is private not-for-profit schools. The lowest cost is public universities. Slightly above that is for-profit and career colleges. When I look at access to education and the way our country is right now, I believe there is a place for career colleges as they exist. When you look at existing colleges – the Arizona State’s of the world – who are creating online programs. The highest demographic going back is 47-year-old women who have some college and are looking to go back to school to enhance their education. The opportunity mix for enhancing your education … there are many avenues to do that. A student anytime, anyplace can go back to school and enhance their education.
WA – Are you seeing more growth with the private and public colleges?
DF – What we are seeing is most schools have online programs of some sort. We work with private schools, big name private schools. The programs they are offering online or are advertising for are certificate programs for executive education. We are seeing the schools with brand names are protecting their brand. They are selling programs that would be for a niche market – executive education. The first place they appeal to is alumni, or a geographic area or a given industry.
WA – Let’s talk geography for a moment. Are you seeing more business in China or other places right now?
DF – Right now, our biz is in the US. We have attempted to create campaigns for schools to work outside the US. The most we do is work with schools in Canada. I would say, we are a US agency focused on US-based citizens for education.
WA – When it comes to deceptive marketing? Do you still have sites like that or see sites like that out there?
DF – We have never had sites like that. We don’t have any now. We have a product called Lead Peep. It looks at the lead and where it was referred to. In the last 5 months, out of 75,000 leads, we had 1 referring URL that we thought was questionable. It wasn’t deceptive. It was questionable. We are seeing pretty much a transparent environment. We consider it a level playing field and a clean environment because of the product Lead Peep that we have. Schools buy it from us to police other agencies and other sources of leads. In that regard, I know the schools are continually on guard. I can’t speak to what they are finding.
WA – What impact did the investigative stories by media such as Bloomberg News and others have on the industry?
DF – The media doesn’t invent stories. There was a story there. It was vociferously reported. Was the amount of fraud in the industry as big as the story. I don’t know. By the same token, are we in a better place now? We are in a better situation now than in two years ago. Did the amount of scrutiny put on the industry hurt our business for a period of time. Yes it did. Our belief is that we are through it and in a better place because of it.
WA – Do you think the bad actors left?
DF – The interesting thing of working in the Internet – a computer, server and a couple of programmers can get you in front of millions of people very quickly. A lot of the people who caused a bad name in this industry were individual players who simply move on to another vertical. They have just moved into easier pickens.
WA – What will be the future of this business?
DF – 400% year over year of growth in mobile searches as opposed to online connected searches. Searches on mobile devices and tablets by 2013 should surpass searches done in a connected way. For the younger users in high school and college, text is their primary means of communication as opposed to text. Meanwhile, for people of our generation email comes first and texting is second. We are creating campaigns that embed QR codes in advertising and texting so we can link mobile devices to landing pages for lead collection information and provide information for potential students for schools and education. We expect to start campaigns in January that embed QR codes.
WA – If I am a kid with an iPhone with a QR scanning app, where would your advertisements surface and what would I do with them?
DF – You will see it in legacy media in print, on a campaign in January. You will see a QR code on a mobile-enabled web site. A smaller version of the lead form that you might find on a web site. If they do not have a QR reader on their phone, there is a short code you can just text 55-1212 college. That brings them back to the same landing page. The responding text is a link to that page.
WA – That takes them to a college or set of colleges?
DF – It takes them to a list of colleges to choose from… they are not forced into anything or anyone contacting them as a potential student. Their name is not given to a call center. They still have to review the material, enter a form. This is just an information delivering medium.
WA – so it goes to a site that lists your colleges?
DF – Yes. Pretty much. We have to make money. We have two such sites. Anytime we are running a … specific campaign. The landing page the individual is delivering too is created around messaging and banner ad. Only the schools we work with that offer degrees in criminal justice programs would be featured. It is all tied to the messaging.
WA – Why not say: “This is not a comprehensive list of colleges.” Or say, “Here is a list of colleges paying Vergo Interactive to recruit.”
DF – It doesn’t say “here is a select group of colleges.” The messaging does say these colleges offer programs in criminal justice. I really think the consumer is a lot more educated to realize there are more than 30 colleges that offer programs in criminal justice. We find that students – they shop. It’s extremely rare that a student is a first time explorer. Students tend to shop education pretty hard
Debbie – We make every effort to provide prospective students with as much information on education as possible. They will leave our site. We are just the first introduction.
