Pay-per-click vs. rent-a-click

by Mathew on July 12, 2006 · Comments

I don’t want to get into the whole debate over how big “click fraud” is — with some estimates as high as 14 per cent of all online pay-per-click advertising (in which Google and Yahoo are the leading players), and Eric Schmidt of Google arguing that the problem is self-correcting (something Mark Cuban takes issue with). Google is also trying to settle click-fraud related lawsuits.

I do think it’s interesting to watch the markets, including the black and grey markets, find ways of profiting despite Google’s restrictions on click fraud — which can involve either paying people to click on your ads (if you run a website), or paying people to click on your competitor’s ads (if you’re an advertiser who wants to drive up your competitor’s costs). When it comes to the former, there are stories popping up all over about offshore “click farms” where impoverished families in India make money by clicking ads — the 21st-century equivalent of stuffing envelopes.

And a reader named Mike just sent me a link to something he came across at the Blogging Stocks blog: auctions on eBay that sell the services of click-fraud artists. As the post describes it, there are half a dozen auctions with titles like “5 Google Adsense Ads Clicks Hits Each day for 5 Days” (Buy It Now for $1.99) that advertise how they “Don’t deal with worthless hits/clicks. These are real people clicking on your Adsense ads. Real money flowing into your Adsense account.”

They advertise how they arrange it so that multiple clicks don’t come from the same IP address in a 24-hour period, since that would trip Google’s fraud filters. No doubt some of them will be found out anyway, but others will spring up — it’s like Whack-A-Mole. And of course there’s always ClickMonkeys.

Could pay-per-click be on its way out, as my friend Scott Karp has argued? And if so, what replaces it — cost-per-action? No doubt fraudsters will find a way of gaming that too. For what it’s worth, my friend Markus from PlentyofFish, who knows a lot about online advertising, says there’s a lot of hype about click fraud, and security consultant Bruce Schneier has some thoughts at Wired News.

Google has responded on its official blog to the post about Eric Schmidt’s “let it happen” comments (hat tip to John Battelle).

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  • Lyubomyr
    List of pay per click programs: http://www.sitesreview.net/pay-per-click
  • Mathew, I've commented about this in the past and think I may have the solution. Specifically, why doesn't Google move to a CPM model - cost per month. Leaving the nitty gritty logistics aside, take the example of someone like me. Agoracom currently spends between $2,500 - $4,000/month on Google, depending on activity in any given month, knowing full well that many of those clicks are bogus - but what choice do we have if we want to reach the customer?

    If Google moved to a CPM model, Agoracom would submit a fixed amount it is willing to pay in a given month i.e. $2,500. Our position would be determined relative to monthly budgets of our competitors and not click throughs, thus eliminating all issues related to click-fraud but still maintaining an auction system for best positioning. If my $2,500 represents 25% of the total amount being spent on "Investor relations" this month, then I get 25% of the impressions (context ads) and the bottom 25% placement (search terms).

    Nitty Gritty - If the other 75% is made up of 75 competitors with 1%each of the total $ being spent on investor relations, Google would adjust my position accordingly.

    At that point, its up to me to decide if I want to increase it to buy my way into a better position. At least I now know that I'm truly competing against my competitors and not click-farms.

    With respect to affiliates, Google would simply pay them a pro-rata amount based on number of click-throughs. IIf there is an issue of click-fraud, its up to Google and the affiliates to work it out, not the advertisers.

    It's a slightly less sophisticated model than CPC but it fulfills the objective of advertisers competing for better placement via an auction model that can be changed on the fly.

    I predict the CPC model will inevitably collapse as click-fraud worsens through the introduction of more sophisticated schemes.

    I'll go even further and predict that within the next 12-18 months we will see a major bust of a massive click-fraud scheme that will have taken Google and its advertisers for $10,000,000 - $50,000,000. If internatiional crime organizations can find a way to mobilize planes, trains, mules and automobiles to smuggle and sell cocaine while risking death and incarceration, you can bet the farm they are already working on the very simple task of placing people in front of PC's and having them click on a mouse. Think about it.

    Let's face it, CPC is free money just waiting to be taken by modern day criminals who no longer have to commit a crime to steal money - money that Google is serving on a silver platter.

    Best,
    George
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