Why Click Fraud Doesn’t Matter

Authored by robert on July 26, 2006 - 10:13am.

Though industry advocacy groups and researchers maintain advertisers have been overcharged by as much as $1.3 billion and that nearly 15% of all clicks are fraudulent (source: WSJ), this is much ado about nothing. If all search marketers based their bids and campaigns on accurately tracked ROI’s, click fraud could exceed 50% and the market could still work efficiently (especially if bids could approach zero). Unfortunately, not all marketers are this smart, which ruins it for the ones that are.

For obvious reasons, properties like Google should do everything they reasonably can to reliably weed out fraudulently clicks. In fact, a recent independent investigation came to the conclusion that Google is responding adequately to combat click fraud. But marketers have to do their part, as well, to prevent a hyper-inflated click market that does not adequately compensate for dishonest and unintentional behavior. It is naive to price one’s ad words, thinking that a vast majority of all clicks represent honest individuals truly interested in exactly what is being promoted. In short, keyword pricing should have a bad behavior discount reflected in search bids.

Regarding the $1.3 billion “lost” to click fraud, here are some follow-up questions that come to mind:

• Why did it take $1.3 billion for this representative group of advertisers to realize that they were over paying for keywords? Didn’t anyone do some tests along the way?
• How much revenue did the ad campaigns associated with the $1.3B loss generate?
• How much revenue would this total marketing outlay have generated if applied to other marketing channels besides search?

Even a utopian world of completely sincere individuals would suffer from farcical online epidemics like:

Confusion Fraud: When users mistakenly click on an ad thinking it was promoting something else

Cursor Fraud: When users mistakenly click on an ad because their cursors were not where they thought they were

Morbid Curiosity Fraud: When users click on an ad out of fascination for how transparently deceptive and unrelated an ad is to what they are seeking

If concerns over click fraud someday reach even higher fevered pitches, Google and other search ad networks, could change their business models to a cost-per-impression model. But, of course, then there would be complaints about “impression fraud”, as well. Click fraud, in my opinion, is just another example of how online advertising channels are persistently held to exceedingly higher and unrealistic expectations than offline channels.

Speaking of which, I can’t wait to start following the next ad crisis – Skip Fraud – now that Nielsen and TiVo will be tracking the viewing of TV commercials.