Don – It is not that much different than a potential high school senior going to a guidance counselor’s office and applying to 10 to 12 schools. In this instance, the acceptance rate is higher at for-profit colleges. We had enrollment counselors at GCU or University of Phoenix who currently work for US. The vast majority of students have spoken to at least 3 diff schools. They are shopping for the education just like they would shop for every consumer good. On one side, there is potential for fraudulent behavior. On the other side, we have given the consumer the opportunity and the power to not just make a choice but to find information. It’s naive of us to think that the people on the Internet are a bunch of rubes. Most of the people are extremely savvy about what they are doing and in ferreting out what they need and want. I really would hope the people portraying the industry one way would look at it and say the consumer does have the power. They have access to information and the freedom of choice.
WA – How do you know these students are not being misled?
DF – We are an interactive agency… We try to operate at a transparent level. On the walls of our office are six works: work hard, be fair, play nice. We try to be fair – give student information and choices. And also being fair with the schools so they know and understand how their info and message is being dispersed through our campaigns and how we are capturing names and students for them. At some point, everybody who is in business really has to work at an ethical standard. Will all of us ever be perfect, I doubt it. There is no such things as perfect information. But there is fair information. And that is what we aim for.
WA – How many uniques do you have on the two university sites?
DF – In the course of a month, we’re capturing about 12,000 uniques. I think in terms of views, it is significantly higher than that.
WA – How many staff?
DF – We have 26 people in our office in total: a full creative staff of web designers and people who write copy, someone who manages social media sites for clients, IT staff, account managers, sales people. We have a media team, which monitors the sites and traffic and helps with buys. We have other background people – a controller and administrative staff.
WA – For 2012, what are areas where education marketing will be headed?
DF – Social media is interesting. Schools have to be willing to embrace social media for social media to work. If they do embrace social media, they can brand all their communities on one page. It helps them create that kind of social area for potential students and people that might like that school or feel like they are affiliated in some way with that school. We are finding that some schools, once a student decides to apply or enroll in a school, they can click on an icon and have their own personal Facebook page mention that they decided to continue their education at xyz school. That is another way for other people to know or create awareness of some of the programs that school may have. Social media is moving into the forefront. I don’t see any of the schools right now managing Twitter. My guess is in the next year or two, once schools consolidate Facebook pages, they will look at Twitter as well.
WA – In terms of demographics, what age groups, ethnic groups, etc. will drive online enrollment in 2012?
DF – Everything I am reading predicts it will stay the same. My personal opinion after being in the industry and going to some of the conferences and seeing what the schools are doing, I think the next wave of people to do online education will be people looking for post graduate degrees who normally would do something campus based at night. Executive MBAs, which are concentrated on weekends… I think that will be the next wave of people to adapt to online education.
WA – What about age trends?
DF – Schools are seeing a wave of people right now anywhere from 55 to 65. People who have retired or at a stage in their life where they are at a change in what they need to do. They are finding a spike in applications for particular programs and career colleges. Medical coding and billing. People in their 50s and 60s looking for that.
WA – How will online universities compete with “bricks and mortar” universities for enrollment in 2012? What new tactics are emerging?
DF – When I talk to school enrollment counselors and executive programs, each school feels they have a unique story… the big players who do most lead generation themselves, I know they are changing the playing field on what they do. Many of the schools we do business with, I don’t see them changing their messaging in terms of how they compete with other schools. I see them changing messaging on programs they have for individual students.
WA – How will online education and classroom learning interact in 2012?
DF – I think that the blended education is really going to move. There is going to be more of a blend. Schools with campus-based programs will have more classes online. The state of Idaho (had) a bill to require each high school student to take credits online so they will understand and get a feel for online learning. If that takes place, that will guide online learning to a lower level, pre-secondary education. That will increase blended learning for secondary education and online learning. When they were going back and looking at the Arab spring and talking to folks in Syria, credited with starting the revolution in Syria, they asked how they organized. They took an online course from Harvard on community organizing and entrepreneurship and used their learnings there to organize their revolution in Syria.
DF – Back to your original question: “Is all of this good?” I don’t know if I can make a qualified statement about good. But when people have the opportunity to increase their knowledge, the world ends up being a better place for it.
WA – What are the tactics every university must include in their marketing campaigns in 2012 to attract new students?
DF – I think the messaging the schools have had to employ in 2011 based on the Gainful Employment Act… I think that level of attention is going to continue. I think the potential students and shoppers for education will have more info that is at their disposal regarding what the programs are like, what the costs are, how many credits can be transferred. I think the messaging will continue to be enhanced and increased in quality as well as content for the potential students. The regulations have really filtered down to a point where enrollment counselors are conscious of signing students up so students know what they are getting into and are making a choice about furthering their education
WA – This business reminds me of the fishing industry? You lead generators are like fishing operations out there casting nets to round up fish and take to the customers back in the college market.
