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False Ad Clicks Cost Google 1 Billion Dollars A Year 233

Meshach writes "There is an interesting story at CBC which claims that Google loses one billion dollars per year to fraudulent ad clicks. The article contains an interesting description how how the company determines if a click is false. 'The company explained that it determines which clicks are invalid through a three-stage system. Most of the illegitimate clicks are automatically detected analyzed and filtered out in the first stage ... The second part uses automatic and manual analysis of the AdSense network to weed out false clicks before they are logged to an advertiser's account.'"
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False Ad Clicks Cost Google 1 Billion Dollars A Year

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  • Ledgerlines (Score:3, Interesting)

    by suso ( 153703 ) * on Tuesday September 18, 2007 @06:37PM (#20661149) Homepage Journal
    See, it all works out because they make it up from the interest on the money that they don't have to pay out to adwords accounts that aren't over $100 [roughtype.com]. Kinda like how a bank makes money.

    Actually there was some other article I read recently about how much Google probably makes off of that, but I can't find it now.
    • Re:Ledgerlines (Score:5, Insightful)

      by moderatorrater ( 1095745 ) on Tuesday September 18, 2007 @06:42PM (#20661231)
      Assuming that each account has $99.99, and that Google can get a 10% interest rate with that money (they may have to pay out on it, after all, so they've got to keep it close to liquid), it would require 100 million such accounts. Somehow, I'm doubting that they make that much off of it.
      • Re: (Score:2, Funny)

        it would require 100 million such accounts. Somehow, I'm doubting that they make that much off of it.
        Did you see Office Space or Superman 3? Yeah, it's like that. They take all the fractions of a cent and keep it for themselves.
      • Re: (Score:3, Interesting)

        by Rolgar ( 556636 )
        Banks only have to keep 10-12% of the funds available for withdrawal. The rest is invested/loaned out to make money.
      • Re: (Score:3, Interesting)

        by encoderer ( 1060616 )
        "Somehow, I'm doubting that they make that much off of it."

        Well, "that much" is subjective, wouldn't you say?

        Your point is that for GOOG to make ONE BILLION a year, they'd have to have 100MM accounts with $99.99 in them.

        Not at all likely, for obvious reasons.

        However, wouldn't you think that, oh, ONE HUNDRED MILLION would surpass "not that much"?

        If so, they'd only need 20MM users with an average of $50 in the account.

        That's still not all that likely, but it's certainly doable. And we're talking $275,000 a da
    • Re:Ledgerlines (Score:5, Insightful)

      by ajs ( 35943 ) <ajs@nOspam.ajs.com> on Tuesday September 18, 2007 @06:55PM (#20661403) Homepage Journal
      I'm often confused by why people think that there's some mystery cash floating around in Google's (or any other online advertiser's) pocket. There's an obvious need, when payments are tiny, to limit the frequency of transactions so that aggregation can happen. However, it's not like your Google AdSense account is a money market account with cash sitting in it, gathering interest. Google simply has a line-item in their budget for payables that cannot be issued yet because the transaction fees on cutting someone a check for $0.03 cost them more than the payment itself.
      • Re:Ledgerlines (Score:4, Insightful)

        by DrSkwid ( 118965 ) on Tuesday September 18, 2007 @08:51PM (#20662491) Homepage Journal
        People probably have that idea because every $0.01 of every click in your unpaid Adsense account was paid for, up front, by the advertisers, with real money.

      • by jsight ( 8987 )
        This would be true if they were only paying out at some small # (like the $10 that amazon uses for their affiliate program). But they are taking the money up front and then only paying out at $100.

        I have to imagine that there are a good many accounts out there that either never reach $100, or only reach it over large periods. I'd think they could make decent money on that "float".

