Credit Karma CEO: "Negative" ads hurt business

Online credit score service Credit Karma recently received an $85 million investment from Google. In response to this news, the CEO of Credit Sesame, a competitor, told CBS MoneyWatch that "Google's investment in Credit Karma is good for Credit Karma but bad news for consumers." Credit Karma CEO and co-founder Ken Lin asked to respond to this concern, which he does here. We also talked about the reasons for the partnership with the search giant and his hopes for the future of his company.

Competition among providers of of free credit scores, in which companies allow customers access to their credit details free of charge, is heating up. Key players include Credit Karma, which doesn't require a credit card but rather serves up advertising to customers. The company says it has 23 million customers.

Then there's Credit Sesame, which offers a similar service and is quickly nipping at Credit Karma's heels, growing seven-fold in 2013 to surpass 3.5 million customers. And who isn't familiar with the jingle made famous by FreeCreditReport.com, a company that is perhaps the most recognizable (but does require you to enter credit card information)? Like with any industry, competition means more options for consumers, and this is usually a good thing.

CBS MoneyWatch: Why is Credit Karma teaming up with Google?

Ken Lin: As we've continued to grow, there is a lot of opportunity to add features and products. We're adding new features for our member base, but we're not focused on data sharing, which some people have speculated we will do. It's not about Google wanting credit information, it's about Google thinking we're adding value to the ecosystem of financial services.

So how do you respond to the concern that this deal will benefit Google more than your customers?

KL: It's completely off-base. There is no data-sharing -- it's against our agreement with our customers. We're interested in Google because they're a great brand and have tremendous experience in technology and scaling technology. From their perspective, they like that we're innovators in the space.

What else do you believe makes Credit Karma unique?

KL: We were the first company to give away free credit scores and do free credit monitoring. On a scale perspective we've become the largest probably by a factor of 10. We have the most integration with the banking institutions, the most data and most feature-rich tools. Now we want to add technology and make the process of transactions easier. It shouldn't take you 15 minutes to figure out an auto quote.

What is the biggest challenge for the industry today?

KL: The majority of the companies continue to advertise their services in a negative way, and it gives the whole industry a bad name.

What do you mean by negative advertising?

KL: They're disingenuous in how they're marketing. If you look for the term "free credit score" on Google, you'll see 90 percent of the people who show up will require a credit card and you to enroll in a monitoring product. When your search term is free credit score and you have a requirement like that, it's disingenuous. We absolutely are free, have no credit cards required and have 23 million members.

What advice do you give budding entrepreneurs?

KL: Be passionate about what you do. You have to be enthusiastic without the reward of dollars.