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December 03, 2004

Google CFO addresses the issue of Click Fraud

I've been following the click fraud issue since Google began publicly addressing it in their SEC filings leading up to the IPO. Google Chief Financial Officer George Reyes addressed the click fraud issue at an investor conference sponsored by Credit Suisse First Boston, reports an article in CNN.

"I think something has to be done about this really, really quickly, because I think, potentially, it threatens our business model," Google Chief Financial Officer George Reyes said Wednesday.

What exactly is click fraud? Essentially, someone (or something) clicks on ads either to drain a competitor's daily ad budget (so their ads no longer display) or as a publisher to make more money with AdSense.

Does Google have things in place to combat click fraud? Yes, to some degree. I have received refunds for fraudulent clicks on my Adwords campaigns, and Google has suspended publishers committing fraudulent clicks. And more recently, Google has launched a lawsuit against Auctions Expert International for fraud, for allegedly clicking ads to earn money through AdSense.

The case, filed Nov. 15 in the Superior Court of Santa Clara County in California, is among the first civil lawsuits to relate to click fraud. The lawsuit charges that Texas-based Auctions Expert International signed up to display Google's targeted text advertising on its Web site, and then fraudulently clicked on the ads to profit from its pay-per-click system.

Google and others are under scrutiny as advertisers grow concerned about phony clicks."Because advertisers pay Google for each click on their advertisements, Google strives to ensure that each click is generated by a user legitimately interested in accessing the site being advertised," according to the complaint.

"Defendants...flagrantly abused (Google's service) by artificially and/or fraudulently generating ad clicks," the filing says. "These clicks were worthless to advertisers, but generated significant and unjust revenue for defendants."

Google generates 98% of its revenue through their paid advertising programs, and has been the reason behind the company's massive growth this year. And protecting that against click fraud has to be a priority.

Coincidently, I have heard of an increased number of publisher's being suspended for fraudulent clicks in the past few days. Perhaps a fraud prevention algo tweak, or perhaps a few more people added to check for "less than desirable" publishers. If a publisher is going against the terms/policies, well they should be shown the error in their ways ;) And since my experience has shown that nearly every suspended publisher I have known of has been blatantly breaking the terms ("hey, click my ads", framing external webpages with AdSense, etc), Google will only improve advertiser's confidence in Adwords by continuing to actively prevent fraud. Should by-the-book publishers be paranoid of getting caught in the crossfire? I don't think so. "Innocent" publishers are usually not all that innocent after all.

Posted by Jenstar at December 3, 2004 07:33 AM

Comments

It's really a huge deal, and has gotten surprisingly little attention. A huge amount of people are getting ripped off on Adwords, they just don't know it yet. Once everyone understands what exactly their competitors or adsense publishers are doing, this will become a huge deal.

Posted by: G at December 9, 2004 08:37 PM