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|Click Fraud Internet PPC Advertiser Risk #1|
One of the most powerful peices yet on click fruad ran this month on Wired [wired.com].
|Pay-per-click advertising is big, big, big business. So are bogus hits on Internet ads. It's search giants against scam artists in an arms race that could crash the entire online economy. |
|Bill Gross, the man who invented PPC back in the late '90s when he presided over the startup incubator Idealab, has argued that, despite the cleverness of the various methods used to fight it, click fraud will continue to cast a shadow over PPC advertising. Ultimately, he believes, advertisers will switch to another model... |
|Pay per conversion is an interesting rev-share model. |
Not all advertisers are e-commerce or affiliate sites who expect immediate transactions. Service businesses, for example, are advertising for leads that can be developed into sales or business relationships at a later date. So, if the model called for pay per conversion, there would have to be agreement on what a "conversion" is.
If anything, I think it's more likely that Google, publishers, and advertisers will move to a CPM model (especially if Google wants to expand its roster of mainstream ad agencies and advertisers, not just the traditional PPC market of e-commerce and affiliate sites). Madison Avenue understands CPM, and impression fraud is probably easier to control than click fraud. (Also, CPM advertisers are used to having a certain amount of "waste circulation" from readers who don't see ads, radio "listeners" who leave their favorite FM station on for the dog during the day, or TV watchers who head for the bathroom when the commercials come on.)
If you need further proof of the article's prescience, check out the various stories coming out about Jeanson James Ancheta [wired.com] (that link is to Wired's version).
|Starting in August 2004, Ancheta turned to a new, more lucrative method to profit from his botnets, prosecutors said. Working with a juvenile in Boca Raton, Florida, whom prosecutors identified by his internet nickname "SoBe," Ancheta infected more than 400,000 computers. |
Ancheta and SoBe signed up as affiliates in programs maintained by online advertising companies that pay people each time they get a computer user to install software that displays ads and collects information about the sites a user visits.
Prosecutors say Ancheta and SoBe then installed the ad software from the two companies -- Gamma Entertainment of Montreal, Quebec, and Loudcash, whose parent company was acquired last year by 180Solutions of Bellevue, Washington -- on the bots they controlled, pocketing more than $58,000 in 13 months.
Not a big jump from that type of affiliate program to an AdSense publisher or a member of Yahoo's affiliate network.
The Wired article on click fraud is simply too believable.
Pay per conversion.
|before adsense, online business was a one-sided advertiser market. it was about affiliate programs sucking out publishers with their pay per lead/sale method to squeeze out the last cent for their clients (=advertisers). for 90% of adsense publishers, there was simply no way to monetize a website to live on. |
IMO, there has been too much attention paid to the ability to "monetize" a website, and not enough on the ability to prevent advertisers from being charged too much.
|google et al revolutionize the market with their contextual cpc/cpm model. with them as middlemen, we have a win-win-win situation, for the first time giving the publisher negotiation power to DECLINE affiliate business proposals which don't generate adequate revenue for him. |
It is not such a win-win-win situation from the advertiser's standpoint, particularly those who are victims of click fraud.
|so now you are thinking because of fraudulent actions (which are inevitable for every accounting method) we're going back to the old pay per sale model? |
It is far easier to commit click fraud than any other type of commercial fraud. CPC is an inherently poor business model. Pay per sale is better from an anti-fraud standpoint, but worse from the standpoint that all sales are not the (immediate) result of a search or visit to a publisher's site.
|why do you think a publisher should accept once again branding and promotion FOR FREE without being compensated? |
In general I think advertisers should pay fixed fees. How the fee is determined may be the result of bidding or some (statistical) assessment of the value of a human eyeing the ad. But publishers will at least be able to be compensated for the use of their sites, while considerably minimizing their advertisers' exposure to click fraud.
|Fact is, there's waste in all forms of advertising. |
Sure, but most traditional advertising is based on a statistical projection of that part of the audience that the advertiser wishes to target. While there is certainly reason to argue the methods of audience sampling and size estimation, it is much more difficult to "game" that system than with CPC advertising.