        There's nothing unethical about it at all, of course. If you want lower payout amounts, just use a different service.
      • Re:Ledgerlines (Score:4, Informative)

        by tompaulco ( 629533 ) on Tuesday September 18, 2007 @10:56PM (#20663281) Homepage Journal
        Hmm, well, they seem to not want to pay me until I have $100 balance in adsense, but they are perfectly happy to bill me every month when I owe them $6.03 for adwords.
    • No, banks make money by lending out more money than they have.
  • This comes with the territory of running an internet advertising service. Between accidental clicks and sites which 'farm' ad revenue, you stand to lose a chunk of money.
    • Re: (Score:3, Interesting)

      by hedwards ( 940851 )
      What I'm curious about is what kind of information they disclose to the people that have ads on their site. If I were trying to pay for hosting with ad clicks, I'd be pissed if I was being cheated out of 10% of my clicks because google suspected that they were illegitimate without informing me that they were withholding the money.

      Yes, fraud does happen, but why should the advertisers get an undue break when its only on a small scale and not organized by the website operator? It seems awfully fishy that goog
  • Upside down logic (Score:5, Insightful)

    by Anonymous Coward on Tuesday September 18, 2007 @06:41PM (#20661215)
    It's more like $1B dollars in fraud is not passed on to the advertiser. Many billions more probably are. Google isn't losing a thing.
    • by Anonymous Coward
      In the same way that the RIAA is losing quadrillions of dollars to music piracy.
    • by Original Replica ( 908688 ) on Tuesday September 18, 2007 @07:26PM (#20661717) Journal
      Yeah, I don't think Google is hurting for $$$ right now. One share is $535.27. http://www.googlestockquote.com/ [googlestockquote.com] I don't think they are actually hemoraging a billion a year, it's more like they are wishing all of those clicks were valid so they would have a billion more in profit. Well in that case, I lost $250,000,000 last week because of a faulty QuickPick in the Lotto.
    • by vrtladept ( 674792 ) on Tuesday September 18, 2007 @07:37PM (#20661801) Journal

      Honestly I don't understand how they "loose" 1 Billion in ad revenue due to fraudulent clicks. In fact they don't loose anything. If the clicks were a fraud, then they weren't earned. This is the same kind of funny logic that is used to say that piracy costs billions. There some weird assumption that if this fraud click didn't happen that a legitimate click would happen. In a world with no scarcity ("selling" a click does not prevent selling another click). There is no loss due to clicks that shouldn't count.
      • by timeOday ( 582209 ) on Tuesday September 18, 2007 @08:42PM (#20662417)
        For google, click fraud is a quality control issue. It dissuades potential advertisers from paying google for clicks because they don't know how many of those clicks are worthless.

        Saying click fraud costs google nothing is like saying bad transmissions cost Ford nothing because the customer eats it. People aren't stupid, so pretty soon things that decrease the utility of the product also hurt the market for the product.

    • It's more like $1B dollars in fraud is not passed on to the advertiser
      ... who will be less inclined to deal with Google in the future. Advertisers lose and Google loses.

      Oh but wait, I forgot. Losses in probability and losses in investment aren't really losses at all, and even somehow help the party in question. *cough* RIAA trolls *cough*
  • by JoelKatz ( 46478 ) on Tuesday September 18, 2007 @06:41PM (#20661221)
    The logic behind this story is bogus. The $1 billion in money that these fraudulent clicks cost Google doesn't exist. If not for the bogus clicks, these clicks wouldn't exist.

    It's like a software company claiming that false orders cost them $10 billion dollars last year because they received an bogus order for 100,000,000 copies of a $100 product. Had they not received the bogus order, they would not be $10 billion richer.

    • by p0tat03 ( 985078 )
      Who says they're not doing an analysis of caught vs. un-caught fraudulent clicks? If they have a decently accurate percentage figure for fake clicks that manage to pass their system, then that IS money lost, since it WAS paid out.
      • by rbanffy ( 584143 )
        "If they have a decently accurate percentage figure for fake clicks that manage to pass their system" then it's because they have a way to detect them.

        It they can't detect them, this number is, at best, a guess.
        • Re: (Score:3, Insightful)

          by p0tat03 ( 985078 )

          A cost-effective system might not be able to detect them, but there are ways to get a good idea about where this number may lie. 100% human-powered filtering of random clicksets? That would catch almost all fraudulent clicks, but be horrifyingly expensive to implement across the board, but by comparing results from a random human test to the machine system you can get some idea of how many you miss in the automated method.

