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Names from co-registration sites ARE like the subprime mortgage crisis

by Andrew O'Halloran, Chief Privacy Officer

It is hard to read or watch anything these days that does not mention the subprime mortgage crisis. While not to simplify the reasons for the subprime mortgage crisis, I see some interesting parallels for email marketers considering sourcing data from co-registration sites. Consider the following similarities:

Making Mortgage Deals and Co-Registration Too Attractive?

Mortgage applicants were often enticed to apply for mortgages--that they could not realistically afford--by the promise of low (or no) interest rates in the short-term or the promise of increased equity from higher and higher house prices (buy now because it is going up!).

Similarly, some data collection sites employ a similar strategy by enticing a person to sign-up by offering a free gift. What most do not say are all the steps, time, and information that the subscriber will have to provide before meeting the “requirements” for the gift. You can imagine that even if someone musters the energy to complete the application process (especially if the only reason was to win the free gift), it is less likely many of these people will be appreciative when they receive additional offers from email marketers!

But Follow The Money!

Like in any other field, mortgage credit sales representatives are commissioned on the sales they bring in (and not what they turn down – although these rejections are more positive to the bottom line in the long-run). Most co-registration agreements are priced around the number of subscribers provided – the more subscriber names provided, the more revenue generated! Not to you, but to the co-registrar.

The main difference, however, is that a good mortgage company will also have a credit department that will use readily available risk metrics to scrutinize the mortgage opportunity brought in by the sales representatives. Email marketers, however, have a much more difficult time to accurately assess the quality of subscribers and generally must rely more on the reputation of the co-registration company: How long have they been in business for? Who do know has used them and what were the results? What do their sign-up sites look like? Would subscribers really want to receive content from you? In short, if you are not asking the right questions, you are not going to achieve email deliverability and marketing success. What’s worst – you also risk involving yourself in legal problems (e.g. CAN-SPAM violations) should you not do enough of your own homework.

Bad Mortgage Paper – Bad Names

A contributing factor to the subprime mortgage crisis was that the appropriate loan risk assessment checks like debt to income ratio, credit history, long-term prospect of meeting interest payments, were ignored. Similarly, email marketers often don’t evaluate the data suitability from a co-registration site. For example: is a check done to confirm that the email address is valid? Is a check done to validate the accuracy of the data (e.g. does the zip code fall in the state indicated?); how many other marketers are receiving the subscribers information?; what information is collected? What content is the subscriber truly interested in receiving? In short, “garbage in, garbage out” – don’t expect to cultivate a good company and IP reputation with AOL, Yahoo, and the other ISPs you are sending to if you are sending to the wrong people, people that are not interested, or people that don’t exist.

But Where’s the Bailout?

Of course in the financial crisis, the government guarantees depositors and is likely to step in and guarantee mortgage-backed securities – at least to some extent. But with co-registration names, don’t be expecting anybody to bail you out. The old financial maxim Caveat emptor still reigns supreme.

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