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Google's announcement of a US$90 million click fraud settlement is making the rounds on various blogs and news sites. The Kelsey Group believes more legal issues around the topic of click fraud will arise. Our view is that the solution to click fraud already exists in the CPC bidding engine. Advertisers that feel they are not getting quality traffic have the opportunity to lower their bids, and, hence, increase their price-per-click ROI. After all, every click is not supposed to turn into a sale nor is every viewer a buyer when NBC sells advertising. This is the reality of all advertising, regardless of the medium. We expect, however, that Google and others will eventually follow the offline media industry's example and offer a structured program like "make goods" as the next logical customer escalation point.

This Post Has 2 Comments

  1. Fraud is old news and what brought the link networks to their knees in the late 90s as a cottage and village industry that can be managed by the "professionals" the search sites themselves. This is not dissimilar to the monitoring of electronic trading in the financial world. When a pattern exists that appears suspicious, someone or something should be able to flag and review it.

    For Google, et. al. with myriad technology brains, this should be easy. Granted, the fraud is a little deeper and more local now than then- a competitor of a business running up the bills but this too can be detected and outed by the same technology that tracks and bills the advertisers.

    It should not be up to the advertiser to manage this. They have enough to do and should be able to rely on the expertise of Google, et. al. If you set yourself up as an expert and proffer certain advice to me, I should be able to rely on that. If you knew that the advice was faulty or the information is incorrect, then you have caused me to rely on you to my detriment.

    The other challenge is the geometric impact on revenues. At one point in my old posting in an IYP, we counted the revenue created from a single $1.00 click as it traversed the channel to the sites, to our site. $1 became $3.20 in revenue (Google economics). If you use that anecdotal metric, the $90 mm in Google settlement would have been about $300 mm in the search/click world so such fraud has a multiplier effect.

    Ultimately, while many pithy and pious comments are proffered by the click industry, they cannot stomach the obvious it's the evil that men do that causes the problems. However, when you set yourself up as a bastion of democratization in advertising then you best have a voter fraud system in place. It is unreasonable to place the burden to detect and manage fraud on the advertiser.

  2. It is called click fraud, not click "quality", because advertisers are being fraudulently charged for clicks from automated systems, while they are only contracting to buy clicks from individuals (regardless of the quality of the individuals), not software bots. NBC does not sell buyers; it sells an audience of a promised number of viewers and its make good only compensates for a lower size audience than promised, by rebroadcasting a commercial so that it is broadcast before the total guaranteed number of viewers. A "let them eat cake" philosophy may be the MO fueling the financial gains of the primary search engines Google, Yahoo…and their primary advertisers Ebay, Citysearch…but it is unlikely to be a successful market penetration strategy. PS: Lower bid prices do not equal higher ROI; lower bids often result in lower placement which often decreases ROI.

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