July 02, 2005
Click Fraud Goes Mainstream?
According to Reuters in this story Google is being sued in Federal Court over their handling of Click Fraud. The plaintiff in the case is a company by the name of Click Defense, which sells software to help online merchants detect and fight click fraud.
Because of their business, some are saying that the suit, which is also trying to gain Class Action status, is somewhat dubious. After all, it gets Click Defense some free advertising, and if there were no Click Fraud to deal with Click Defense would be out of business. In the various other stories I've read about this suit the folks at Click Defense say their main reason for filing is that they want the courts to force Google to release the real numbers detailing exactly how prevalent Click Fraud has become.
I'm willing --at this point-- to give Click Defense the benefit of the doubt and hope that some good comes out of it all. Hopefully more of the mainstream press will get on the bandwagon and that pressure will force the PPC Providers to make changes in how they report and share information. Keeping it all a big hush-hush, no-I'm-not-telling, secret --especially from the people who are paying for those ads-- is not only silly but leads to a lot of angst and mistrust.
Generally speaking, most in the industry ascribe a 20% number to how much Click Fraud is out there. That's one in five. Click Defense says they've seen it be as high as 38%. Personally, when I ran a lot of Adwords ads and set up my own little Click Fraud detection for a few sites the Click Fraud number came in as around 1/3 of all clicks were fraudulent.
The problem, as Click Defense right puts it IMHO, is that neither Google nor Yahoo! (via Overture) will release any numbers about the amount of Click Fraud they detect. They refuse to release this info for obvious reasons, since the mainstream press would probably latch onto those numbers and it would be quote harmful to their reputation. And I'm quite sure if they did release their internal data the number would still be on the low side. If they were catching all of the fraud, then companies like Click Defense, aQuantive and DoubleClick would not exist. There would be no need.
The new suit follows on the heels of another Click Fraud suit that was filed a few months ago in the State Court in Arkansas, as outlined in this AP story. The earlier suit takes on Google, Yahoo, AOL and Ask --all of whom display PPC ads-- and was filed by Lane's Gifts and Collectibles, which is a local gift shop that advertises on the Web.
Frankly, this one is more of a feel-good story since the plaintiff obviously isn't looking for free advertising. But by the same token, they probably don't have the same resources or information to back up their claims that Click Defense has available. Plus the notion that all of the defendants are involved in some type of conspiracy is a bit much in my opinion. I honestly don't think any of them are actively participating in or allowing Click Fraud. They would rather that there were none, I'm quite sure.
The Arkansas group is trying to get their suit moved to the Federal Court system, but you can bet that all of the defendants are going to challenge that.
Is this the first shot across the bow for the PPC Providers? Can one or both of these lawsuits help in the effort to force PPC Provider to supply more information to their advertisers --at the very least-- so that the individual advertisers can become more proactive in fighting Click Fraud?
Personally, I don't care if the Click Fraud number is the generally accepted 20%, Click Fraud's number of 38% or my number of around 33%. All of those are waaaaaaaaaaaay too high. Even given those numbers, I would hazard to bet that if you asked the average PPC Ad Purchaser if they'd ever received any type of refund, let alone a 20% credit every month for fraudulent clicks, nobody would say they had received such credits.
The couple dozen PPC advertisers I did ask have never knowingly received any type of rebate. Ever. So it may be a case that the only advertisers who are consistently getting refunds for Click Fraud are those squeaky wheels who are doing some type of Click Fraud Detection on their own, outside of what the Providers supposedly offer. Given that, it would make sense that none of the numbers are close to matching.
Putting those numbers into perspective, and using credit card merchant accounts as a comparison, if you were a merchant and had a 20% fraud rate for any month, you would be dropped by your merchant bank so quickly that your head would spin. In fact, if you had an ongoing fraudulent rate of as little as 2% you're likely going to lose your ability to charge fees to anyone's credit card. Forever.
No matter how you slice it, Click Fraud is rampant.
Until the PPC Providers take it seriously enough to include the people who pay for those ads as part of the Solution, it's going to remain a problem. Being so secretive about how big or bad the problem is, as they've always been, does nothing but convince the average person that they've got something to hide. Something sinister.
People are going to fear the worst if you give them no choice in the matter.