          This is also how we figure out QA numbers in manufacturing - not every bad device th

        • Re: (Score:3, Interesting)

          by JoelKatz ( 46478 )
          This is a nonsensical argument.

          For example suppose they can afford to audit a random 1% of clicks they detect are bogus and 1% of clicks they detect are legitimate. Assume 1% is statistically significant. They can compute with known accuracy how many clicks fall into each of these categories:
          1) Legitimate clicks detected as legitimate.
          2) Bogus clicks detected as bogus.
          3) Legitimate clicks detected as bogus.
          4) Bogus clicks detected as legitimate.

          Type 1 clicks, obviously, are great. Type 2 clicks don't harm G
      • by karmatic ( 776420 ) on Tuesday September 18, 2007 @07:10PM (#20661577)
        Actually, paid out, or not, makes no difference. Either way, it doesn't cost Google anything.

        Let's take a look - clicks are either legit, or aren't.

        Legit Click - Money comes from publisher (not Google), and Google gets a cut.
        Bogus Click, Caught - No money changes hands. Without said bogus click, Google makes exactly the same amount of money.
        Bogus Click, Not Caught - Money comes from publisher (not Google), and Google gets a cut (profit).

        If you look the scenarios, the only for Google to "lose" money is to mis-detect a legit click as fraudulant, as the publisher gets a legit click for free. Google, of course, minimizes this likelihood, and makes sure it's more likely to have false negatives than false positives (I spend enough on Google, and do my own metrics to know this is the case).

        Fraud costs _publishers_ money; it _makes_ Google money (up until the point when advertisers start jumping ship).
        • by catbutt ( 469582 ) on Tuesday September 18, 2007 @07:39PM (#20661815)
          I think you are failing to factor in that the amount google makes on ads is determined by the market rate. And the market rate takes into account whether or not the clicks are real or not, since if it doesn't produce sales equal to the amount they pay for the advertising, people won't pay for it, and the price therefore adjusts downward. Google doesn't necessarily make more or less money because of false clicks, they just are paid less per click, but there are more clicks.

          You say "up to the point where advertisers start jumping ship". They don't "jump ship" per se, they just pay less.
        • by moderatorrater ( 1095745 ) on Tuesday September 18, 2007 @09:04PM (#20662615)
          To keep its lead in text ads and to avoid law suits, Google puts a lot of time and effort into catching fraud. That costs them money in development and the projects the developers could have done instead. Then there's the percentage they would have taken had that been a legitimate click which they no longer take because they have to nullify it. Then there's the lost bandwidth from having to serve out and record the click, plus the extra servers because of fraud. Let's not forget that they have to pay their lawyers to defend them from the lawsuits that would come whether google's at fault or not.

          It's true that publishers lose more money from fraud than google does, but that doesn't mean it doesn't cost Google either.
      • by Ajehals ( 947354 )
        If so it would also mean that they charged advertisers for them, so they still aren't losing* anything.

        *That's the apparently similar to "loosing" in case anyone is confused... :)
      • by JoelKatz ( 46478 )
        "Who says they're not doing an analysis of caught vs. un-caught fraudulent clicks? If they have a decently accurate percentage figure for fake clicks that manage to pass their system, then that IS money lost, since it WAS paid out."

        Err, what?! If they fail to detect a bogus click, they get *PAID* by the advertiser for that click. They pay out less than the advertiser pays.

        Google is only scammed by bogus clicks indirectly.

        For example, if I run an ad with Google and some other company, undetected bogus clicks
    • ... is that mainstream news outlets have become so completely brainless as to parrot statements like the ones in this story. Then they wonder why people are seeking alternative sources of information.

      The logic behind this story is bogus. The $1 billion in money that these fraudulent clicks cost Google doesn't exist. If not for the bogus clicks, these clicks wouldn't exist.

    • by ortcutt ( 711694 )
      How dumb are reporters these days? Seriously, I fear for the future of the journalism. Also, whoever at Google is making claims like this should be fired for sheer stupidity.
    • could be worse.

      I'd hate to see a billion fraudulent chicks. ...except maybe on easter.
    • Re: (Score:3, Informative)

      by daeg ( 828071 )
      Google could charge for the clicks. Then they'd make that $1 billion back.