|If advertisers are nervous about PPC campaigns, then they can follow tradition and buy CPM ads--preferably from sites or ad networks that reach appropriate audiences. |
True. FWIW, I'm inclined to believe that the click fraud problem is far more serious at 2nd and lower tier engines/networks than at the top-tier. If some SEC investigation causes these companies to be shut down, more power to them. Of course, as there would still be a certain amount of click fraud at the remaining engines/networks, we should expect that some form or regulation be created to help protect the interests of advertisers.
|IMO, there has been too much attention paid to the ability to "monetize" a website, and not enough on the ability to prevent advertisers from being charged too much. |
let's not forget the positive side effect for all surfers: advertisers being able to monetize a website means more useful content for the web, that is more information and better surfing experience for the user. ok, in the worst case, if fraudsters and spammers are also able to monetize, that means more crap. one could blame google for indirectly promote both forms.
|It is not such a win-win-win situation from the advertiser's standpoint, particularly those who are victims of click fraud. |
question is rather, to which party the business risk in terms of failure probability is transferred to. advertiser or publisher.
so, naturally advertisers prefer pay per lead/sale and publishers prefer pay per click/impression.
|It is far easier to commit click fraud than any other type of commercial fraud. CPC is an inherently poor business model. |
right, that's at the nature of things. easy to implement, easy to manipulate.
|Pay per sale is better from an anti-fraud standpoint, but worse from the standpoint that all sales are not the (immediate) result of a search or visit to a publisher's site. |
the user has to click on the ad, leave the browser open, make an immediate purchase and all that in one process to attribute the sale to the publisher. whereas most of the time, the advertiser gets free branding on the publishers' website. that is completely crazy. pay per sale as business model is at least as poor as cpc. so there's a draw.
|In general I think advertisers should pay fixed fees. |
i agree. interestingly, that would lead us back to some kind of cpm just like in traditional media.
CPM is FAR easier to manipulate than CPC.
CPM was the first attempt at monetizing the net and a quick look at current CPM rates anywhere will tell you what happened to it.
I think we are still in the very start of the internet advertising revolution and it will continue to evolve with the following otions
2 Pay per click
3 Pay per Call
and possibly an auction type system combining CPM and pay per call or pay per click
The current pure affiliate marketing offers poor returns for publishers and the contextual advertising is to easy to be manipulated
The problems are no different in this area than any other if advertisers perceptions become to ingrained re: current fraud levels then even if the fraud becomes fully controlled it can take a long while for that to be believed
Also any who have used the traditional print industry know that fraud can easily occur in flyer distribution
The same analogy can be looked at in the car industry many people believe the quality of US manufacturers is not as good as japanese manufacturers and even if US manufacturers quality was better than Japanese manufacturers it would not instantly change perceptions and could even take years before the public believed it
i throw out nearly any advertiser who is interested in selling things directly through my website (my site is content, not sales oriented). no chance! instead i offer cpm ads to him or to go to the adwords program. then, i hear them crying every time "but adwords is so expensive".. not my problem.
that's a new game, a new balance of power. i can do that now. for me there is no benefit in being the sales agent. that's always second best, like it or not. i thank google for being able to decline that kind of offers. nowadays most publishers' first choice is adsense rather than being cheated by affiliate programs or direct offers with marginal payouts and shady, not veryfiable accounting methods. there is no way back to the old times as long as enough advertisers are willing to participate in adwords. i see no problem there as long as advertisers earn decent money with the program.
back then, everyone was astonished why google chose cpc. but it's probably the best in between pay per sale (not accepatable by publishers for above mentioned reasons) and pay per impression (sometimes failed but i forecast a comeback). and they are hugely successful. a little bit paying attention on conversion here (smart pricing) and a little bit letting cpm slip in (e.g. fixed fees for image ads) there - and there you have it.
surely the critical point is that google keeps control over click fraud and is able to push it constantly under a certain level.
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