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That Ol’ Black Magic

Apparently Google has plans to plans to cleanse itself of class-action “click fraud” liability to the tune of $90 Million. While that sounds like a lot of money, when you consider search engine marketing is a $4.2 Billion dollar a year proposition, $90 Million sounds like a steal. The number becomes even more manageable when you consider that Google may “pay” for the bulk of the settlement in “click credits” to advertisers.

What is “click fraud”? In the broadest sense, click fraud, or “black magic” as it was previously known, is charging advertisers on a pay-per-click basis for clicks on an onlie advertisement made maliciously by a non-customer. These clicks may be made by angry competition seeking to cost the advertiser more money, but are typically made by third party website owners. Google encourages these website owners to place ads on their websites. Google then pays the website owners based upon how many times people click on the ads. More clicks = More money.

The problem arises when the website owner clicks on the ads numerous times to increase revenue. There are even “click farms” where people are paid to click on the ads repeatedly. Although Google and other search engines vehemently assert they have protocols in place to reduce click fraud, even defining what is and what is not a fraudulent click can be daunting.

Understandably, search engines would rather pay a small fine than divulge information relating to their proprietary methods of detecting and defeating fraudulent click throughs. Not only would such a disclosure give their competitors a market advantage, they argue, but revealing detection methods would simply encourage malicious clickers to work around the detection systems. The most serious issue, however, is that this type of fraud, as well as other types of fraud, like fraudulent eBay transactions, generate astronomical amounts of revenue. Consumer advocates fear that if a company is faced either investing millions of dollars to decrease their revenue, or paying a relatively insignificant fine, there will be little motivation toward rigorous enforcement.

For the present, the only way for a company to deal with the situation is to monitor revenue generated from the search engine advertising and make a cost/benefit analysis as to whether the campaign is more or less valuable than other types of advertising. Once the cost exceeds the benefit, the company should drop the campaign and not worry about malicious click-throughs. As with any business model, once the cost of fraud starts to become a cost for the vendor, as well as the customer, the problem will resolve itself very quickly.

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