      However, they'd also stand to lose a lot of customers. Our AdWords bill is high enough for a small company, paying extra hundreds or thousands a year for fraudulent, worthless clicks would scare me the hell away from AdWords.

      Much of AdWords' value to Google is in keeping a high number of subscribers to keep the bid prices up relatively high on popular keywords. Losing popular subscribers could send prices down, costing them even more
    • Re: (Score:3, Interesting)

      by bcc123 ( 550310 )
      ROFL. I don't see why the point of the article is so hard to grasp, but here is the explanation of the logic:

      Google discards those clicks voluntarily. If they hadn't, they could be charging the advertisers for each such click, and would be making more money.

      The logic is not bogus.
      • And that would drive the advertisers away, because nobody wants to pay for those fake clicks.

        If you look at it a very specific way, you can frame the discussion so that it looks like it's costing google a billion dollars. But it's not really a meaningful or useful number, except that Google can say to potential advertising clients, "hey look how honest we are, you should use our advertising service."

      • by JoelKatz ( 46478 )
        "Google discards those clicks voluntarily. If they hadn't, they could be charging the advertisers for each such click, and would be making more money."

        So, is Google stupid? No, of course not.

        They are smart enough to know that if they charged for clicks they know are bogus, they would make *less* money. They'd have to charge less per ad, they'd lose customers, and so on.

        These bogus clicks ARE NOT opportunities to make money. They're simply bogus.

        There is no scenario where Google could convert these into reve
      • Re: (Score:3, Interesting)

        I have a friend who is a criminal. He offered me a million dollars last year to help him with his fraud. I turned him down.

        Thus, my criminal friend's fraud is costing me a million dollars. See the problem?
    • Re: (Score:2, Interesting)

      by Anonymous Coward
      The $1 billion does exist. Remember the order didn't come from the people clicking (who have no money) but from the advertizers (who do). But it's not fradulent clicks that cost google the money, it's their own identification of these fraudulent clicks. The statement by google is accurate:

      "every percentage point of invalid clicks we throw out represents over $100 million [US per] year in potential revenue foregone,"

      It is "potential revenue" because if they hadn't done the analysis, they could have charged a
      • by JoelKatz ( 46478 )
        Let's put it this way. The $1 billion Google "lost" they did not earn and were not entitled to. It is insane to say that fraud cost you money that you did not earn or was not entitled to. If someone loses $100,000 to a Nigeria scam, they are actually out $100,000 that they earned and that they are entitled to.

        The argument you are making is incorrect for very subtle reasons. I'll try an analogy because I think that explains it best:

        Suppose I run a video game store. Someone leaves 100 copies of Halo 3 on my d
    • The $1 billion in money that these fraudulent clicks cost Google doesn't exist.

      Yes, it does. It exists and remains in the hands of Google's advertisers who, if Google didn't work as hard as it does to identify fraudulent clicks, would be charged that amount.

      Now, really, this doesn't mean Google is "losing" money, it means Google is spending money (both in terms of staff time and resources, and in terms of reduced effective advertising charges) to provide quality service (i.e., only charging for the meaning

  • Stupid articles that dont contain any actual information. Got me all excited to know how google filters the false clicks.
  • Ads (Score:5, Insightful)

    by Threni ( 635302 ) on Tuesday September 18, 2007 @06:43PM (#20661241)
    I've been on the net for about 11 years now, and I've not one single time ever deliberately clicked on an ad because it was interesting. I've clicked on accident; I've clicked to allow a download to proceed, or to get a limited time pass to an otherwise charged-for service/site, and I've clicked just for a laugh to fool people into thinking I give a shit, but the day I start to get interested in and buy products based on commercials (online or elsewhere) instead of reading reviews, comparing alternatives and talking to friends/family who've bought something is the day you can take my brain out and give it to someone else.

    • "but the day I start to..."

      *pulls out circular saw*

      You didn't ACTUALLY specify that your brain could be removed only after said action. >:D
    • Re:Ads (Score:5, Insightful)

      by sampson7 ( 536545 ) on Tuesday September 18, 2007 @07:01PM (#20661469)
      This is cruel.

