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Wednesday, January 25, 2006

A Confusing View on Click Fraud

I read Andy Beal's blog post ( commenting on Scott Kessler of Standard & Poor's recently downgrading Google from hold to sell where Scott listed click fraud as one of the reasons why.

Well it seems to me that Andy's comment "Advertisers are already pricing click-fraud into their bids by virtue of measuring the return on ad-spend" seems to be an echo of an Eric Schmidt interview with The Sydney Morning Herald ( where Eric says "...advertisers are missing the point of Google's new model. It shouldn't matter what Google does with their ads, he argues, so long as the received value, which advertisers can measure, is higher than the price they pay."

To me that's rubbish. It's up to the advertiser to determine what an acceptable ROI is, not the search engines. If an ROI exists of 3% with click fraud, who is to say it wouldn't be 5-6% without.
Eric later says "I have this fantasy that goes like this," he said at one point. "You are the C.E.O. of a large company, and I come to you and say, 'Give me $1 million and give me your Web site, and we will guarantee you will get $100 million in sales.' Which C.E.O. would turn that down?"
What CEO would turn down an extra few percentage points of ROI with a reduction in click fraud?

The second portion of Andy's comments tries to use retail shrinkage from a consumer’s point of view as an example against the seriousness of click fraud. Of course, we aren't talking about the consumer’s point of view, but rather the wholesaler/manufacturer's point of view. Click fraud costs may not necessarily passed on to consumers. Andy's example also misses the mark because if a retail store has a poor shrinkage prevention program then it is the retailer who is out money, not the wholesaler/manufacturer.

I blogged a few days ago ( about an SEW forums poster, Discovery, who claims he was laughed at by his Yahoo! rep when discussing his concerns about the click fraud on his client's account and what he expected of them as far as a credit and an investigation.

It's unfortunate, Andy being as public facing as he is, that he doesn’t see the conflict of interest that exists here where search engines are keeping millions of dollars that they didn't earn. The above example mentioned by Discovery is a bit alarming if accurate and could represent the internal attitude of Yahoo! at its core level and not the executive/PR machine level.

I created VeriClix in the hopes of leveling the playing field for the advertisers. To provide them the information they need to get those credits and to try and keep the search engines in check. However, at times, even that seems like a drop in the well. I hope Steve Malouf's team can set a precedent and help advertisers regain more control.

It was interesting to note that GOOG was down 8.5% today with a good deal of selling.


  • Thanks for sharing your views. I agree that Google should not keep any money obtained via click-fraud - at Fortune Interactive we include click-fraud monitoring with all our campaigns - I simply do not believe that click fraud is as big of an issue as some make it out to be. It's certainly not 30% of all clicks, as some have reported.

    By Andy Beal, at 9:33 AM  

  • Thanks for your feedback Andy.

    I dont claim to know the exact percentage of click fraud for any given industry is. However, from what John Slade of Yahoo and Shuman Ghosemajumder of Google had to say at SES Chicago on the panel I was on, about throwing away more clicks than they bill for, we can assume its a serious percentage.

    By Jeff Martin, at 10:54 PM  

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