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Click Fraud
CyberGroupJanuary 18, 2006
The Basics
• Advertisers agree to pay Google or Yahoo for preferential placement in searches
The Basics
• Advertisers agree to pay Google or Yahoo for preferential placement in searches
The Basics
• Advertisers agree to pay Google or Yahoo for preferential placement in searches
• Advertisers also pay Google or Yahoo to place ads in third party websites
The Basics
• Advertisers agree to pay Google or Yahoo for preferential placement in searches
• Advertisers also pay Google or Yahoo to place ads in third party websites
The Basics
• Advertisers agree to pay Google or Yahoo for preferential placement in searches
• Advertisers also pay Google or Yahoo to place ads in third party websites
• When a user clicks an ad, Google or Yahoo recognize revenue from the advertiser’s budget and pay third parties a portion
• Prices per click run from a few cents - $84
The Stakes
• Google earns over 95% of its revenue on the pay per click model– 2006 est. $5.2 Billion
• Because of expectations of growth in this revenue it commands a P/E ratio greater than 100 vs. an average of 14 for the S&P 500
• At these high multiples, share prices can collapse on missed earnings. Yahoo’s stock tumbled 13% Tuesday afternoon after only growing income by 39%
How are Google and Yahoo Responding to Click Fraud?
• We don’t really know specifically– Google says it looks at IP addresses and
timing patters, among other things
How are Google and Yahoo Responding to Click Fraud?
• Yahoo has a “Click Protection System”– Each click is evaluated along 90 data points. Some of
the data points evaluated are: • IP address • User session information • User cookie information • The network to which an IP belongs • The user's browser information • The search term requested by the user • The time of the click • The rank of the advertiser's listing • The bid of the advertiser's listing • The time of the search • The time of the click
How are Google and Yahoo Responding to Click Fraud?
• Google does offer credits for invalid clicks, but only in the prior two months
• It is likely that fraudulent clickers and pay-per-click advertisement providers are engaged in continuous escalation and adaptation
• In November 2004, Google sued a company for hiring 50 people to click on ads on its own website, thereby generating false ad revenue– Google was victorious and collected $75,000 in
damages
Google and Yahoo both assert that they cannot reveal how they
combat click fraud
• They say it would undermine their fraud prevention systems
• Yahoo also says, “We have two patents pending related to this technology, so we cannot currently disclose too many details about the methods we use.”
Third-party auditors have stepped in to fill the click fraud gap
• Clicklab, WhosClickingWho, Click Fraud Detective, among many others
Third-party auditors have stepped in to fill the click fraud gap
Advertisers Could Monitor Click Fraud on their Ads
• A few lines of code in a web site can help gather information about visitors– Browser/Resolution/other stats– Referring page– IP address
Advertisers Could Monitor Click Fraud on their Ads
• Invisible code in a web site can gather information about visitors– Browser/Resolution/other stats– Referring page– IP address
• This is currently available to advertisers– Most do not track this information– Most do not even keep track of their return on
investment
Possible Solutions by OSPs• If 3rd parties can do it, Google and Yahoo can
too• Filter using IP addresses
– Remove multiple clicks that originate from the same IP
– Proxy servers at work places or ISPs may assign the same IP address to several users
– Blocking IP addresses that are suspected of fraudulent clicks is not effective
– Serious evil doers will either mask their IP or use different addresses
Possible Solutions by OSPs
• Other things to monitor: cookies, ad ranks, time of clicks and searches, browser information, etc.
• May need to increase the anti-click fraud team• Use GeoPositioning
– Once GeoPositioning improves, can tell if clicks are coming from a competitor’s office or a company specializing in click fraud
– Now can probably tell what country clicks are coming from, so can monitor for suspicious traffic
• Team up with 3rd parties to develop new tools
Alternatives and Modifications to Pay-Per-Click
Other Formats Already in Place or In the Works
AdSense• Google places links it thinks are relevant on third
party sites and splits the revenue with the host• Google allows advertisers to pick and bid on
whose websites they appear• Advertisers can pay based on how many people
are expected to see the ad ("cost per thousand" basis)
• But, they must still compete with advertisers who choose a cost-per-click scheme
Other Formats Already in Place or In the Works
Pay-Per-Call• Links hooked up to telephonic systems like
Skype will then connect you with the company when clicked
• This makes it harder, or at least more expensive to engage in click fraud
Pay-Per-Action• Advertisers pay only when clickers follow up and
provide requested demographic or contact information or purchase a product
Flat Rate
• Model used for other media advertising• Fee charged for certain period of time• Variations in price for placement
• In order to match the revenue of pay-per-click, Google could auction off top placement for certain searches
CPM (Cost-Per-Thousand) Model
AdSense Advertisements• Charge based on average number of visits to a
site where link is hosted• Agree to post the ad for a given period of time to
circumvent competitors’ use of fraudulent clicking to get the link off the site
Advertisements on Google Search• Charge based on popularity of search term• Agree to post for a given period of time• Variations for placement
Pay Per Time at Site
Charge advertisers per unit of time the clicker spends at the site after clicking the link
Pay-Per-Sale- The “Holy Grail” of Advertising according to
some- Google gets paid a percentage of the sales that
occur after a clicker links to the advertiser's website
- Could operate in addition to a flat rate - Could create a sales-per-click scheme where
Google gets a percentage of total sales through Google divided by the number of clicks - This way, Google has an incentive to combat
fraudulent clicking- “Google Wallet”
Role of Government
Outlaw Click Fraud?
• Enforcement?• Incentives?
– Who benefits?• Advertisers?• Or search engines?
– Knowledge Problem• Resources
– Will small advertisers pursue expensive litigation?– A threshold?
• What if Google / Overture is already taking best efforts?
Transparency Regime
• Require Reporting• Standards• Problems?
– Too much information?
Government Action on the Fraudulent Clicking Problem
is a Bad Idea • Because it would be excessive/ineffective
to outlaw click fraud– Seems like a problem that should be resolved
contractually between the relevant parties– It would be difficult to enforce against
particular competitors– Jurisdiction problems
Government Action on the Fraudulent Clicking Problem
is a Bad Idea • Because the market will solve this problem itself
– Stores don't close their doors because of shoplifting. Click fraud is just part of the cost of doing business and advertisers will just budget for it
– Already there are some Google/Yahoo competitors with different models, like Snap.com
– If the problem gets so bad that advertisers can't afford PPC advertising anymore, providers may begin offering other models rather than lose advertisers altogether
The Future of the Internet: PPC?
• Generativity: – Will new ways to “optimize” sites to get at the
top of search results be developed?– Will more companies move to an online
storefront so that they can go to a pay-per-sale model?
The Future of the Internet: PPC?
• OSP Control: – How will companies count clicks?– Will Google/Yahoo create a new model?– When click fraud occurs, will OSPs and ISPs
be shielded from liability in the same way the DCMA provides a shield?
• Is click fraud analogous to other types of “real world” or online fraud?
The Future of the Internet: PPC?
• Culture: – Do people see this as fraud?– Who will have the upper hand – the
advertisers or the providers?• Will PPC become obsolete?
– Create better fraud detection?– Movement toward pay-per-sale?
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