Lead Generation Fraud Guide: How to Stop Fake Leads in 2024

Lead fraud is a big problem for marketing budgets. Business owners—and even some lead generators—often don’t know where their money is going.

So, how does this happen?

Well…

You pay for lead generation and get traffic. But when your sales team starts working, they find that half of the leads are bots. Many others don’t even know what you’re offering. They’re not the right audience!

For business owners, this is a waste of money. For lead sellers, it’s also a hit to their reputation. Fake leads can lead to TCPA violations, which could result in penalties of up to $100,000 or more.

To help you avoid this costly problem, this guide will show you how to spot lead generation fraud and stop fake leads from entering your system.

Let’s get started!

What is Lead Fraud?

Lead generation fraud occurs when incorrect or duplicate lead details are submitted, often by bots that fill out lead forms with fake names and contact information. This results in a flood of useless data, wasting both time and resources.

Additionally, some individuals may provide false information to exploit promotional offers or gain access to restricted content.

This not only squanders marketing funds but also makes it more challenging to connect with genuine leads.

Even savvy business owners and professional lead generators can sometimes fall victim to this type of fraud. How does it happen?

Often, it’s due to a lack of the right tools and strategies.

Effective lead generation requires:

• Advanced captcha systems
• Real-time lead verification
• Behavioral analysis
• Cross-referencing 
• Fraud detection algorithms
• Manual audits
• Quality scoring 

Without these essential elements, even experienced lead generators can find themselves grappling with fraudulent activity.

The good news is, comprehensive software solutions that incorporate these features are readily available. By leveraging these tools, you can significantly reduce the risk of lead fraud and ensure you’re connecting with real, valuable prospects.

Now, let’s explore how lead generation fraud actually happens and identify its common sources.

Equipped with this knowledge, you’ll be better prepared to protect your business and optimize your lead generation efforts. 

Common Types of Fraud in Lead Generation

There are 3 types of fraud in lead generation:

1. Bot-Generated Leads

Bots can be programmed to automatically fill out forms on websites, submitting fake names, email addresses, and other contact details. 

They can submit hundreds of entries within minutes. And, of course, none of them are real.

This means your sales team spends a significant portion of their time dialing numbers that are not in use.

This results in wasted marketing budget, wasted time, and skewed performance metrics.

2. Form Spamming

Form spamming is when forms are repeatedly filled with irrelevant or promotional content. This could be meaningless text (like “asdfghjkl” or “Lorem ipsum dolor sit amet”) or advertisements of irrelevant products/services. 

Spammers can also insert malicious links within the meaningless text, which poses a security threat to your system and users. 

For example, a spammer might submit a lead form with a message like:

Check out this amazing deal on cheap sunglasses!

Followed by a link to a phishing site. 

If you click on the link, you might unknowingly download malware or be tricked into providing sensitive information, such as login credentials or financial details. Ultimately, this compromises your company’s data OR your leads’ data – damaging your business’s reputation.

3. Identity Theft and Misuse

Identity theft and misuse are severe forms of lead generation fraud where fraudsters use another person’s details without their consent. It could include names, addresses, and even social security numbers!

“Consumer identity & privacy” is what TCPA and GDPR essentially guard.

So, identity theft and misuse represent one of the worst kinds of lead generation fraud. It puts your business’s reputation at great risk and may lead to legal repercussions.

Consumers lose trust in you, and the government might question your credibility as a business.

Suggested read: How to ensure TCPA compliant lead generation in 2024?

Potential Sources of Fraudulent Leads

Here comes another big question of this post — who is behind all this lead gen fraud?

Technically, there are 3 major sources of all types of lead generation fraud. These are:

1. Unethical Lead Generation Companies

Some lead generation companies inflate their numbers with unverified or fraudulent leads. And this is usually the case with fixed fee pricing models (i.e., Y number of leads for X dollars) 

They deliver the promised number of leads and get paid. Since “quality” wasn’t part of the deal, they don’t care about your conversion rate. They might use bots or form spamming to boost their numbers. 

You, the lead buyer, will find out about these fake leads only after you’ve paid, usually when your sales team starts working on them.

2. Compromised Web Forms

Form spamming and bot-based lead generation are possible only if your system is vulnerable.

