Like John Lennon, Google CEO Eric Schmidt must have received a visit from Mother Mary, whispering words of wisdom about click fraud. Using an economic thought model reminiscent of “laissez faire” and “trickle down,” Schmidt said the best way to deal with fraudulent clicks is to “let it happen.”
ZDNet blogger Donna Bogatin reports a Schmidt quote from a Standford speech that is likely to become as infamous as last week’s don’t-make-me-separate-you-two speech to Larry Page and Sergey Brin. