People are upset about Click Fraud. But I think advertisers have never had it better. What is Click Fraud? Wikipedia to the rescue:

Click fraud occurs in pay per click [PPC] online advertising when a person, automated script, or computer program imitates a legitimate user of a web browser clicking on an ad, for the purpose of generating an improper charge per click. Click fraud is the subject of some controversy and increasing litigation due to the advertising networks being a key beneficiary of the fraud whether they like it or not.

So basically, advertisers are paying Google, Yahoo and other publishers money for every time someone clicks on their advert. Obviously, if you’re an advertiser, you’d hope that someone clicking on your advert means that person is interested in your products and services. Unfortunately, there are people who click on adverts or write software to click on adverts that have no interest whatsoever in whatever you’re selling. This has led to some very bold scare stories about PPC being doomed, the end of western civilisation and other such tosh.

It’s annoying to waste your advertising budget in any way whatsoever, but it’s part of the game. Advertising is about speculation: you can’t avoid it. “Half the money I spend on advertising is wasted. The trouble is I don’t know which half,” said Lord Leverhulme (or David Ogilvy or John Wanamaker – it’s a bone of contention). That statement has been true for a long time and it’s only PPC that’s ever helped business owners pick the right 50%.

Pay-per-click advertising is different from old media. It’s a lot more secure than advertising in a newspaper, magazine or broadcast. Advertise in a daily paper with a circulation of 1mn readers and they’ll charge you $80,000 for a page. You’ve got no idea of the ROI until you try it out. If the newspaper doesn’t reach the sort of people who buy from you or your advert is rubbish, then you’ll get nothing back. If they aren’t in the mood to buy things then they will flick straight past the advert. The advertiser doesn’t get his/her money back in that case either. Why on earth are people suggesting they should get refunds from Google and Yahoo?

With pay-per-click, apart from the click-frauders, the only thing that advertisers really pay for are potentially interested customers. The economical efficiency of that compared to old media is staggering. When Eric Schmidt was asked by ZDNet whether he thought click-fraud would slow the growth of PPC advertising and Google, of course, he said no. It never will, because despite the scare stories, it works very well.

Think through the sums. With traditional advertising, $80,000 buys you a presence in front of a million newspaper readers or a 30-second TV spot. You have no idea if any of them will respond or whether you got your messaging right. If you spend $80,000 dollars on AdWords or Yahoo, on the other hand, then you get the exposure anyway and that’s almost free. Totally free normally. Because the ads are published on the basis of relevant context, then you’re almost guaranteed the sort of audience you want. The thing you pay heavily for is clicks: the equivalent of phonecalls from your newspaper advert. Let’s go overboard and say that half of those clicks are fraudulent. That’s wayyyy higher than it really is, but let’s suppose that 50% of the clicks you got were generated by a machine. So what? You’re still getting massively increased efficiencies compared to the old model. Because of the scare stories, the networks are extremely vigilant in hunting click-fraud, so I really believe it will never represent a large fraction of an advertiser’s traffic. It’s just not in the networks’ interest so they’ll work it out.

Traditional media won’t sell you advertising on a response basis as a new customer. Probably they never will. They are in business too. They can’t take the risk that the advertiser has produced an effective piece of copy, or that they know their customers well-enough to select your publication because it will work. The advertisers themselves have almost no idea until they try it. The only reason Overture or AdSense exists is because of the explosion of internet sites. The number of blogs doubling every six months. If you’re the thousandth most-visited site about technology, and most are a lot lower than that, then you might still get decent traffic, but you won’t get an interview with an advertising agency. They have 999 other technology sites to contend with that are more important than you.

Nobody in this argument is thinking about the Long Tail of internet sites that are providing this terrific value. The ones that are 1000+ on the rankings. These are the networks’ lifeblood because the owners can’t get brand advertising on their sites. When will those people get fed up and stop offering such cheap rates, I wonder? When they realise that a couple of dollars a month is an insult to the effort they’re putting in and the audiences they’re getting? The proposed introduction of Cost-Per-Action advertising might spell the end of this particular bandwagon.

Perhaps the next step is about the distribution of brand advertising. Giving PowerPoint presentations to a bunch of ad agency guys is old hat. It just isn’t efficient any more. There are too many viable, cheap, relevant media outlets to allow for it. What we still don’t know, I think, is the next best thing.

Help spread this post:

Possibly related posts:

• Blogging for pennies
• Free Tickets for Behavioural Targeting
• The Ajax Myth