FCC’s closure of the ‘Lead Generation Loophole’ and its impact on small businesses

December 12, 2023
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Tomorrow, December 13, 2023, the FCC is set to make a pivotal decision that could dramatically reshape the lead generation landscape, particularly affecting comparison-shopping websites and the small businesses and franchise systems that depend on them for leads to fuel their growth. Its widely anticipated passing not only initiates a six-month countdown for small businesses and franchise systems to adapt their lead generation strategies, but also signifies a pivotal moment for the digital marketing landscape as a whole.

Background and overview of the FCC’s “Lead Generation Loophole Closure” rule

Comparison shopping websites have revolutionized the way consumers find and connect with service providers. On these platforms, users can conveniently input their contact information just once to indicate their interest in a particular service. Subsequently, this information is shared with multiple providers, enabling consumers to compare offers, rates, and services. For example, someone seeking a new loan can submit their details on a website. That site then sells these details as ‘in-market leads’ to a variety of lenders, who can reach out to the consumer with their respective offers.

comparison shopping websites

These lead buyers, often local small businesses, then email, call, and text to compete for the consumer’s business, often through robo-calls, automated emails and texts, and sophisticated call center operations. This multi-lead tactic has been a key component of the comparison-shopping website business model, enabling the sale of a single lead to multiple SMBs, often in different, seemingly disconnected, industries.

Consider our example in Lending. A comparison-shopping website focused on loans might sell a single lead to not just local mortgage loan officers, but also to local real estate agents, insurance providers, local home improvement stores, and even private schools (and more)!

While a single SMB might pay $50-200 for the lead, the comparison-shopping website may sell the lead tens or hundreds of times over, making thousands of dollars in the end… on one lead! Hence, the lead generation loophole. This multi-lead approach has enabled favorable economics and has been the driving force in making the comparison-shopping portal industry one of the world’s most profitable business models. 

However, consumers have become increasingly frustrated with being inundated with calls and texts after submitting an online lead for information about a service. It got to be too much, and the FCC undertook an initiative to explore tightening these lead generation rules.

Under the FCC’s new proposed rule, this dynamic is set to change significantly. The new “Lead Generation Loophole Closure” rule includes a requirement for one-to-one consent, meaning that a consumer’s information can no longer be shared with multiple businesses without distinct, individual consent for each business to which the lead would be sold. 

Lead generation loophole and its impact: one to one consent

This anticipated adoption of the new FCC rule not only signals a profound shift in the strategies small businesses use for lead generation but also poses a fundamental challenge to the operational models of comparison-shopping sites, hinting at potential industry-wide transformations.

Impact on small businesses and franchise systems

Facing this shift to individualized consent, small businesses might encounter not only increased lead acquisition costs but also a potential scarcity in lead availability from third-party aggregators and comparison-shopping websites—a change reverberating across industries. 

Detailed call to action for SMBs

With new “Lead Generation Loophole Closure” rule’s enforcement expected by mid-2024, the clock is ticking for SMBs to align with the new standards. This involves exploring new, compliant lead generation methods, possibly incorporating more personalized local marketing tactics or advanced technology solutions. It’s crucial for businesses to revamp their strategies now to avoid seeing their lead pipelines evaporate or even potentially facing legal or regulatory repercussions for non-compliance.

Preparing for the future

At Evocalize, we’ve always been advocates of SMBs taking control of their own demand and lead generation rather than simply buying demand or leads from others – we felt so strongly about it that we built a company around the concept!

It’s never been a better time to build your own lead generation engine: build your own local brand, cast your own line out to Google, YouTube, Meta (Facebook & Instagram), TikTok, industry websites, and more, build your own customer list and control your own destiny. You can do this on your own, or license technology like Evocalize to automate it for you. If you’re part of a franchise, the best franchise systems should have high-performing, compliant, solutions built for you to use out of the box. If they don’t, point them to Evocalize or other direct lead generation technology ASAP. 

Remember, online leads take more time to nurture than those you buy, so you must start now to be ready when this “Lead Generation Loophole Closure” enforcement goes into effect in Summer 2024!

Lead generation loophole and its impact

The impending FCC ruling represents a significant shift in the digital marketing domain. It’s a call for businesses, especially small ones and franchises, to rethink and innovate their approach to lead generation in this new era.

For those interested in delving deeper into the specifics of the FCC’s proposed rule, the full document can be accessed here.

Disclaimer: The information provided here is based on our current understanding of the FCC’s proposed “Lead Generation Loophole Closure” rule as of December 12th, 2023. This interpretation is subject to change and may evolve with the final decision and subsequent clarifications by the FCC. Readers are advised to consult legal or regulatory experts for the most accurate and up-to-date information.

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