If your web form isn’t protected by strong CAPTCHA systems or data validation processes, bots and malicious actors can flood your system with fake activities.

So, who’s responsible here? The party setting up the web forms in the first place.

It could be your lead generation partner or your marketing team. They are not making use of the right security tools and techniques.

How to undo the damage and secure your system? Scroll down to the last section, we’ve shared a robust solution.

3. Affiliate Fraud

Affiliate earnings involve earning a commission on the overall price of a product or service.

Unfortunately, the affiliate model is also exploited in lead generation fraud.

Some fraudsters generate fake leads using bots, stolen identities, or false information to meet their targets. They earn a commission on each fake lead they produce.

Why lead fraud is a HUGE problem?

Lead fraud is a HUGE problem because it’s draining your resources — and it is hard to detect.

Bob Huffman emphasized this repeatedly in his book Black Box. But if you don’t have time to read the book, let me sum it up for you…

When you launch a lead generation campaign, the starting point for your targeted audience is a simple ad.

Consider the graphic below from our pay per appointment lead gen guide:

The journey begins from ‘media’ which is essentially an ad space on:

• Search engine
• Some website’s blog space
• Videos 
• Social media 

You either buy this space directly from the website owner OR you go for a programmatic ad—an automated process for purchasing ad space.

Since most of the big websites (such as Facebook, Google, Instagram, BBC, etc.) do not offer direct buying, you have to go for programmatic ad buying.

Which is where tracking the placement of your ad becomes difficult – opening up room for fraudulent activity.

According to a 2023 report by the ANA (Association of National Advertisers), 25% of total programmatic ad dollars were wasted. That’s $130 billion!

Now, “wasted” does not mean that the money is utilized in poor marketing strategies or yields a poor ROI.

“Wasted” here means 25% of the money is simply gone – poof 💨

There’s no trace of where that 25% went.

On top of that, Juniper Research also reports ad fraud alone cost advertisers $84 billion in 2023. They reported that 22% of all digital advertising spend was stolen by fraud. 

So, if you spend $100 on ad space, you can be sure only $75 is actually being used effectively.

The programmatic ad system is so complex that tracking is difficult. Middlemen take unfair cuts that you don’t know about.

Even from those $75, more dollars will be stolen by fraudulent activity.

Dr. Augustine Fou — a fraud expert —  says: 

‘… 50% of money that makes it through to publishers could still be subject to fraud if that publisher is buying traffic and doing other shady things like refreshing the page every 10 seconds, refreshing the ad slot every 2 seconds, stacking 10 ads on top of each other, loading 1,000 hidden ads in the background. The advertiser is still exposed to the potential of 100% fraud if that publisher is a fake site using fake traffic, and selling their inventory through the adtech plumbing.’

In simpler terms, the whole programmatic ad system exposes advertisers (business owners or lead gen professionals) to double jeopardy.

First, you lose 25-50% of your investment to middlemen…

Then, you face other online risks, like lead generation fraud, form spamming, MFA (made for advertising) sites, viewability issues, and more.

The World Federation of Advertisers warns that ad fraud could become the second largest source of criminal income by 2025, after drug trafficking.

Zooming in, this “money drain by fraud” means the following for you:

1. Wasted Resources: Given the stats above, a $100 investment means you could expect the results of a $30-$40 investment. Apart from loss of capital, your team will waste lots of time, electricity, and phone credit, following up leads that are not even genuine.
2. Reduced Productivity: Dialing numbers to invalid leads can be severely demotivating for your sales and marketing team. It can develop frustration among your outreach teams, reduce productivity, and overall efficiency. 
3. Potential Damage to Reputation: When you reach out to people who did not consent being contacted, you risk your business reputation. Recipients will view your efforts as spam — leading to negative perceptions and possibly public complaints or bad reviews.
4. Increased Risk of Heavy Fines: Contacting people without their explicit consent can also trigger significant fines under Telephone Consumer Protection Act (TCPA). The TCPA requires businesses to obtain prior express written consent before making certain types of calls or texts. If you violate the act, it can result in fines ranging from $500 to $1500 per incident. Some businesses have paid over $100,000 due to TCPA violations!
5. Poor Lead Quality and Data Integrity Issues: Fake leads pollute your database, affecting the overall quality of your lead data. Analyzing this data can be excruciatingly time taking and often fruitless.

