By now, you should be familiar with the term "click fraud" which refers to the act of repeatedly clicking on paid search links to either fraudulently make money, or to create an expense for those you don't like (such as a competitor).
We've addressed click fraud in columns past, citing the investigative news stories coming out of India suggesting that there are sizable organizations in place that exist solely for the purpose of committing click fraud. Click fraud is an important development for B2B publishers to be aware of. Most don't employ the pay-per-click business model, and thus their advertisers can't fall victim to click fraud, an advantage that many B2B publishers should be quick to emphasize to prospective advertisers.
But how big is click fraud really? It's getting a lot of attention lately, but how prevalent is it?. Reliable statistics on illegal activities like this don't exist, and the search engines have all been taking steps to implement technological solutions to reduce click fraud. So is click fraud a tempest in a teapot? We were starting to think so, until we saw this stunning quote from George Reyes, Google's CFO, speaking at a major investment conference hosted by CSFB this week:
"I think something has to be done about [click fraud] really, really quickly, because I think, potentially, it threatens our business model."
As one insight into the size of the problem, Jessie Stricchiola, the president of Alchemist Media, a paid search consulting firm, told CNN that she estimates that as much as 20 percent of all clicks on paid search ads are fraudulent, and she contends that not all search engines have been as aggressive as they could be about combating click fraud. Of Google she noted, "Google has been the most stubborn and the least willing to cooperate with advertisers" that complain about click fraud.
Published reports indicate that click fraud was a primary topic of conversation at recent conferences sponsored by Jupiter and Majestic Research as well. There are now open discussions in investment circles about how exposed the major search engines may be with regard to click fraud, and some analysts are even suggesting a close watch on companies such as eBay and Amazon, which are heavy buyers of paid search, and thus have a greater exposure to fraud.
In our view, click fraud is simply one more illustration of what continues to be most problematic about "pay for performance" advertising: it looks great as long as you don't look too closely. Yes, search engines only get paid if they perform, but for most B2B marketers, "performance" means having traffic shipped to their sites. If that's all you want, great. But if you're depending on paid search for qualified leads or sales, maybe it's performing, maybe it's not. Nobody really knows for sure. And even if the search engines are able to wipe out the scourge of click fraud, they remain resistant to looking too closely at the remaining legitimate clicks they generate for advertisers. To the search engines, all clicks are created equal, and they need it to stay that way. Because if it becomes clear that not all clicks are of equal value and quality to the advertiser, guess what? Advertisers will want to pay less for all clicks, or only pay for the best quality clicks. Either scenario is bad news for the search engines, for whom your ignorance is their bliss.