      My family runs a small business, http://www.beadstore.com./ [www.beadstore.com] We are not Apple or Microsoft. We do not gross anywhere near a million dollars a year. Each time you click on one of our ads you take somewhere between 5 cents to $1.00 directly out of our pocket.

      Now we try to target our ads only to those who care about beads and jewelry and such -- but our ads sometimes display for completely random searches.

      What on earth is possibly wrong with buying something off the internet? A Google search for "African King Beads" (including the quotes) and my store is the first hit.

      I also happen to know many of the merchants listed on the right advertising for those key words; after all, the high end collectible bead family is relatively small. I would *never* click on one of their ads, because I know it costs them money every time I do. If I wouldn't do this to my competitors, why would you do it to a random stranger?
      • If I wouldn't do this to my competitors, why would you do it to a random stranger?

        You seem like a relatively decent and honest person. Others, not quite so much.

        consider this scenario
        If I were to say pay someone $25 a day in cash to spend 3 hours "clicking ads" I could probably force a small company like yours out of business in just a few short weeks.
        Build a small business out of this process, charging local small companies to sabotage their competitors, and have someone in a small country where $25 is a fairly large amount of money and you have a fairly decent reason why.

        As a business

      • The GP doesn't imply that anything is wrong with buying off the internet, he implies that buying based on ads is something stupid that he wouldn't do. Personally I agree with him on that, I'm one of the people unaffected by advertisements and so no matter how good an company or product is I'm not going to buy it based on an ad. I've only gotten interested in probably 10 products thanks to ads and I've only bought 1 item that I can remember where I originally heard of it from an ad (a christmas gift for some
      • by lennier ( 44736 ) on Tuesday September 18, 2007 @07:49PM (#20661937) Homepage
        I guess it never crossed my mind that by clicking on a banner ad I'd be causing economic harm. I thought the ad economy these days was all based on impressions, not clickthroughs.

        Makes me want to protect the little guy by filtering out all ads before they display in my browser, just to be on the safe side. Don't want to hurt anyone by accidentally clicking... :)

        • by Rich0 ( 548339 )
          The irony is that everybody is obsessed with click-throughs, and yet impressions are probably the most important effect of an ad.

          How many click-throughs do you get on a super-bowl ad? Yet people pay a fortune for them. There is more to advertising than counting clicks...
      • If your business strategy relies on people not being assholes on the internet, may I wish you all the luck in the world. Since the first goatse was posted, it was clear that the internet breeds assholes...

        .....shitcock. [penny-arcade.com]
    • I've been on the net for about 11 years now, and I've not one single time ever deliberately clicked on an ad because it was interesting
      New computer users click on ads (as well as everything else on the screen). You have simply learned to ignore them. New users have not, which is why google makes money.

    • Re: (Score:3, Insightful)

      by swv3752 ( 187722 )
      I have clicked on adds to buy a product, but it was for products I was looking to buy anyways. I figure i can help support a site without costing me anything extra.
    • There are people on the net dumb enough to believe a distant, heretofore unknown relative needs their services to get a few million dollars out of their African country. And there are enough of them for this kind of fraud to cost Americans millions of dollars a year.

      I'm not at all surprised.

      • You might also be surprised at how many of those same people run small businesses, web-based or otherwise.

        It never ceased to amaze me, when my job involved dealing with small~medium business owners, how straight-out dumb some of them were. Outside of their own little area of expertise, many were not too far above the "touch the fire to see if it's hot" level...

        (No, I'm not talking about their tech skills. I really am referring to their everyday level of intelligence; the kind necessary to walk without falli
    • by pembo13 ( 770295 )
      Before Google Ads, I could have probably said the same, but I have come across some click worthy Google ads.
    • I wouldn't say that I'm particularly susceptible to being manipulated by advertisements, but even for someone like me who mostly ignores them, I would say that they manage to sometimes make me aware of products that I wouldn't otherwise know about.

