Is Click Fraud Really a Problem?

Click fraud is currently a major topic in online advertising. Many argue that it presents a threat to the stability and viability of pay-per-click (PPC) advertising, the key revenue generator for both Google and Overture. In actuality, click fraud is not a significant issue at all.

Click fraud occurs when ads are clicked for reasons other than a genuine interest in learning more about the product or service advertised. Click fraud occurs in two forms. In one instance, fraud arises from competitors trying to sabotage each other. One competitor clicks on the ads of another just to drain the budget of that company. The other instance occurs when webmasters (or people associated with the webmaster) repeatedly click Google AdSense ads (which are syndications of others' ads) on their own web pages in order to generate more revenue. While both Overture and Google have developed sophisticated technologies to detect click fraud, their systems are, and may never be, foolproof.

The real question is how much does click fraud actually damage the PPC industry? Gross fraud, i.e., when one person or technology consistently and repeatedly clicks on an ad, aside, which Overture and Google can easily detect, we believe that click fraud has no real impact on the industry. The following explains why.

Efficient market theory says that it is impossible to "beat a market" because prices already incorporate and reflect all relevant information. As the PPC industry has matured, efficiency has begun to take root. That is, the price of each keyword has been driven up to the point where it reflects the highest price an advertiser is willing to pay for a click.

For instance, a book retailer may pay $1.00 per click based on internal metrics. These metrics dictate, for example, that on average 30% of clickers purchase a book and the average profit per sale is $4.00. So, for every 100 clicks ($100 cost), they make 30 sales ($120 revenue) and generate a $20.00 (20%) profit. Note that years ago, the same retailer may have been able to pay only $0.50 per click, but as the market matured and more retailers began advertising, competitive bidding forced the price up to $1.00 where the highest return the most advertisers can make is 20%.

The key point is that click fraud is already taken into effect when advertisers select the highest amount they will bid. For instance, there is no difference whether an advertiser pays $0.83/click for 121 clicks with 21 being fraudulent, or $1.00/click for 100 clicks when there is absolutely no fraud. In either case, the advertiser pays $100 and generates a profit of $20, and Overture and/or Google make $100. What changes is the advertiser's yield (e.g., the percent of clickers who purchased the book) which in turn effects their highest bid price. That is, with fraud, 30 out of 121 clickers (24.8%) purchased the book, and without fraud 30 out of 100 clickers (30%) purchased it. Without fraud, the bid price in an efficient market will rise from $0.83 to $1.00.

In summary, online advertisers must focus on analyzing and improving their internal metrics (e.g., conversions) and not worry about click fraud as it is already incorporated into keyword bid prices. Hopefully, the frivolous lawsuits and refund requests spawned by apparent click fraud will end as those in the industry recognize this undeniable fact.

About The Author:
Tommy Maric is the manager of TopPayingKeywords.com. TopPayingKeywords.com is designed to help webmasters maximize their profits using Google's Adsense? program. Through extensive research, TopPayingKeywords.com develops up-to-date databases of the most popular keywords and their accompanying bid prices. For more information, please visit http://www.toppayingkeywords.com.

Contact:
877-TOP-WORD
(877-867-9673)
info@TopPayingKeywords.com

---

3 Tips For Adwords PPC Management

Adwords PPC Management Tip No. 1Setting up an accountIf you... Read More

Improved PPC Marketing Performance from Time-Tested 80/20 Principle

As marketers and business owners, we're always looking for "the... Read More

7 Great Ways to Lose Your Shirt Using Google Adwords!

Google Adwords is a great tool! Careful use can lead... Read More

Paying for Website Visitors: The Allure of PPC for Small Biz Owners

There are good reasons why many webmasters and website owners... Read More

How Much Should You Pay for a Click

You have a web site ready for action. Your product... Read More

How to Increase Your Adsense Revenue

If you're a webmaster, you've probably heard about Google's Adsense.... Read More

The Truth - Adsense Click Fraud Can NOT be Stopped

Your probably reading this article because you use Google Adwords... Read More

Discover How to Create Ads Which Give Incredible Results!

Many people decide to spend a lot of money putting... Read More

Pay-Per-Click Search Engines ? The Basics

Search engine optimization can take a long time to show... Read More

Work Your Google AdSense to the Bone!

You got your website, you got your AdSense account, you... Read More

Buying Your Way to the Top with Pay Per Click Advertising

Imagine if you could advertise ONLY to people who have... Read More

How To Write Little Tiny AdWords Ads That Bring Giant-Sized Profits

It seems to be a phenomenon. You try Google AdWords... Read More

Top Paying Keywords: How to Increase Your Pay Per Click Returns

There is no doubting the success of Google's Adsense program.... Read More

Can I Make Money Online with the Adsense Program?

Sure you can. If you will learn how many other... Read More

Not Sure If Your Online Advertisement is Working?

Without tracking, your online advertising is just a shot in... Read More

What is PTRE and Is It Worth Your Time?

PTRE stands for Paid To Read Email programs. Online companies... Read More

Picking The Right Keywords For A PPC Campaign

Running a pay-per-click advertising campaign can be very expensive if... Read More

Profiting From Second Tier Pay Per Click Search Engines

Once you venture into the world of Pay Per Click... Read More

Expand Your Horizons - Sell Your Professional Services Through ClickBank

ClickBank allows its merchants to sell many different types of... Read More

When Adsense Makes No Sense: Knowing When Not To Use The Google Adsense Pay-Per-Click Program

Google's AdSense program is a proven money-maker that has enriched... Read More

Google Adsense: What You Need to Know!

We read about how to develop a Google AdWord campaign,... Read More

How to Use Pay Per Click Marketing, the Emoneyreport Way!

The cycle of affiliate programs and money making ventures goes... Read More

Targeting Usage Demographics to Increase Paid Search Conversions

During conversations with web business professionals about pay-per-click search engines,... Read More

Googles AdSense Soon To Have New Rival?

A large part of Google's multi-billion dollar annual turnover comes... Read More

How to Quickly Create an Adsense Site That Brings In the Bucks

One of the hottest crazes for online marketers is Adsense... Read More

Pay Per Click Advertising Can Be Very Risky Business

Click fraud is an unfortunate byproduct of the pay per... Read More

Internet Advertising Options

Your online business will likely require more advertising than a... Read More

MSN PPC Advertising Behavioral and Demographic Targeting: Killer App. or Achilles Heel?

Examining the failures of the web content design of many... Read More

We Are Right In The Middle Of A Pay Per Click Baby Boom

No, this baby boom will certainly not swamp the Social... Read More

Adwords & Adsense: A Beginners Guide

The Mechanism First a brief glossary of terms: Adwords: The... Read More

Is Pay Per Click your Best Marketing Bet?

You may already have heard of this method to get... Read More

Contextual Ads

These are simply advertisements related, in theory and often practice,... Read More

The Sensible Way To Earn Money With Google AdSense!

Dear friends,Google AdSense has rapidly gained a status of an... Read More