Big Tech Doesn’t Care

Big tech companies appear largely indifferent to solving the issue of fake traffic, which significantly contributes to lead fraud. 

A report highlighted by Mashable — provided by cybersecurity firm CHEQ —-revealed astonishing levels of fake traffic on X during significant events like the Super Bowl. 

The data showed that a staggering 75.85% of the traffic from X to its advertising clients’ websites was fake during the Super Bowl weekend.

This issue hurts the trust in online traffic metrics and raises concerns about how advertising money is spent on big platforms.

Even with these big numbers, big tech companies haven’t taken strong steps to fix the problem.

Under Musk’s leadership, things have gotten worse. About 80% of trust and safety engineers and half of the content moderators were let go. This led to more fake traffic and bot activity —- weakening the platform’s ability to handle these problems.

Advertisers and users have noticed. Google Analytics often shows no real traffic, while X reports high activity.

The lack of serious engagement from X, as indicated by their non-responsive PR responses, underscores a broader disinterest in tackling the bot and fake traffic crisis. This raises questions about the transparency and business ethics of big tech entities in handling ad fraud.

There’s surely a need for better transparency and ethics in big tech companies. But the truth is we don’t expect any major improvements anytime soon!

Signs of Fraudulent Lead Activity

The systems you pay for ads are often where the fraud happens. So, how do you keep your investments safe from fraudulent activity?

Eliminating fraud completely is impossible because there are too many fraudsters and schemes. 

But you can use tools to identify signs of fraud and alert you right away. 

Here are some warning signs to watch out for:

1. Unusually High Volume of Entries from the Same IP Address

If you get lots of submissions from the same IP address (e.g., 10+ entries) in a short time, it could mean bot activity. Use monitoring tools to detect and flag repeated submissions from the same IPs.

This saves your time and marketing budget from pointless efforts.

2. Inconsistencies in Lead Information

Mismatched data points are clear signs of potential fraud. For example:

• Phone numbers that don’t match the provided area codes (e.g., a lead lists a Chicago area code but provides an address in Miami)
• Names that don’t match email address patterns (e.g., a lead named “John Smith” uses an email like ‘samantha.jones@example.com’)

Use data analytics tools to spot irregular patterns. 

These tools can identify improbable name and address combos or detect sequential data entries that suggest automated submissions. 

This ensures the quality and authenticity of the leads you collect.

3. Spike in Lead Volume With Minimal Response 

If you’re suddenly receiving a high volume of leads but only a few are engaging or converting, it likely means many of your leads are low-quality or fake.

Simply generating leads isn’t enough; it’s crucial to monitor their progression through the sales funnel. Check lead quality using key performance indicators like:

• Conversion rates
• Engagement levels
• Email bounce rates 

For example, if you get 1,000 new leads from a campaign but only 5 convert into sales, it could mean the leads are unqualified or fraudulent.

To ensure a high ratio of real leads, continuously monitor and evaluate lead quality.

4. High Bounce Rates in Communications

High bounce rates indicate lots of invalid email addresses in your lead list, meaning many fake lead submissions. 

Sending emails to fake leads is:

↳ A waste of time & marketing budget

↳ Risky for the success rate of your future campaigns and your brand credibility

When many emails bounce back, your sender reputation is hurt, and your emails get marked as spam. Eventually, even emails to real prospects will land in spam folders.

To avoid this, regularly clean your email lists and use verification tools to ensure email addresses are valid before launching campaigns.

5. Discrepancies in Engagement Patterns

Engagement patterns that deviate from typical human behavior, such as emails being opened immediately at all hours or clicks occurring at unnaturally consistent times, often suggest bot involvement.

Analytical tools can detect these anomalies by analyzing interaction data in real-time. By distinguishing between human and non-human interactions, you can filter out fraud leads.

6. Feedback from Sales or Customer Service Teams

Regularly survey your sales or customer service teams. 

If they frequently report leads denying any knowledge of submitting their information, it’s a strong indication of fraud.

Establish a feedback loop where suspicious interactions are reported to the marketing or data teams. This helps in early detection and response.

