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July 7, 2006

Are We Imagining Click Fraud?

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Al Scillitani was kind enough to grant himself an interview with Al Scillitani recently (what, you’ve never talked to yourself?) and the two Al’s had a rousing debate on the topic of click fraud.

I was surprised to read a lot of the things Al said. Two points in particular that stood out were that Al doesn’t think click fraud is out of control and secondly, he doesn’t think advertisers should frequently monitor their instances of fraud.

Al says:

“Is click fraud out of control?

No. I do believe it is happening, but mostly to the more competitive "cut throat" industries… I would be surprised if it was heavily impacting more than 10% of all companies using paid search.”

I guess it depends on your definition of “heavily impacting”, but 10 percent seems like a mighty small number to me. I’d be very interested to see where that number came from. Especially with Outsell Inc.’s latest study estimating advertisers lost a total of $800 million in 2005 and 75 percent of advertisers’ surveyed saying they have experienced click fraud. Ten percent is very different than 75 percent.

And that’s the problem. We don’t know how big of an issue click fraud really is. We have the search engines’ self-serving estimates and advertisers’ claims of money lost, but there’s no objective party telling us who lost what and when to whom. All we see and hear are small companies suing to regain lost earnings and the search engines making million dollar settlements. What impression are we supposed to be getting?

I think click fraud needs to be closely monitored. Maybe the search engines need to start keeping logs of how many fraudulent clicks they’ve stopped so we’d have some concrete numbers. Or maybe that responsibility should be placed on the advertiser. Either way, I think it should be someone’s responsibility.

But Al doesn’t even encourage advertisers to frequently monitor, or hire to someone to frequently monitor, for click fraud. He says, do it once. If something looks suspicious, act. If not, you’re done.

That makes me nervous. Just because I haven’t been robbed in the past 20-something years, doesn’t mean I won’t walk out of the BC building today and meet a masked man on the way to my car. I don’t think monitoring is something you can do one time. In fact, I think that goes against the actual definition of the word “monitoring”.

Like Al said, theft is part of business and brick and mortar stores face it everyday. But that doesn’t make it right and it doesn’t mean you should idly stand by and watch it happen.

“Let’s say you are the store manager of Walmart. Completing an audit, you realize someone is stealing a $1 pack of gum everyday. This upsets you, but you have 2 choices: 1. buy more security cameras for thousands of dollars and hire an hourly security guard for $50/hour or 2. Say to yourself, this is part of doing business and spending thousands of dollars every week to save $7 a week is ridiculous.”

Clearly, spending thousands to save less than ten is ridiculous. But we’re not talking about $7 dollars. We’re talking about $800 million in a year, more than $2 million every day. And there’s no reason you need to spend thousands of dollars monitoring. There are plenty of systems to passively monitor your account which would cost far less than that.

Is click fraud preventable? Not completely. Just like kids stealing gum isn’t preventable. But the difference with click fraud is that advertisers can see where the theft is coming from. If Walmart’s store manager had a list of all the 11-year-olds stealing gum from his store, I bet those kids wouldn’t be allowed in anymore. Monitoring your PPC accounts allows you to put a face on those sleazy IP addresses stealing from you.

Al’s a smart guy, way smarter than I am, but I would be hesitant to encourage people against monitoring their PPC accounts. No amount of theft is okay and advertisers should be vigilant about detecting and reporting it.

Oh – and Al thinks I should have prefaced this entry by stating this is all my opinion. But if you’ve ever read the BC blog, I think you’re well aware of that by now. Heh.





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