Savings Experiment: Tissues vs. Toilet Paper
Wrecks to Riches: Hunting Sunken Treasures from Cape Cod to the Costa…The lawsuit by Kinderstart against Google, while an interesting issue, is small potatoes compared to what many consider to be the real elephant in the room: click fraud. Both Yahoo and Google have already run into legal trouble -- resulting in relatively small monetary settlements -- regarding such allegations. Today the San Francisco Chronicle discusses a new report by Burlingame market researcher Outsell Inc. suggesting that click fraud cost merchants $800 million last year and is a signficant enough threat that 27% of merchants are cutting back on click-based advertising.
Coincidentally, over on ZDnet, Digital Micro-markets blogger Donna Bogatin has recently been discussing both Microsoft's and Yahoo's assessments of and attempts to thwart click fraud, concluding that click fraud prevention could be the next great search engine differentiator. She also suggests that Google has lagged behind its competitors in facing this issue publically.
Now this is hardly a new problem. It has been around long enough to have spawned a whole set of start-ups aimed at prevention. But the fact that it won't go away -- and if the Outsell report is accurate, may actually be getting worse, at least from the merchants' perspective (and who else counts?) -- may suggest that cost-per-click needs an upgrade. The next step, of course, is the cost-per-action model that some analysts and customers are pressing for. Some sites already offer this and Google is reportedly experimenting with it as well.
But CPA is a very slippery slope. The issue goes back to why online publishers traditionally resist cost-per-click pricing for display advertising: your revenue becomes dependent on the advertiser's creative. A good ad is going to get more clicks than a poorly executed one. CPA action takes that dependency a step further: the search engine's revenue depends on both a well-designed pitch after the click plus an enticing offer. If the advertiser fails on either of those points, you're not going to get paid and your inventory isn't generating revenue.
If I ran a search engine, I'd be spending a lot of time and energy trying to maintain the credibility of my cost-per-click business. If the market really does turn to cost-per-action, we may end up looking back on these as the Golden Days of search engine advertising, when the money just fell from the sky.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
Reader Comments (Page 1 of 1)
7-05-2006 @ 1:03PM
Gordon Anderson said...
The extent of click fraud is very difficult to judge and various participants in the industry have a vested interest in making it appear worse than it is. I believe the best indicator of the concerns about click fraud are the ad revenues themselves. As long as the ad revenues keep increasing online advertising continues to be profitable for the advertisers regardless of click fraud.
7-06-2006 @ 6:04PM
mikeyb said...
When will the AOL merger with TWC really be settled?
Aol never was actually worth over 200 billion and why such a quick drop to just over 8 billion in about a 3 year time. Time Warner is a good company just paying for AOL"s forced takeover and their mistakes. Hopefully, the true value of their stock will show. New products cost to produce, but our future should be very positive if politics steps back. The AOL deal was much worse than ENRON. :(
7-08-2006 @ 12:32AM
Joe said...
I spent some time today looking at the online auctions on ebay for "adsense" ready sites. I was shocked to see at least 1/2 dozen auctions for "clicks". Yes, that is right, an auction set up for the purpose of generating fraudulent clicks to generate revenue for web site owners! One auction said he had 300 people around the country who do the clicking for him!
7-10-2006 @ 1:38PM
Jim Trego said...
I disagree with the thinking of the writer who stated that"As long as the ad revenues keep increasing online advertising continues to be profitable for the advertisers regardless of click fraud." Click Fraud is FRAUD and is stealing from advertiser's ad budgets. I suspect there are few advertisers that wouldn't like to be able to increase their ad budget by 15%. Cutting out click fraud would give them that increase. We have one client that recently put in a claim for 1.3 million dollars for click fraud. The sad thing is that many advertisers are fearful of the big guy search engines to the extent that if they put in claims they would be shut off by the search engine. Google, Yahoo, MSN and the others are not stupid. That kind of action would surely backfire. http://www.clickdefense.com
7-10-2006 @ 4:25PM
Jim Trego said...
Advertisers need to fully appreciate that the paid Search Engine networks are more likely to be unable to properly detect and quantify their own “Click Fraud” internally. This is because of the fact that Click Fraud detection does not occur within a Google, Yahoo, or any other paid search engine network independently. Click Defense has taken Click Fraud detection to a Global Enterprise level with its unique ability to combine millions of customers’ tracked clicks, forming the first Global Click Fraud system to assess all search engine networks that have experienced Click Fraud attacks within the U.S. and world wide. Google and others will continue to provide limited returns based solely on their own proprietary click fraud tracking data. http://www.clickfraudlegal.com