Click Fraud To Destroy Internet Advertising

Remember back before everyone had blogs and everyone had portal or news sites? Back then, even those with Cornelia de Lange Syndrome could use their tiny misshapen hands and three stumpy fingers to Control+V their way to Dot Com millions. Somewhere in the bowels of the Internet, a single person wrote content, and everyone else got rich cut and pasting him, largely through the hysterically over credulous advertising endorsement of companies no longer with us. Man, those were the days.

Eventually the bubble burst, and it’s only recently that advertising on the Internet has really rebounded enough to be profitable to more than a select few… largely through programs like Google’s AdSense. But Wired warns that click fraud (which is estimated by some to be as much as 50% of all click-through advertisement traffic) may land another death blow to Internet advertising:

Pay-per-click is the fastest-growing segment of all advertising, reports the Interactive Advertising Bureau. Last year, Yahoo! alone ran more than 250 million individual listings, according to Michael Egan, the company’s search-marketing director of content strategy. Yahoo! doesn’t break out PPC earnings separately in its financial statements, but Goldman Sachs analyst Anthony Noto believes that keyword advertising accounted for about half of the company’s estimated $3.7 billion in revenue for 2005. PPC is even more lucrative for Google. According to Noto, Google will end 2005 with $6.1 billion in revenue. About 99 percent of that revenue comes from keyword ads (over 56 percent from AdWords, according to the company’s most recent quarterly financial statement, and 43 percent from AdSense), making Google a bigger recipient of ad dollars than any television network or newspaper chain. All of which is to say that little blue text links, a type of advertising that barely existed five years ago, are poised to become the single most important form of marketing in the US – unless click fraud ruins it.

If that occurs, the consequences will be felt throughout the Net. By splitting revenue with the sites that host the ads, search engines have become, in effect, the Internet’s venture capitalists, funding the content that attracts people to the computer screen. Unlike the VCs who backed the boom-era Internet, search engines now provide revenue to thousands of wildly diverse sites at little up-front cost to them – PPC advertising is one of the few income sources available to bloggers, for instance. If rampant click fraud overwhelms the system, it will muffle the Internet’s fabulous cacophony of voices.

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