7. Unexpected Geographic Discrepancies

Receiving leads from regions where you’ve had no marketing efforts is a clear red flag.

Use geolocation tools to verify the authenticity of the lead’s IP address.

1. It should come from regions of your interest to be passed further down into the sales funnel.

2. The claimed address should match the actual IP address.

For example, if a lead claims to be from Texas but the IP address traces back to another country, you need to dig deeper into the lead’s validity.

Technological Solutions to Detect and Prevent Fraud

Here are some foolproof ways to deal with fraudulent activity:

1. CAPTCHA and Other Human Verification Tools

It’s funny how a computer asks us whether we’re human or not.

But it sure is an effective defense against fraudsters.

CAPTCHA prompts you to prove you’re human by presenting puzzles, quizzes, or clickable challenges. These are easy for humans but hard for bots. 

The goal is to prevent bots from submitting fake leads or engaging in malicious activities on websites.

There are several types of CAPTCHA systems, each with its pros and cons:

• Text-based CAPTCHA: Requires users to type distorted letters or numbers. It is simple but may frustrate legitimate users. 

• Image recognition CAPTCHA: Asks users to select certain images. It improves accuracy but sometimes slowing down the process. 

• Invisible reCAPTCHA: Works in the background. It assesses user behavior without requiring interaction. Although this makes it seamless, it is potentially less reliable in certain scenarios.

When implementing CAPTCHA in lead generation forms, balance security with user experience:

• Keep the challenge as unobtrusive as possible, especially with invisible CAPTCHA.

• Ensure accessibility for all users, including those with visual impairments. 

• Regularly updating your CAPTCHA system can also help stay ahead of more sophisticated bots.

2. Advanced Form Validation Techniques

When developing lead gen form, it’s a good idea to use advanced form validation techniques — such as the following:

a) Email verification

Email verification tools check the syntax of an email address, its history, and cross-reference it with domain records to ensure it isn’t fake.

b) Phone validation

These services verify phone numbers by checking country codes, line types (mobile, landline), and active status. This reduces fake or incorrect leads.

c) Data Formatting Rules

Set strict formatting criteria—like requiring email entries to include “@” and domain extensions or specifying the number of digits for phone numbers.

Any data that doesn’t meet these rules is automatically filtered out, saving time and preventing low-quality leads.

d) Custom Validation Logic

Custom validation logic is useful for detecting suspicious patterns — such as extremely fast form submissions—-which might indicate bots or automated scripts. 

You can also flag inconsistent data entries, like mismatched area codes and regions. This further enhances the accuracy of your lead collection process. 

3. IP Address Monitoring and Blocking

As mentioned earlier, nonsensical geographic details are a big indicator of fraudulent activity. If you see a lead from an area you never marketed to, be on high alert! 🚨

How to find, trace, and combat these nonsensical geographic details?

a) IP Address Monitoring

Use tools to track the IP addresses of users. These tools can identify suspicious activity patterns, like multiple submissions from the same IP address within a short time, which may indicate lead fraud. Regular monitoring lets you flag these anomalies before they affect lead quality.

b) IP Blacklisting

Blacklisting tools automatically block submissions from IP addresses linked to fraudulent activities. This prevents known malicious users or bots from disrupting your system.

c) Geographic Filtering

Adding geographic filters to your system helps analyze incoming leads. It flags or blocks submissions from regions irrelevant to your business. For example, if your company only serves North America, filtering out submissions from other continents can reduce lead fraud and ensure you’re spending your marketing budget on the right audience.

👉 Finding the “right audience” is the key to building a stable business. Learn how to find the right people and effectively sell to them here: 7 Step Guide to get a Strategic Marketing Edge for Building a Longer Lasting Stable Business.

Addressing the Root Cause: Improving Targeting to Exclude Sources of Fake Traffic

Lead generation fraud is most likely to happen when you’re in the wrong place—far from your target audience.

Here’s how to shorten that distance and minimize fake leads:

a) Create Decoy Pathways for Suspicious Traffic

This is basically an “uno reverse” move. 😏

Bots and fraudsters are looking for you.

You can let them find you and lead them away from you.

How so?

Create a decoy pathway, a.k.a fake conversion paths that look legitimate.

