BusinessWeek: Really Click It or Ticket

BusinessWeek is running a doom-and-gloom investigative report into click fraud, calling it “a dizzying collection of scams and deceptions that inflate advertising bills for thousands of companies of all sizes,” and warning “The spreading scourge poses the single biggest threat to the Internet’s advertising gold mine and is the most nettlesome question facing Google and Yahoo, whose digital empires depend on all that gold.”

The article profiles click fraud perps from a 23-year-old using a false name in Budapest to a Kentucky woman with a cat named Sassy who likes to garden and help elderly people. They claim to make $70,000 and $60 per month, respectively, from their click fraud outfits. BusinessWeek estimates the click fraud industry overall is bringing in $300 to $500 million a year, based on $1 billion in annual ad billings (approximately 10 to 15 percent of total pay-per-click income).

At Google’s Press Day this summer, we were surprised to hear Omid Kordestani, Google’s senior vice president of global sales, respond to an audience question on the topic “Click fraud is not a serious problem for us at all.” Since then, the company has been a bit less flippant, posting a public rebuttal and study, and arranging a $90 million settlement for a click fraud lawsuit.

BusinessWeek asserts that advertisers are turning away from pay-per-click, and large companies such as Expedia and LendingTree are joining forces to lobby Google and Yahoo and share information. Meanwhile, the FBI, the U.S. Postal Inspection Service, and the Senate Judiciary Committee are investigating. Our take? Google and Yahoo need to be much more transparent about the ins and outs of their ad businesses.

Writers Brian Grow and Ben Elgin antagonize domain parkers (others in the press have been much friendlier), who post ads on unused URLs, for operating as middlemen for click fraud. It would be interesting to see if such sites pass muster with investigators. There is an increasingly narrow line between user-generated content aggregators and domain speculators. If we were to encourage passerbys to contribute some free content around a popular topic (say VoIP, or maybe asbestos), plug in AdSense, and search engine optimize, would you consider it a fun new participatory social site or a scam?

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