Click Fraud: The $800 Million Dollar Problem
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Written By Reprise Media | July 6, 2006 | Share This
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It’s no secret that many of the ad clicks advertisers get in their pay-per-click campaigns aren’t exactly on the level. And it’s no surprise that if you ask the advertisers, they’ll tell you the problem is bigger than the engines are letting on. Still, when you see a click fraud dollar amount in the neighborhood of 800 million, it’ll make you sit up straight. That’s the figure reached by market research outfit Outsell in a survey of 407 online advertisers conducted in May, reports News.com, and the same survey pegs the rate of click fraud at 14.6 percent.
To put that 800 mil in perspective, Google recently agreed to settle a class action click fraud suit, covering all outstanding complaints, to the tune of $90 million - and $30 million of that goes straight to the lawyers (the suit is still pending approval of the claimants, some of whom aren’t happy with the low payout). Yahoo is settling a click fraud case of its own, although the final damage on that won’t be determined until a retired federal judge helps evaluate the veracity of past click fraud complaints.
According to Outsell’s survey, the damage to PPC advertising goes beyond $800 million, which represents cash that advertisers believe they’ve spent on fraudulent clicks. Advertisers also report that the click fraud risk has caused them to curtail online ad spending by an additional $500 million. And even if you think the money seems a little high, it’s alarming that 27 percent of the surveyed advertisers said they reduced their PPC spending or eliminated it entirely.
Of course, the engines acknowledge click fraud, even if they publicly estimate the problem to be small. The question is, how do they plan to deal with advertiser confidence? According to ClickZ, the Outsell report’s lead analyst, Chuck Richard, predicts that “All these pressures are going to accelerate the introduction of CPA programs and the adoption of them.” Indeed, Google’s already toying with a CPA ad network, which would diminish fraud by requiring additional actions after the click before paying out. Richard also suggests that the engines become more transparent about their click fraud combat - such a provision is part of the Yahoo! settlement.
However, Richard cautions, “It’s not a solution. Just announcing figures is very important, but I think the similarities are clear, just as every security system has been hacked, people out there are just immensely creative in finding ways around the system…[the engines] are always going to be at least a half-step behind the people out to defraud them.”
Topics: Click Fraud |
Woud the CPA ad network really see the light of day? We all know that if this is really implemented, it will cut click fraud by 90%, but the problem is that it will also cut Google’s income by almost the same amount! Introducing a CPA ad network into pay per click is probably the best thing that can happen to Adwords and Adsense, that’s when it will start to really make SENSE.