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'Click Fraud' is Everywhere...So What?

Feb 25, 2008
Click Fraud occurs in all forms of media. That may sound like an odd statement, but it is true if you accept this definition of click fraud:

Click Fraud n 1. Paying a rate for media that's based on an invalid metric.

Click Fraud has received tons of attention over the past few years due to the rise of online advertising on search engines such as Google, Yahoo, MSN, etc. However, 'click fraud' has been around since the dawn of advertising.

When you buy advertising in a newspaper, your rate is largely determined by the circulation of that paper. Let's assume that the paper you decide to advertise in has a circulation of 100,000 people. What if only 50% of the people that subscribe to the paper actually read it on the day that your ad runs? Do you pay half the price for your ad? Now, of the 50,000 people that actually read the paper that day, if only 10% actually noticed your ad, do you only pay for a circulation of 5,000 vs. 100,000? Of the 5,000 people that noticed your ad, let's assume only 10% were actually in your target market. Does the newspaper charge you for just 500 readers? If only 50 of the 500 people that noticed your ad were in your target market and actually called you or visited your store or Web site, do you get charged for just a circulation of 50? Obviously, the answer to all of these questions is no. So, why aren't there a ton of blogs and message boards dedicated to the fraud that has been occurring in the newspaper industry for well over a century?

The television industry, similar to the newspaper industry, sets their rates according to the number of viewers that a program receives. Does the TV industry refund money to you if their projected number of viewers is proven to be less than that of Nielsen ratings? Does the TV industry subtract out the percentage of viewers that change channels during the commercials? Do they account for the fact that people leave the room to grab some food or go to the bathroom when commercials air? The TV industry knows how many households have DVRs, so do they determine the size of the audience after they account for those they know skip commercials? Of course they don't. So why is it that we allow the TV industry to charge us based on grossly inflated rates?

Click fraud is not as much of an issue online as it is offline. In the world of online advertising, you get to set the price you are willing to pay, whereas you do not get to set the price for offline media. Therefore, if you were willing to pay a max CPC of $1 for a keyword and you determined that 10% of the clicks are fraudulent, then you should reduce your max CPC by 10% to $.90 to account for the fraudulent activity. The nature of the auction system adjusts the going rate for clicks based on the market's ability to convert those clicks. So if 10% of the clicks are fraudulent, then the market as a whole would bid 10% less than they would for the same keyword in a market without click fraud. This does not happen in the world of offline media. The publishers put out a rate and you either accept it or you don't.

Another reason why click fraud is not as much of an issue online is that you can truly measure it. Perhaps this is why click fraud gets so much attention online since people can finally measure how much they are spending on advertising that is not valid. Whereas in the offline world, people know that not every subscriber to a paper will see their ad, nor will everyone watching the program they run a commercial on pay attention, so they could never measure the extent. Because you can measure the impact of click fraud online, you can take the appropriate actions to mitigate it.

Click fraud occurs everywhere. The better job you do of measuring your advertising's performance in terms of the profit contribution, the better equipped you are to handle click fraud. Treat online click fraud as a cost of doing business, just as a brick and mortar would treat theft. Nobody likes that it happens, but it does, so you just need to deal with it.
About the Author
Adam is the Chief Revenue Office at ClearSaleing. He is a seasoned sales manager starting insides sales teams at Google and Actuate Software. Adam holds a B.S.B.A. in Marketing from The Ohio State University. ClearSaleing
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