Just wanted to get everyone's take on the front page article in the Wall Street Journal titled "'Click Fraud' Is Costly for Web Outfits".
I don't think fraud is that pervasive. This article does more harm to PPC than any fraud that is being committed.
There have been many questions about why the the click fraud suit, reported about in the WSJ, was filed. Here is a statement taken from the website of The Law Offices of Joel Fineberg. He is the attorney for the class action plaintiffs. CLICK FRAUD: Why we are suing the major search engines On-line "click through" advertising is being touted as the definitive way for advertisers to gauge their exposure to potential customers. Unlike advertising in traditional media such as radio, TV or print, "pay per click" Internet ads appear in response to a specific request from the potential customer, in the form of keywords entered into an Internet search engine. U.S. sales from advertiser-paid search engine results are expected to continue growing at a rapid pace, from $3.2 billion in 2004 and $2.5 billion in 2003. This year, the PPC advertising market is expected to exceed $5 billion. And, as more advertisers compete for desirable keywords in their respective industries, the cost for clicks has risen too. Advertisers are reportedly paying 45 cents per click this year, up from 40 cents last year. In certain industries, the costs are even higher. However, the search engines are billing and collecting revenues for fraudulent clicks. Unfortunately for the on-line advertisers, they are not getting what they are paying for. Through our investigation and in-depth analysis of web server logs, we have identified that in many cases advertisers are being billed for advertising which is not made or generated by bona fide consumers. As a result, the major search engines, such as GOOGLE, YAHOO!, ASK JEEVES, AMERICA ONLINE, LYCOS, LOOKSMART and FINDWHAT, are billing and collecting fees for pay-per-click advertising which is not being provided to the advertisers. This type of fraud affects big and small business throughout the industry. The amount of money these search engines collect as a result of Click Fraud may be staggering. Also, Click Fraud can have a dramatic effect on small business with limited advertising dollars by making the market too expensive or wasting precious capital on illegitimate advertising costs. We believe that the major search engines are seeking to conceal this problem, and have not done enough to make their bills transparent and only collect revenues for actual bona fide advertising. Clearly, the search engines have an economic disincentive to eliminate Click Fraud, as it increases their revenues charged and collected. Advertisers, victimized by pay-per-click fraud, have filed a class action lawsuit in the circuit court of Miller County, Arkansas. The lead plaintiffs are Lane's Gifts and Collectibles (www.lanescollectibles.com) and Caulfield Investigations (www.caulfieldinvestigations.com). Their small businesses have been affected by this problem. Has your business likewise been the victim of Click Fraud? If you have any information about Click Fraud, have reported suspected Click Fraud to the search engines or are trying to determine whether it has happened to your business, please e-mail us at jfineberg@fineberglaw.com or dgresham@fineberglaw.com.
It is clear why “click fraud†cases are so appealing to class action attorneys, because who knows more about charging for unwanted services then class action lawyers? It was bound to happen though and now the process has begun of driving up costs for everyone, no matter what the outcome of the cases. The funny thing is that these cases are going to create more click fraud in the long run because innovative young companies that could have a solution to click fraud will be scared to enter the market and by creating a false sense of security for advertisers. Imagine if 8 years ago someone had sued Lycos or Yahoo for not returning the best results in their search engines. Google may have never opened its doors due to the risk of lawsuits. Click fraud is an issue, but the much larger issue is how ineffective cost per click advertising is. The only solution in both instances is to allow the marketplace to work. Advertisers will find a better solution in the marketplace. If an advertiser finds that they are spending $10 to acquire new customers due to click fraud and ineffective systems, when they only want to spend $5, they will take their ads to a solution that is better for them. But this requires advertisers to actively manage their campaigns and for new solutions to be available, two things class action lawsuits discourage. The marketplace will work. Why is cost per click advertising so big in the first place? Because advertisers were fed up with ineffective CPM deals so they took their business elsewhere. No lawsuit required. Reproduced from "No Lawsuit Required: Click fraud and online advertising"