Online Click-Fraud A Whopping 16%
Here’s an interesting figure bloggers and webmasters will find interesting: 16%. That’s the percentage of all clicks on online advertisements in Q3 2008 that turn out to be fraudulent according to the ClickForensics Click Fraud Index (via Seeking Alpha). Even more striking, fully 27.1% of Pay-Per-Click (PPC) clicks on popular search-engine content networks like Google Adsense and Yahoo Publishers Network (i.e. those predominently used by bloggers) turned out to be fraudulent.
What Does This Mean For Advertisers?
This number likely hasn’t deterred advertisers too much in the past because the internet, being a new advertising medium, has so far offered a significantly higher return-on-investment than traditional media. But that can’t last forever. Eventually, the return on internet advertisement dollars will equalize with that of traditional media. When that happens, high rates of click fraud will be the bane of online publishers’ existence, since that type of thing doesn’t really exist with other forms of advertising. Advertising networks, especially the search engine content networks, will need to take aggressive steps to curb click fraud to survive.
What Does This Mean For Bloggers?
As a blogger and webmaster, I’ve always been aware of the problem but had no idea it was so prevalent. High rates of click-fraud punish small publishers (like me and most other pf bloggers) by reducing the amount advertisers are willing to pay for clicks, knowing almost a third of them will be fraudulent and won’t lead to sales. Theoretically, decreasing click fraud should increase the value of remaining clicks, driving up the amount of money advertisers should be willing to pay for traffic and thus, increasing bloggers’ revenue. As bloggers, it is in our best interests to discourage click fraud. Above all, don’t click your own ads and discourage your friends and family from doing the same. They may think they’re helping you out, but in reality they’re doing just the opposite. The long-term viability of this business model depends on advertisers believing they get value for their advertising dollars.
What Does This Mean For Investors?
Surprisingly, the situation is quite rosy for investors in content network companies like Google and Yahoo. Even with high rates of click fraud, online advertising is clearly still profitable to advertisers. Furthermore, online advertising will continue to steal market share from traditional print and broadcast media over the next decade regardless of economic conditions, so even in the event of a prolonged recession, online advertisers should still experience decent growth rates. The high incidence of click fraud merely represents an additional avenue of growth: as click fraud is reduced, the amount of money flowing through the content networks and ultimately to publishers should rise commensurately. I thought of this while reading a piece on CNN Money earlier on five reasons to buy Yahoo stock. Perhaps a 6th reason?
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Great article and the 27% number is suprising. I wrote recently on how Google’s adsense pay outs seem to be dropping and I can see why this may be the case now. Long term though advertisers will move towards a Click to Sale model where only clicks that result in sales of a product or service will payout. This means that bloggers should start looking at non-Adsense sources of income!
NB; Stumbling this article…
I agree with your point on advertisers moving to a click-to-sale model, which means bloggers will have a lot more work to do (i.e. preselling affiliate products, etc) compared to simply putting up adsense and hoping for the best. I think adsense will continue to work in the future, just not as much as it once did. There will always be advertisers willing to pay for untargeted traffic for a low enough price.
The entire Adsense business model has too much mystery, with no disclosure even to publishers as to what a click is worth. How do we know if Google is not engaging in click measurement or compensation fraud as well?
Well, publishers can come close to figuring out what particular keywords pay if you have an adwords account. Google tells you what it would cost to target certain keywords and you can figure out deductively what percentage off the top google takes (averages about 20% last I heard). But they could certainly be more open about it. It is in Google’s best interests not to piss of publishers, I would think, since the multitude of small publishers are their bread and butter. I think once competitors like Yahoo, MSN, Chitika, and adbrite start approaching adsense’s level of sophistication, publishers will start demanding more of Google in order to stick around and they’ll have to clean up their act. I’m hoping, anyway.
The number of online ad providers in growing very fast, even as Google Adsense remains the leader. I would think one of these is going to figure out a way to reduce the click-fraud % and therefore create more value and a competitive advantage.
Actually google will continue dominating the search engine market. But why people keep using adsense as opposed to other programs is beyond me.
DGI, what do you recommend besides adsense? I have tried chitika with little success. I do have pretty good luck with Amazon, though not on this blog. I’m steal wary of selling follow text links.