Google Gets Smart on Click Fraud

from Silicon Alley Insider by Henry Blodget

Google has been has been intently focused on click fraud for years, but has done a piss-poor job of communicating this. Its communications strategy has effectively been to say, "Click fraud's not a problem, third-party auditors like ClickForensics don't know what they're talking about, and if you don't just take our word for it we're not going to bother to explain ourselves." Finally, however, the company appears to have gotten as wise about this communications challenge as it has about others.

Google's click-fraud czar, Shuman Ghosemajumder, grants a long Q&A to Forbes.com in which he patiently explains many of the reasons why third-parties do not have all the information they need to accurately assess clicks--and, for the first time, he manages to gives the impression that Google is not being vague because it has something to hide. Forbes.com's Andy Greenberg asks a lot of the right questions, and the Q&A gives the impression that Google really does have the click-fraud problem under control.

The most important point about click fraud at Google, which Ghosemajumder does not make, is that the vast majority of it occurs on the AdSense affiliate network, not the AdWords paid-search service. The latter generates more than 80% of Google's profit (profit, not revenue), so the threat to the company's core business is minimal. In fact, if click fraud on affiliate networks ever got out of hand, this might end up driving even more business to AdWords. Key points after jump.

• Fair Isaac estimates that click fraud is far worse on AdSense and other affiliate networks (10%-15%ish) than on AdWords (1%). This is not new news, but Ghosemajumder appears to confirm that these estimates are in the ballpark, noting that they average out to an overall rate of 7%. Google itself has put the fraud number at "less than 10%."
• Google has a strong economic incentive to throttle the click-fraud problem, and it has dedicated major technical expertise to tracking it.
• The main reason third-party auditors like ClickForensics can't track the problem accurately is that they don't know what 1) the click-through rate is for any given ad and 2) the percentage of clicks that Google has eliminated as "invalid." (Google doesn't share this data with advertisers). ClickForensics and other auditors have always argued that it is Google that doesn't have enough information, as Google doesn't know what happens after a purported "clicker" leaves Google and visits the advertisers' site. The truth is probably somewhere in between.
• Ghosemajumder says it is difficult to say whether click fraud has increased in recent months, as ClickForensics and others have reported. This is not a flat-out denial, but it also doesn't necessarily sound like a dodge (Given the complexity of the issue, it may, in fact, be difficult to say). Google's tiny refund rate of 0.02% has not changed.