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Click Fraud Gets Smarter

Click Fraud Gets Smarter but the national media clearly needs smarter technology reporters who actually understand what they are reporting on. BusinessWeek reporter Burt Heim confuses the issue of click fraud and cleary misunderstands an issue he is struggling to explain to a large audience.

His subhead is correct enough, “Internet ad-traffic scams could be ripping off as much as $1 billion annually. Are Web companies like Google doing enough to foil them?” But his analysis garbles the players in the click fraud drama.

In the first paragraph he equates views of ads with clicks on those ads from Google search result pages and fails to explain how actual clicks on those ads cost advertisers money. Then later, confuses that issue by stating:

Attention to online fraud will only increase as advertisers devote more of their budgets to the Net, where the cost of ads varies by frequency of clicks.

No Mr Heim, the cost of ads doesn’t “vary” based on how frequently they are clicked. The price is the same per click and ads that same figure to the total for every single click. Frequency does not affect the cost of the ads, but the total cost of the ad campaign.

Some search consultants say click fraud accounts for upwards of 20% of all traffic, and may generate more than $1 billion in dubious sales a year.

Huh? “Click fraud accounts for 20% of all traffic” would have to apply to 20% of traffic to ADVERTISERS due to clicks on those ads, but the “$1 billion in dubious sales a year” would apply to Google or Yahoo sales of those ads.

While it is clear (to those of us who do understand the terms) what Heim is trying to get across, he is probably confusing the readers, who know even less than he does and rely on his analysis to clear it all up for them.Here is a clear analysis from a July 2004 C|Net story on click fraud

So down to the meat of the matter here – Click fraud is a huge problem, as evidenced by the entry of publicly traded companies (Fair Isaac) entering the click fraud fray. And it is apparent when multiple class action suits are in progress against Google Adwords for click fraud that the issue is reaching a boiling point.

Now when “Standard & Poor’s equity analyst Scott Kessler downgraded Google stock in part because he considers click fraud a “notable risk” (see BusinessWeek Online, 1/17/06, “S&P; Downgrades Google to Sell”) this echoes the worried comment in Google’s own SEC filing

“If we are unable to stop this fraudulent activity, these refunds may increase … If we find new evidence of past fraudulent clicks we may have to issue refunds retroactively of amounts previously paid to our Google Network members.”

Clearly Google knew it was a problem long ago, but has failed to mollify advertisers or publicly address the issue to calm concerns of investors.

Now, thanks to the voiciferous protestations of long-time click fraud bulldog Jesse Strichiola, of Alchemist Media – Google may see those fears come to haunt their profitable dreams. She speaks frequently at conferences on click fraud and how to combat it and joined with with previously mentioned company, Fair Isaac to help beat back this threatening beast that could seriously maul the pay-per-click industry.

Fair Isaac and Strichiola announced their anti-click fraud campaign at the Search Engine Strategies Conference and show in New York. Both Google and Yahoo have got to be seriously frightened of this looming threat to their largest income sources.

Comments on this entry are closed.

  • James O March 9, 2006, 8:29 am

    Great Post!

    I agree that both Google and Yahoo! have been hiding from the realities of click fraud for some time.

    While most advertisers see click fraud as a part of the cost of PPC marketing, it will not always be that way. Once someone steps up and publicly and conclusively proves the extent of the click fraud issue, a flood of click-fraud actions should follow.

    If Google or Yahoo were really smart, they would take their heads out of the sand and start dealing with the problem openly and publicly now. It will be hard for Google to continue acting like they “do no evil” when they have to admit that they knowingly kept hundred of millions in revenue that was generated by fraud.

    Thanks again for the post!