      But it's all about the venue and the relevance of the ad. The ads on Penny Arcade's website have showed me new games that I ended up spending some money on. The guys that run PA have said that they only accept advertisements for games that they think are of reason
    • One thing Google is bad about is they'll kick a site out of AdSense, with no way to appeal, if users come to your site and start making a lot of fraudulent ad clicks. You can effectively put a small site out of business doing this and Google doesn't even give a damn. They don't just not pay you for the clicks - they won't allow you to ever get paid for the clicks again. It really sucks too sense Google has kind of cornered the market so there are a lot fewer good options for earning ad revenue on your websi
    • Moonpod's "Starscape", saw in a /. banner ad, downloaded the demo, liked it, registered the full version, and I was very happy with it.

      Also my current web host I found from a Google sponsored link. Sponsored links are useful when you're shopping, a bit like classified ads.

      I've *clicked* on a fair few banner ads, mostly to find out what they are. But my clicks don't generally translate into intent to purchase.
    • I've clicked on plenty of ads, usually to read information.
    • It's worse than you think. I conslut sometimes for a couple of small ISPs, and when I take a look at their squid logs, I see that 1/3 of all freaking http requests are for ads. And don't forget that bandwidth is precious, same for screen real estate and human attention.

      You may reply "but the ISP is paid for that anyway". Yes, but they have to deliver less real content for the same money while incurring more costs. So who loses? Customers and ISPs. Who wins? Advertisers. Guess where my sympathy is.

    • by catbutt ( 469582 )
      So...just curious...do you encourage others to act the same way you do? Because a lot of the web would disappear if there wasn't a revenue model.

      I occasionally click on ads if they pique my interest, especially at sites I frequent and enjoy. To take the point of stance of never clicking on ads (as if by principle), is akin to someone who says they never tip at a restaurant on principle. What exactly is the principle?
  • by El_Smack ( 267329 ) on Tuesday September 18, 2007 @06:44PM (#20661257)
    From TFA "Google does not charge its advertisers for clicks it determines to be invalid. For example, if 10 out of 100 clicks were excluded Google would not charge its advertisers for the invalid clicks, cutting into the company's revenue."

    Someone is counting invalid clicks as lost revenue, rather than counting them as, well... invalid? Who at the Googleplex used to work in the music/movie industry?
    • This is actually even worse. It could be argued that someone might buy a CD or a movie if they were unable to pirate it. But, you can't say that google would get more legitimate clicks if they could eliminate the fake ones.
      • Re: (Score:3, Insightful)

        But, you can't say that google would get more legitimate clicks if they could eliminate the fake ones.

        You could say Google would charge advertisers more in total, given its rates, if it didn't detect as many of the fake ones, though.

      • by Dunbal ( 464142 )
        But, you can't say that google would get more legitimate clicks if they could eliminate the fake ones.

              No no no you just don't get it. See, if you click on the ad, you HAVE to buy the product/service. Otherwise you are committing fraud... /sarcasm
      • No, but they could save money on the back end through servers and programmers/analysts/etc who spend time finding fraud.
    • Well they could have also worked for the BSA... You know, the "Bogus Statistics Association"...
  • by VidEdit ( 703021 ) on Tuesday September 18, 2007 @06:45PM (#20661263)
    Google doesn't get to charge for fraudulent clicks. That isn't the same as "loosing" $1,000,000,000.

    Google isn't out any cash for the fraud, it is people who **buy** Google ads and pay per click who potentially loose money to fraudulent clicks, not Google. And there no way that Google can catch all click fraud, so it is **inevitable** that at least some advertisers will be charged for fraudulent clicks.

    Nice post. Way to make Google look like the victim when they aren't the ones who actually pay for fraudulent clicks.
    • by hiryuu ( 125210 )
      How the hell did you get it right in the subject ("lose"), yet screw it up twice in the post? :P
  • by bidule ( 173941 ) on Tuesday September 18, 2007 @06:48PM (#20661307) Homepage