Here’s how LeadsHook does it:

Imagine two leads fill out the lead generation form on your website:

• Lead A is using a proxy or submitting nonsensical/incomplete data.
• Lead B submits real, complete, and relevant data.

The back-end design of your quiz will automatically recognize Lead A as fake and Lead B as real, directing them to different pathways.

This works with the help of conversion pixels (more on that in the next section).

The key idea is a misleading form or decoy pathway that appears legitimate to fake leads. It traps them in a false funnel while protecting your genuine lead data.

This technique uses behavioral triage to detect fraudulent activity at the starting point and automates precautionary measures.

It’s a small time investment (mainly when setting up the quiz) but acts as a strong filter for lead fraud.

b) Use Conversion Pixels & Make Most of Exclusion Audiences

When setting up pixel tracking, create two distinct pixels:

• One for real leads
• One for fake leads (those routed through decoy pathways)

Decoy pathways help you gather profiles flagged as fake leads. These make up your “exclusion audiences” — profiles you want to avoid.

By studying these two pools of lead data, you’ll be able to distinguish authentic behavior from fraudulent activity. This helps you recognize, understand, and focus on genuine user interactions.

You can also feed “exclusion audience” data into Google Ads or Facebook to prevent your ads from being shown to users with suspicious behavior. This enhances your targeting precision.

Additionally, using data from your verified leads, you can create look-alike audiences that closely resemble your genuine customer base. This way, you can direct your advertising efforts towards those who are most likely to convert.

c) Tackle Ad Platform Limitations

Major ad platforms like Google and Facebook offer basic fraud detection tools, but they aren’t robust enough to fully protect you from fraudulent traffic.

Why? Because these platforms focus on clicks and impressions, which benefit them, not necessarily lead quality for you. 

This means you could be getting lots of fake leads from Facebook ads, resulting in wasted ad spend.

To overcome this, consider using third-party services specialized in fraud detection and traffic analysis.

These tools provide in-depth insights into where fraudulent clicks or interactions are coming from, allowing you to manually adjust your campaign settings.

For example, once you identify high-risk regions or traffic sources, you can set up geographic filters or exclude specific audiences. Regularly monitoring and optimizing your campaigns based on this data will help you refine your targeting, reduce fraud, and improve your ad spend effectiveness.

d) Continuous Monitoring and Adjustment

Just like any business process, ongoing evaluation is essential to maintain the integrity of your traffic sources and prevent fraud.

We recommend doing a weekly evaluation to keep financial disasters at bay. Seriously.

Nik, LeadsHook’s CEO, once saw a company face unimaginable disaster because they ignored weekly evaluations. The company was paid 90 days in advance, so they didn’t see a need for tracking profits weekly.

Only when they received an $800,000 bill from Google did they realize the damage. 🫠

Weekly analysis is crucial to catch problems early and avoid financial disasters like this.

Use analytics tools to monitor KPIs and review user behavior to spot trends, anomalies, and potential fraud attempts. Feedback from sales teams and CRM systems can also offer insights into lead quality, enabling ongoing improvements.

As a precaution, it’s also wise to change your campaign strategies now and then. Sticking to one strategy without any changes can allow fraudulent entities to figure out and exploit it.

Final Point

As we wrap up, here’s an important reminder:

It is impossible to completely eliminate the chance of lead fraud.

There are tools that can significantly reduce lead fraud (like LeadsHook!) But no tool can eradicate itentirely.

In fact, most businesses don’t even use fraud detection tools at their highest settings. Trying to remove 100% of lead fraud can sometimes hurt your revenue instead of benefiting it.

So, you need to decide how much fraud you’re willing to tolerate. This decision should be made in light of your financial goals.

If you try to block every single case, it could cause more harm than good.

The ideal approach is to build the most effective and focused path to your target audience. By reaching more qualified prospects through the right channels, you reduce the chances of fraudsters slipping through.

A simple way of doing that is to set up a quiz on your website. Publish ads that lead to this quiz.

But your quiz itself should be smart enough to set up different conversion pixels, track responses, and segment your audience into different categories.

Like these personalized lead magnets for example. In fact you could a similar quiz right now. 

Just sign up for LeadsHook free trial and build a quiz that attracts, segments, and retains your target audience super smooth!