Google on Click Fraud: *Shrugs Shoulders*, “Meh.”

Google CEO Eric Schmidt: “there is a perfect economic solution [to click fraud] which is to let it happen.”

His theory, essentially, is that if Google just stopped policing the flood of fake clicks originating from shady companies looking to hike up the cost of their competitor’s Google placed ads, the advertisers will eventually clue in and the value of the ads will go down.

Which is great in threory and all, except that Google has a duty not to erroneously bill their clients now. More over, is the fact that Google is overbilling their clients because of a problem in their Adsense model any less major if the amount they are overbilling goes down over time? Whether they are overcharging by $10,000 or just a buck, they are still charging clients for ads that were not clicked by customers.

Looking at the problem in aggregate and declaring it “no big deal” is crappy. Not that Google is necessarily talking about stopping their police efforts: apparently, their engineers think trying to find news ways to stop click fraud as “great fun.” How nice for all their advertisers to hear they are treating the problem so casually.

Google CEO on click fraud: ‘let it happen’ is perfect economic solution [Digital Micro-Markets]

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  1. If Google is aware of the extent of their dependence on fraudulent activity to keep their business afloat and they’re not disclosing that to their investors, that would lots of fun.

    Surely the SEC, for example, would be thrilled to find out more.

  2. Morton Fox says:

    Google is not worth 70 times earnings if they can’t deliver quality ad hits. How are they better than Doubleclick then?

  3. Morgan says:

    Companies pay for TV ads we don’t watch and magazine and newspaper ads we don’t read. Isn’t paying for ads that won’t do you any good part of the business?

  4. gunnk says:

    For an idea on just how bad this fraud can be, take a look halfway down this article:

    http://www.cnn.com/2006/TECH/internet/01/31/furst/

    for information on the use of botnets by frauds to commit click fraud. A blatant use would be detected, but if the bots each click on the botmaster’s site once every few days but also click on bunches of other sites at random, Google has little chance of figuring out which AdSense participant is the fraud (too much noise, not enough signal).

    Assume $0.50 per click. Assume 50,000 bots. Let each one click on the botmaster’s ads once per MONTH. That’s $25,000/month or $400,000/year. Each each bot clicks on two other random ads out there per day, that’s a total of approximately 50,000 x 2 x 30 = 3,000,000 clicks per month — out of which Google has to find the 50,000 belonging to the botmaster (under 2%). Oh, and this is just the simple scenario to catch — what if the botmaster sets up ads on 10 sites? More noise! How about more bots or less-frequent clicks?

    Click fraud should kill this model sooner or later.

  5. ModerateSnark says:

    I don’t know how well the argument holds up, but an ex-paypal employee has blogged why he thinks Google’s lackadaisical attitude about fraud means that Google Checkout is doomed to fail. (Part of the argument is that PayPal only survived because of fighting fraud, and all its previous competitors foldec because they failed to fight fraud.)

    I hope he’s wrong, and Google finds a way to fight fraud without screwing with innocent people as PayPal tends to do (everyone knows about PayPalSucks.com, right?).

    PayPal needs a competitor, but Google will need to do better on Checkout fraud than it does on AdSense fraud.

  6. Morgan, no.

    The powerful part of search engine ads is the fact that you can completely track every single interaction. This is one of the selling points for products like AdWords.

    Advertisers will accept clickfraud as a cost of doing business, but only inasmuch as we understand that the incentive exists and that people will try to milk it.

    What’s not okay is Google’s utter lack of transparency on the subject of clickfraud. Advertisers are never given any accounting of the clicks Google throws out as fraudulent. There’s absolutely no accountability here for Google and that’s a big problem.

    Especially if that lack of accountability is what allows them to be so profitable.

  7. Catherine says:

    This comment is coming a little late, but I really don’t see how it’s any of Google’s business who clicks or doesn’t click on the ads. It’s not something they can or should be expected to control as it’s out of the scope of the service they provide. If the advertisers don’t wish to lose money, they can advertise less. If this impacts Google’s earnings, then — and only then — should Google really start to combat the fraud. Otherwise the advertisers should just suck it up.