iMedia's search editor offers a helping hand to the SEC.
Click fraud has been a problem for search advertisers, and a hot topic of debate, since the dawn of the pay-per-click purchase model. Recently, the subject of click fraud has begun to make news outside the small circle of search engine marketers and the broader online advertising community.
For example, the January issue of Wired Magazine contained an interesting, if not campy, depiction of one advertiser's experience with click fraud. And last week, CNBC reported that click fraud has caught the eye of the Securities and Exchange Commission (SEC). The group is now reportedly deciding what to do next.
I have some suggestions for the SEC. If the click fraud conundrum has reached the point where it becomes a hot topic outside the confines of the search world, it might be helpful to spend some time reaching out to purveyors of search advertising prior to discussing the topic with mainstream media. But that's just a warm up exercise.
Stop me if you have heard this one
Every time we revisit the subject of click fraud, there's a new and better technology designed to foil the best efforts of well-intentioned seekers of paid search traffic. The motivations for fraudulent click activity are almost as important as the methods perpetrators use to falsely inflate search traffic.
Outside common definitions and origins of click fraud, the competitive nature of an auction based bid process undoubtedly brings out the worst elements of human nature. Google's auction system relies (in part) on the frequency of click activity in ranking paid listings; some competitors have initiated ways of generating page views with the intention of lowering competitors' positions due to lesser click rates.
Click fraud villains have lots of ways of squirming past detection. They hide telling IP addresses, create software that not only generates clicks, but also dives right into websites (and even adds an item or two to a shopping cart before abandoning the site).
While technologies and tactics for executing false traffic are ever evolving, so are the methods for prevention. Search providers like Google and Yahoo have dedicated teams whose entire focus is fraud prevention and have repeatedly reinforced emphatic opposition to click fraud.
Since deception technologies are changing quickly, and bidding and placement systems vary from provider to provider, there is little hope for standardized detection methods. And of course, there are a few other considerations worth discussing.
The problem for advertisers
Beyond the relatively complex problem of discovering, reporting and convincing a search provider to issue a refund or credit on fraudulent click traffic, there is the issue of fear to consider.
Perhaps the most powerful of human emotions, fear can be used to motivate, manipulate, or even control. My diligence in demanding a refund might be a ticket to missing out on the latest beta. Perhaps I won't be invited to the next round table discussion on the latest and greatest technologies.
Today's lightly organized chaos of third parties representing advertisers -- and the general confusion about who the most reliable resource for advice on search engine advertising is (agency or search provider) -- spells opportunity for search fraud evil doers.
Advertisers are sifting through possible information resources in a constantly evolving search environment while trying to meet the demands of a Google-obsessed society. Meanwhile, click fraud continues on a steady growth path, free of political considerations and the race for search edification with acceptance into the new technology circle of trust.
The problem for search companies
Two key elements come to mind-- revenue reports and shareholder equity. Last week we learned a yet another valuable lesson about placing value on the golden goose when Google's stock took a dive to the tune of about 10 percent. The combination of unrealistically high revenue expectations and sub-par tax management hit the search giant pretty hard.
While Google's earnings are heavily reliant upon revenue from paid search advertising (analysts have reported in the 99 percent range), the search giant is certainly not alone in being dependent upon pay-per-click revenue. Dozens of companies sell paid search listings and paid search has been repeatedly credited with revitalizing the online advertising industry.
Under these circumstances, the pressure to meet or exceed earnings expectations has never been greater.
Can you imagine what the news of an SEC investigation would do to the value of search providers? How about major portals like Yahoo, AOL, and MSN being forced to issue quarterly disclosures of click fraud activity and subsequent revenue shortfalls due to hastily applied standards?
Listen carefully, ye regulators
My advice to the SEC, FTC or private parties interested in dipping their toes in the click fraud pool is this: take a deep breath and look at the big picture before diving in. Have a good long look at the efforts of Google and other search providers to thwart the efforts of click fraud perpetrators.
Will click fraud ruin the industry? I doubt it. Imagine a group of lowlife third parties taking mighty Google down. I think not. Yet if mainstream media is fed by half-baked reports and the occasional information leak, consumer confidence in search might just send search listings the way of the banner.
However, if cooler heads prevail, if due diligence is completed and all parties remain informed, appropriately directed and motivated-- we all might just get out of this mess none the worse for the wear.
Additional Resources:
Putting an End to Click Fraud
Why CPA is Not a Cure for Click Fraud
SearchTHIS: Debunking Click Fraud
iMedia Search Editor Kevin Ryan's current and former client roster reads like a "who's who" in big brands; Rolex Watch, USA, State Farm Insurance, Farmers Insurance, Minolta Corporation, Samsung Electronics America, Toyota Motor Sales, USA, Panasonic Services, and the Hilton Hotels brands, to name a few. Ryan believes in sound guidance, creative thought, accountable actions and collaborative execution as applied to search, or any form of marketing. His principled approach and staunch commitment to the industry have made him one of the most sought after personalities in online marketing. Ryan volunteers his time with the Interactive Advertising Bureau, Search Engine Marketing Professional Organization, and several regional non-profit organizations.
Mr. Ryan is managing partner at Kinetic Results.