Click Tricks Tease Google

anusha Active Member

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#1

Source : TheStreet.com

Google (GOOG:Nasdaq) investors can probably scratch click fraud off their list of worries ahead of Tuesday's fourth-quarter earnings release.

While advertisers are concerned about click fraud, so far the problem doesn't appear substantial enough to cause them to cut back on their search advertising spending. For now, click fraud is more of an annoyance, one that advertisers say that Google and its rivals such as Yahoo! (YHOO:Nasdaq - ) need to remain vigilant in combating.

"Click fraud is an issue for the search industry," says Dean DeBiase, chief executive of search and digital marketing firm Fathom Online. "This year the search sector is projected to grow at a robust rate of 25%-30%, so while click fraud is an issue, it is certainly not deterring or threatening the growth of search marketing."

The specter of click fraud has hung over Google ever since Chief Financial Officer George Reyes described it in a 2004 interview as a "threat" to Google's business model, which relies on the sale of advertising using a pay-for-click model. In its latest 10-Q, Google says that if it fails to curb the problem the company "could lose the confidence of its advertisers."

Despite the ominous sounds of these warnings, there is no sign that the fear of click fraud is hurting Google's earnings. Fourth-quarter results, which come out Jan. 31, will show Google's sales excluding some costs almost doubling to $1.29 billion on earnings per share of $1.76, according to Thomson Financial.

Anecdotal evidence abounds in media reports that advertisers are getting ripped off by click fraud. Figuring out the extent of the problem is difficult because the problem also is being hyped by companies that sell services to fight it.

JupiterResearch analyst Sapna Satagopan estimates between 5% and 10% of ad traffic is fraudulent. While that's a good-sized chunk of traffic, her estimate falls far below other forecasts, which have the scourge as high as 30%. She emphasizes that click fraud hasn't done much to dampen the enthusiasm among advertisers for search.
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anusha, Jan 31, 2006 IP

debare Peon

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#2

Hmmm, 5%-30% click fraud? For someone spending, let's say, $5,000 a month in PPC that's just $250-$1,500 a month in fraudulent charges! Why worry, be happy ... and hope you bought Google stock at the IPO price.

debare, Jan 31, 2006 IP

anusha Active Member

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Okie.. Air ambulance, one of the top keyword is misused often...

Herez an article from wired.com ...

Stuart Cauff launched a charter-jet service in Miami Beach back in 2002. Being a 21st-century business, JetNetwork advertised on the Internet, especially on search engines. Anyone who Googled, say, "air charter Miami" would be greeted with the familiar list of search results and, in a separate place, a plain box of text with a blue hyperlink to JetNetwork's Web site.

Search ads were perfect for Cauff's business. His potential customers - a diverse group of celebrities, photojournalists, medical evacuees, and people who just needed to get away from or to Miami in a hurry - were scattered across the country. To reach this audience with traditional advertising, he would have had to buy time on scores of television and radio stations and space in just as many newspapers and magazines, something that only wealthy, established companies could afford. Even if Cauff could pay for the ads, the vast majority of people exposed to them wouldn't care about charter jets, so most of his money would be wasted. But with search-based ads, JetNetwork's name would appear, at least in theory, only before people who were actually interested in Miami charter flights.

Still, the ads were expensive. This kind of advertising is known as pay-per-click, because advertisers shell out money to a search engine every time a surfer clicks on their links. The price and placement depend mainly on how much the advertiser wants to bid for the search term - also known as the keyword in ad jargon. As other charter-air companies began PPC advertising, the cost of a click on a top-ranked ad rose to about $10 - in some cases as high as $30 - and there could be hundreds of clicks a month.

Which is why Cauff was infuriated when he discovered that up to "40 percent, maybe more" of the clicks on his keyword ads apparently came not from potential customers around the nation but from a single Internet address, one that belonged to a rival based in New York City. "If we get clicked fraudulently, it uses up our ad budget," he says. Advertisers usually set limits on how much they will spend, and search engines drop ads once they hit that limit. As a result, fraudulent clicking "literally pushes us off the page," Cauff explains. "And then our competition buys in at a lower price when we're not there."

Cauff was a victim of "click fraud," the illicit manipulation of keyword-based advertising. In this case, the scam appeared straightforward - one company clicked on a rival's search engine ads to drive up its costs. More complex is a second type of bogus ad click that exploits a second form of PPC advertising: ads fed to Web sites - anything from personal blogs to the sites of major corporations - by search providers like Google, Yahoo!, LookSmart, and, soon, MSN. The search engine indexes the content of the Web site and matches it with a group of relevant ads. (The most familiar form is Google's AdSense program - the sets of links labeled ads by goooooogle that show up on pages across the Internet. The advertisements that appear on Google itself are part of a separate but related program called AdWords.) Thus, bloggers who write about their air-travel experiences and choose to host such ads may find links on their pages for JetNetworks and its brethren. If a blog visitor clicks on the ad, the search engine splits its fee with the blogger. Although these "affiliate" ads have been hugely successful for advertisers, search engines, and the host Web sites, the system creates an incentive for affiliates to cheat. "All you have to do to make some money is find a way to click the ad sent by Google or Yahoo! to your own Web page," says search marketing consultant Joseph Holcomb. "Click! - there's 10 bucks. Click! - there's 10 bucks. It goes on all the time."

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.

The amount of click fraud is difficult to quantify; estimates of the proportion of fake clicks run from as low as 1 in 10 to as high as 1 in 2. In a widely cited recent study, MarketingExperiments.com, an online marketing research outfit, reported that "as much as 29.5 percent" of the clicks in three experimental PPC campaigns on Google were fraudulent. Whatever the exact figure, click fraud has become pervasive, and Google, Yahoo!, and the other major PPC firms have found themselves caught in a game of cat and mouse with its perpetrators. Even as the search engines shore up their defenses, click scammers are becoming more sophisticated, increasingly deploying complex software to disguise the origins of clicks. For now, the search companies and many of their clients maintain that the problem on their networks is under control. But some observers, like Holcomb, believe that click fraud is "a billion-dollar mess" that "has the potential of destroying the entire industry."
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anusha, Jan 31, 2006 IP

Cutter Peon

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#4

I believe there are instances of specific advertisers being targetted by their competition, in which case the fradulant clicks could be far more than 5 or 10%.

Even if click fraud is across-the-board at 30%, advertisers are still getting a way better deal then they would from the yellow pages or newspaper advertising. The people making the big deal about this are just click fraud protection companies and publicity hounds who like to see their name in the WSJ.

I can only remember one case of Google going after a company for click fraud -- and that was over something like $50,000. Thats peanuts compared to the size of the PPC market.

Cutter, Jan 31, 2006 IP

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#5

those are nice articles anusha. thnx

AdsenseAddict, Jan 31, 2006 IP

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Click Tricks Tease Google

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