DF - When this industry first started, schools were paying for leads and for quantity. The individual contractor found their way with reputable schools. Prior to the regulations coming into effect, the schools had a marketing spend and were looking at their enrollment and cost for enrollment. Even though they were buying higher quantity and lower cost, I don’t know if it decreased their marketing spend. If you measure cost per enrollment, it was still relatively high. People in enrollment centers tend to cycle through leads. I think the schools have learned that their costs have declined on the number of counselors to process. They are getting higher quality leads. I don’t think the schools are making that choice at all for independent contractors. Plus, there is a downside if they are caught doing fraudulent marketing. It is far to high for them to take a risk.
WA – What other products do you have besides Lead Peep?
DF – We have Mobie 180. It takes a traditional web site and converts it to a mobile web site. That is something we sell to any vertical. Restaurants, lawyers, dry cleaners – anyone that has a need for a mobile web site. As the statistics say, by 2014, 20% of the searches will be mobile. Getting to a mobile web site enhances the experience. Lead Peep is the other product we sell. It looks back and monitors lead traffic. It works in any industry. There is code on the landing page. When someone gets to the landing page, it is able to capture the IP address. With that, they can look back at the referring URL. We developed that code ourselves because we wanted to ensure our own traffic. Part of this is when you say you embrace the changes in the regulatory environment and the business environment right now… we want to sell that to others as well. We introduced that 3 months ago. We have 3 schools signing on now in the next month or two. We haven’t created the campaign to get it into other verticals. That is a project in 2012.
WA – Are other companies doing this kind of auditing of their leads with software?
DF – Right now, we are unique. While we like to think we are geniuses…. I’m sure there will be, in a few months, other people with products out there. A few months ago in our searches, we didn’t see anyone with this. Debbie had the idea. We were a victim. Like any agency when starting, you are buying leads from other people. Like the schools, we were getting lousy information. We wanted to understand the sources of that information. Our quest to understand that had us generate that idea with our IT departments. They were able to generate this. We have every lead record for everyone who has been on our sites. It sits in a repository – with an IP address or email address. We can find that lead… date stamped where it came in from and a url. We can go back another step and say where it came from. It will show up in Google, Bing or another search engine. If coming from an affiliate, we’ll see the affiliate page. We have to ensure… we still buy a small percentage from other sources. We have to ensure those sources are valid and compliant in terms of their messaging. The schools need to know. Because if someone claims, if I advertise on this school, I would get xyz. We can go back and pull that up and show them. We will also give a screen shot of the page to the school. We save a screen shot in our repository. The school can see the message. We have the screen shot all the way down… below the fold. Not just the top part of it.
WA – How does a campaign work?
DF – At any given time. xyz school says I want to buy 500 leads from you in a month. We create a campaign. They buy those in the course of a month. They can ask for 35 a day or all at once. We put a program out there. We create a point per click or whatever. Let’s say we get 70 leads a day for that school. Other agencies buy those leads from us… the leftover 46. Let’s say we do something similar. We want to know where they are getting their traffic. In the beginning, when the business started 4-5 years ago, there were people out there selling lists of people… (There were) instances where people were getting email lists from someone else and selling them as leads. There were an awful lot of different behaviors. It was more unscrupulous and fraudulent. What we found was when we would deliver these leads to schools, schools only deliver for a certain number of leads. Some schools might ask for 1,000 leads, only paying for 450 because others not valid. They would have an email address that is not valid… invalid phone numbers. After a couple months, we realized that is not a good business model. Some companies have sprung up. Every lead we gather passes through a bureau, which makes sure they have their own databases, have their own phone number and that email addresses match. All of those things in last three years have evolved to the changed environment.
WA – What’s the standard going rate for a lead for an online college?
DF – Schools have a number they are willing to pay for enrollment. They work backward. Let’s just say their metric is $500 per enrollment. They figure out how many leads to buy and how they convert. You might start out at a price. If leads convert at a lower level, schools can negotiate the price down. If your leads aren’t converting within their metric, they will suspend your campaign for other sources. Generally, we create the campaign with a minimum buy for leads. With us, we want to see a minimum of 100 leads a month for three months. That’s kind of the industry standard. If schools don’t want to do that, we charge an upfront fee for the campaign.
WA – Will your firm remain in the education space if it is not as profitable?
DF – We started in education and will always have a place there… But the way the regulation went, the business decreased by 50% or more. Maybe 60%. What we learned was to be vertically integrated in more than one vertical… having all your eggs in one basket is not a good thing. We will maintain a portion of our co that is education specific but we are looking to expand into other verticals. When you say to yourself, are you in the lead generation space? Yes. But really what we do is we collect data on consumers. We are a direct marketing agency that connects clients to consumers. That info can be used for other things. Some companies want contracts for other kinds of direct marketing. When you look at the business that we are in, we are in an information gathering business. You take the data, you measure how much info you have and find a way to use that info and curate it at some level… so you can make a connection for a client to a customer.