Phil Sim

Web, media, PR and… footy

Click fraud an early warning

Remember when Bob Metcalfe predicted that the dot com bubble would pop, largely because banner ads sucked. He got the date wrong but for the most part he was on the money. Since then, of course, pay-per-click targetted online advertising has come along on its proud, white stallion and saved the dot com damsel from distress.

However, that knight in shining armour, might have a few chinks in its plates. ‘Click Fraud’ is finally getting some attention, via this Wired article and this Paul Kedrosky blog post. Wired reckons up to 40 per cent of ad revenue is click fraud generated. Are we at all surprised?

The Web 2.0 community has every right to be shit-scared about this. It’s not quite in the Metcalfe prediction league yet, but it’s an early warning. Slice 40 per cent out of Google’s revenues and suddenly it’s numbers aren’t looking nearly as pretty. Factor in the impending competition from Microsot and Yahoo, which is sure to drive click prices down and the situation looks even bleaker. Consider the fact that just about every Web 2.0 startup is banking on being acquired by one of the companies that will be affected by this, or else are looking to ad revenues themselves and you’ve got an entire ecosystem balanced on something that, Squash reckons, is going to look increasingly precarious.

What these article show is that pay-per-click is a fundamentall flawed concept – eventually Squash reckons it has to be replaced by, if not pay-per-sale, then certainly pay-per-qualified lead. How many Web 2.0 businesses are looking at delivering those kind of outcomes?

Filed under: Online Advertising

5 Responses

  1. Think of it from the publisher’s POV too Phil: under Google’s PPC system, advertisers are practically encouraged to engage in “non-click fraud”. By that I mean that advertisers can get exposure to thousands of Internet users for their brand for absolutely diddly squat if they manage to make an ad that nobody clicks on. So it works both ways. Do two wrongs make a right? Probably not.

  2. Two points.

    Metcalfe predicted the .com bubble would burst in October 1999. Fact is, most of the money was made after October 1999. That’s like saying I predict tomorrow the world will end and when it finally ends 5 billion years from now, I can say I was right.

    The Wired article is a fraud with no real facts to back up anything. I assume if some bum walked up to him (the reporter) and told him that Google was gonna tank, then we’d get an article on that the next month. He makes two stupid mistakes that make him a bad reporter. He says “up to 40%, maybe more”. That translates to a number between 0 and 100%. In other words, he said nothing, but put the 40% figure in your head. That’s fraudulent on Charles Mann’s part. Second, other claims in the article are impossible. Does anybody believe that Google can’t catch click-fraud where 40% of the clicks come from the same IP address? If you believe that, then you can join Mann in the stupid club.

  3. Phil Sim says:

    Hi Randy, ol’ Bobbby predicted it would pop on Nov 8. It popped on March 10, 2000. He was only out by 3 months which for an event of that magnitude is pretty amazing.

    Fact is the MarketingExperiments study found about 30 per cent were frauds. We’re still talking $1+ billion fraud! Secondly, the problem is a lot bigger than one guy clicking on the same address. The basic issue is the system is too easy to rort. If I had a network of a dozen blogger mates and we all clicked on each other ads a couple times a day, that’s click fraud, almost impossible to stop and look how simple it is. So if its that simple, imagine what professional scammers can do.

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