    What is the exchange rate from RIAA dollars to USD? Because it seems they are using the same monetary units.
    • by ceoyoyo ( 59147 )
      I believe the numeral zero features prominently in that number. In fact, I think you can express it using only zeros.
  • Click fraud is only inflating the number of clicks made by $1B. Roughly 10% according to the article. Sounds suspiciously low to me. Spam certainly comprises greater than 10% of all email sent, why are click fraud rates so low?
    • Because you have to either pay someone to actually click on a link or make a bot which perfectly spoofs a browser to do it for you. Either way you need to make sure it happens in such a way that there's no pattern to the clicking so that google doesn't catch you, including timing, ip address, etc. I would liken the click fraud to spam that gets through gmail's filter rather than unfiltered email, and for me that's about 10% (depending on the day).
  • The small company I work for has about $1M in sales annually, and we spend almost $250,000 a year on Google Adwords. Roughly 85% of our sales come from Google. We're getting a conversion rate that is less then one percent and it's gotten worse over time. If it continues to drop, we'll have no choice but reduce our adwords cost-per-click limit and take our advertising dollars elsewhere. No matter how you spell it, that means problems for the G00Gmeister.
    • Re: (Score:3, Insightful)

      by tompaulco ( 629533 )
      We just completely stopped our Google Adwords advertising. We have looked at print, mail, radio and other media advertising, but every time we run the estimated numbers, we find that spending money on advertising would bring us less money in increased sales than we spent on the campaign. I have long suspected, and now believe strongly that the marketers are best not at selling your products but at selling the idea that you need their services.
    • If 85% of your sales come from Google, and your adwords>sales conversion rate is reducing, I'd you're the ones with the problem, not 'the GOOGmeister'.
  • by sampson7 ( 536545 ) on Tuesday September 18, 2007 @06:49PM (#20661329)
    Google loses nothing as a result of clicks it determines to be fraudulent, other than its time and a little server space. On the balance sheet, it's simply as if those clicks never happened. No out of pocket expenses are incurred by google. Eliminating every fraudulent click out there would not increase Google's bottom line one iota, other than its incremental costs of dealing with this fraud.

    We merchants/advertizers are the ones screwed. Google says that 10 percent of clicks are fraudulent? I have zero idea if this is an over-estimate, under-estimate, or dead-on accurate. However, I do know that google has very little incentive to "mark down" my bill every month. My family runs a small business -- http://www.beadstore.com/ [beadstore.com] -- and sometimes advertise on google. How many of those clicks I pay for each month are fraudulent? Who knows. I certainly can't tell.

    This isn't to say that I distrust Google. The fact is, that when we advertise, our sales go up. So something is working. Advertising on Google makes a bigger difference than any of our other venues. But those numbers suggesting that 30 percent of our advertising budget may be/once was/is potentially lost to fraud? That is truly scary.
    • by rbanffy ( 584143 )
      OTOH, I still don't know how and why they declared my site had invalid clicks and, because of it, my AdSense account would be terminated.

      As far as I know, it could even be a well intentioned friend who liked the articles and clicked on all ads to help me.

      Anyway, because of that, Google probably spared its advertisers a couple cents a day.
      • Only a guess, as their methods are secret, but it seems that having a noticable number of addresses always clicking some adverts is a red flag. Of course, if you have a site which has low traffic and a high percentage are repeat visitors, then that's just the sort of clicking you're bound to get.
        • by rbanffy ( 584143 )
          That's exactly my site. 200 unique visitors a day, 80% repeating ones, most of the rest from search mechanisms.
  • Is this billion dollar loss calculated the same way mp3 downloading costs are?
  • by MichaelCrawford ( 610140 ) on Tuesday September 18, 2007 @07:00PM (#20661455) Homepage Journal
    A while back I read that one of Google's founders said that click fraud is the greatest threat to google's business. This is because Black Hats publish websites with AdSense, then fraudulently click the ads on their own pages. They get paid by Google, and the merchants who placed the ads through AdWords Select pay for the fraudulent clicks, but don't enjoy the increased sales that advertising can bring.

    • by patio11 ( 857072 ) on Tuesday September 18, 2007 @09:34PM (#20662835)
      I recently upped my AdWords spending to the (substantial, for me) tune of $15 a day. 20% of my budget was guzzled down by four sites, which all used a technique similar to the following: they had a zillion hand-crafted content pages up, one page on each site was quite close to one of my own search terms, and the page was organized into a workflow. (Search for "apollo bingo card templates" to see the example. No way in heck I'm tossing them a link for it.)

