Click Fraud Could Spoil the Internet Advertising Party
As Steve Rubel rightly highlights, there’s an saying in advertising that goes “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.”
This old adage apparently holds true in the Internet age as well. A recent study by Outsell Inc. reports that online advertisers lost over $800 million last year and that, on average, 14.6 per cent of all ad clicks are fraudulent. Personally, I suspect that even those numbers are lowballed.
Click fraud is a serious problem. It can be as simple as someone installing Google Ads on their blog and clicking on those ads to generate revenue for themselves or it can be a incredibly complex operation utilizing automated scripts (‘bots’), Trojan horses, and IP spoofing to generate artificial clicks on an ad. An even more desperate form of click fraud that’s raised its ugly head recently are the Third-World ‘Click Farms’ – operations staffed around the clock with low-wage workers who are employed to manually click on ads.
Either way, advertisers who have paid good money for Pay Per Click (PPC) keywords end up out of pocket – in a big way. The big search engines, who act as intemediaries and are paid regardless, have been charged by some as being complicit (or at the very least, lax in their enforcement) in allowing click fraud to be perpetrated on their networks. Yahoo! recently had to refund money to thousands of advertisers and early this year, Google settled a $90 million class-action lawsuit on click fraud claims dating as far back as 2002.
Now, if those were my advertising dollars I would want to make damn sure that all the clicks on my ads are legit. Click fraud is a big reason I’m hesitant to jump into PPC advertising, despite the mad rush towards Internet advertising in our industry. As a recent article in Wired Magazine suggests, one of the biggest problems for small businesses are competitors sitting on your search terms and clicking on your ads – slowly draining your daily ad budget and burying your ads. I can see this being a particular problem in a fiercely competitive business like real estate. Me, I’m going to hold off on PPC ads until this storm blows over.
This also does not bode well for any of the Real Estate 2.0 sites who depend on advertising revenue in their business model (you know who you are…). If potential advertisers like myself jump the PPC advertising ship before it even leaves port, there could be a very real impact on your bottom line.
I’m curious, has anybody out there had any experience either buying or selling search terms? How have you fared with click fraud?
Technorati Tags: Real Estate 2.0, PPC Ads, Click Fraud, Google, Ad Words, Adsense, Yahoo, Yahoo Search, Real Estate Marketing, Real Estate Blogging, Real Estate Blog, Real Estate Blogs, Real Estate, Realty Blogging
dustin | Jul 6, 2006 | Reply
I’ve bought a small number of google ads over the past two years, but I’m not sure how to even determine click fraud. For better or worse, I imagine that most small business are relying on Google algorithms to determine click fraud. As you note, it wouldn’t be hard to click on your competitors ads every once in a while, and there is no easy or obvious way to detect that.
Galen | Jul 6, 2006 | Reply
I have a friend who manages adwords accounts for a living. Click fraud exists, but the technology of the bad guys and the good guys seems to be marching along at an even pace – he hasn’t seen fraud rates change over the last couple of years. In the end, my friend’s businesses make a killing from their ad buys and that is really what matters to them. They do try to minimize loss though and they don’t place ads anywhere but Google and Yahoo.
Cost per call and cost per sale are the next big wave and it will be harder (but still possible) to scam them.
Caleb Mardini | Jul 6, 2006 | Reply
As a marketer I’ve spent tens of thousands of dollars on PPC campaigns over the years.
I believe click fraud is problem. I think it should be dealt with.
Ultimately however, It’s a question of conversion ratios. It’s part of doing business. I can look at the dollars I spend and see the results generated. When and if it costs per conversion aren’t optimal I would pull back and adjust.
Google, Yahoo and the like are affected too. If PPC is more effective and conversion ratios are higher I’m likely to spend more on advertising.
I don’t believe it’s that different than in any other advertising medium. How many of those newspapers are just recycled? How many viewers are really watching that show? It all comes down to results.
It’s in the PPC providers interest to reduce fraud as much as possible. But on average I believe that advertisers will only spend their money where they see the results they want.
Greg Swann | Jul 7, 2006 | Reply
My two cents’ worth, distributed in five parcels:
1. I’ve wondered about bogus click-throughs, but of course there is no way for me to detect anything.
2. Pay-Per-Click vendors could easily nip bogus clicks numbered two through infinity by putting a cookie down at the first click.
3. We have huge repeat and referral trees that we can attribute to single clicks-through–tens of thousands of dollars in net income that cost less than two bucks in marketing expense.
4. For number 3 to have worked, we had to get the rest of the service/product equation right, of course. My take is that most internet leads are wasted on most Realtors.
5. Pay-per-click and SEO are the most absolutely perfect Long Tail marketing media. On any given day, I can make $15,000 on an $0.18 marketing expenditure.