Don’t Think Click Fraud, Think Negative ROI

First published March 1, 2007 in Mediapost’s Search Insider

The search engines have a dilemma on their hands when it comes to click fraud. We’re all clamoring for more information on the issue. We all want solid numbers to help us define the scope of click fraud. The very fact that we refer to it as click fraud is confusing. A lot of things get thrown in the click fraud “basket” that are in no way fraudulent. Thanks to sensationalist reporting by publications like BusinessWeek, click fraud is portrayed as the biggest scourge to threaten the Nirvana that is search marketing. A tremendous number of resources have been dedicated towards click fraud by the engines themselves, in response to the advertisers’ demand that the problem be stamped out.

But when you do an honest appraisal of the issue, the search engines would rather we get over our preoccupation with click fraud and start thinking of it as part of a much bigger whole, the return we get on our search marketing investment. This in no way negates the importance of click fraud as an issue. I don’t think there’s anyone more aware of click fraud than Shuman Ghosemajumder (Google), John Slade (Yahoo), and Brendan Kitts (Microsoft). They’re the first to say that click fraud does exist and that they’re each, in their own ways, actively policing it.

It’s more a question of proportional response, an appropriate amount of attention given the actual scope of the issue. And today, for the first time, Google is giving us concrete numbers on what that scope might be, at least for its network. Google is announcing a multiphase approach and product road map to handle the click fraud question. Accompanying the announcement are hard numbers, for the first time, about how much of Google’s traffic could actually be considered fraudulent. I’ll talk more about the numbers in a moment, but first, let’s explore the dilemma that presents itself to the engines.

Caught Between an Over-Hyped Threat and an Ignored Danger

The engines know that, as a factor that negatively impacts return on search marketing investment, click fraud represents a tiny percentage. There are far bigger drains on the performance of campaign that advertisers should be paying significantly more attention to, but thanks to doom and gloom “exposés,” there’s a disproportionate amount of attention focused on click fraud. So, although the engines would rather advertisers focus more on the big picture and consider all the factors, including fraudulent traffic, that are negatively impacting their return on that investment, they’re playing the game they have to and are keeping the focus on click fraud. Google’s announcement today may allay some of the “sky is falling” concerns that are being whipped up by journalists, but in the long run it may do the advertisers a disservice by diverting attention from more pressing campaign optimization issues.

I’ve talked about some of this before, but here are some of the issues I have with the current click fraud situation:

Just Because We Call It Fraud Doesn’t Make It Fraud

Click fraud seems to be the label that has stuck with this particular issue. There have been calls to try to put numbers around the occurrence of click fraud in search marketing. In reality, it’s not that cut-and-dried. First of all, fraud implies that someone loses money through the deliberate actions of someone else. For a click to be fraudulent, at least in the way that BusinessWeek tried to define it, advertisers have to lose money. They have to be paying for traffic that has no value.

Less than 10% are Invalid Clicks

The fact is, there are a number of factors that may result in traffic that the advertiser would probably prefer not to pay for. Fraudulent traffic is just one of them. Google puts all this traffic into a basket they call invalid clicks. This includes double clicks on ads, questionable activity from a single IP address, automated clicks, and yes, clicks from the nefarious click fraud perpetrator. In today’s release, Google said invalid clicks accounted for less than 10% of its total network traffic. The company didn’t want to get more specific than this, because the actual percentage can rise and fall with a fair amount of volatility, based on spikes in clickbot attacks and other factors. Google works to filter this traffic out proactively, so it’s as if the clicks never happened. The advertiser is never charged for this traffic. In most cases, the publisher of the site from which the traffic is generated is never paid for the traffic. No money changes hands, so no fraud has been committed. If anyone is out of pocket, it’s Google, not the advertiser.

The Bottom Line for Advertisers? .02%!

The traffic that the advertiser should be concerned about is the fraudulent traffic that slips through the cracks. This is truly click fraud. It’s not caught by the Google filters and it’s up to the advertiser to come back and report it and request a refund. In this case, money has changed hands and fraud has been perpetrated. Today, Google announced that this represents .02% of its total traffic. Some time ago I did a column after a talk with Shuman at Google, and after making some assumptions and extrapolating the number, I came out with a “worst case” estimate of .2%. It appears that my worst case was much higher than reality, by a factor of 10X.

I don’t know about you, but frankly, if something is only making a .02% impact on my advertising campaign, I’ve probably got better places to be spending my time. One place you might want to look? The conversion rates of your landing page. If you can bump your conversion rates by .5%, you’ve just made 25 times more impact on your overall campaign performance than by continuing to fret about click fraud on Google.

Google’s announcement today was more than just releasing numbers on the occurrence of click fraud. It is also announcing the creation of a Click Fraud Resource Center, a streamlined reporting process, the ability for advertisers to filter out questionable IPs, more details in its nvalid click reporting and some other initiatives. I believe all these things are good and are needed by advertisers, if only to put to bed the perceptions of click fraud as a major issue. But do me a favor, will you? Take some of the time you may be spending worrying about click fraud, and start looking at all the other places where your return on investment may be slipping through the cracks. My guess is there a lot bigger cracks you should be looking at than the click fraud one.

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