      The AdSense block is under the header for each stage in the workflow, which suggests to unsophisticated Internet users that my ads ARE the next stage in the workflow. You might think I'd be happy about that, because it means a lot of users naively click on me thinking I'm the next step in the workflow, but ALL CLICKS ARE NOT EQUAL. As soon as somebody clicks on my ad, they get whisked to a completely different site and realize "Thats funny, something must have gone wrong". So they click back and I'm out nine cents. Repeat times a couple of hundred over the last 48 hours.

      My CTR (click-through rate) for ads on other sites is in the general region of 1%. Thus, I can reasonably assume that about 1% of the audience reading content with my keywords is at least marginally interested in the product I sell. The CTR on ads on these pages which drew clicks by visual deception was in the teens. That means 15x the earnings for the owners of the deceptive pages. However, the conversion rate (percentage of folks who go on to download my free trial or buy from me) from customers with normal levels of interest (i.e. from other AdSense ads, for example) is about 20%. From these pages, it was less than 2%. Thus, the revenue split from a sale of my software goes from something like 40/40/20 advertiser-Google-me to 100/100/-100 advertiser/Google/me. (I am obviously hoping to tweak the campaign to the point where it is closer to 20/20/60, but even at 40/40/20 its still a positive return on investment.)

      Anyhow, when you work out the math it had me paying something close to $25 to generate a fifty-fifty shot of selling a $25 piece of software. I've since banned the deceptive sites (you can manually choose to not allow your ads on certain domains or URLS), of course, but there are still advertisers getting screwed by them as we speak. And, looking through my logs, there are a LOT of sketchy sites in AdSense which would have cost just as much if they had been blasting through enough traffic. That really threatens the utility of the platform. If its 75% conmen to 25% upstanding sites like Mrs. Smith's Teaching Resources there is no reason for me to pay a single penny for the ads since I'll have to babysit the campaign every hour or get a negative ROI.
  • Walmart's shelves are too close together so they can fit more stuff in the stores... because of that they deal with a lot of broken merchendise. Does this mean their business model is broken?
    no, it just means that their business model plans on some loss.
  • It's not really Google who are losing anything; the losers are the advertisers who pay out for invalid clicks that aren't caught, and the small web sites who get their sites closed because their traffic is anomalous.
  • ...by not displaying the ads at all! No false clicks from me. Are you guys doing your part too? [customizegoogle.com]
  • I use Safari on Mac OS X. Every time I click an adword, it directs me to some intermediate page which then goes nowhere.

    So I wonder how many "false non-clicks" they get from people like me? And then how many of my "copy the URL and paste it into the address bar" workarounds are they counting as "false clicks"?
  • Actually Google's policy is a bit screwy (if you are listening Google how about a reply?).

    I just automated a site called www.thecommunitypage.com (using perl/catalyst/fastcgi/linux/apache if you are interested) which used to be just static pages. They have a very nasty competitor who has pulled dirty tricks, including telling people his site is theirs, and I believe their programmer is in jail or some such. Anyway, Google apparently canceled his AdSense account with them because they thought he was trying t
  • How are they losing money? Meaning that they aren't charging their customers (i.e. adwords advertisers) for the fraudulent clicks? That's not losing money, that's not taking part in fraud. Am I losing money by not helping rob the liquor store down the street?

    The money they spend on actually detecting fraudulent clicks is lost, but it can't be $1 billion... and if it is I'd like to meet the handful of programmers that are pulling in $100mm a year. But really, whatever they're truly losing (maybe $1mm a y
    • by JoelKatz ( 46478 )
      "The money they spend on actually detecting fraudulent clicks is lost, but it can't be $1 billion... and if it is I'd like to meet the handful of programmers that are pulling in $100mm a year. But really, whatever they're truly losing (maybe $1mm a year tops?) is just part of doing business in a world with a small percentage of dishonest people. It sucks, but all businesses have to deal with this."

      It's not like money spent to combat employee theft or things like that. Nobody shops at a store because they do

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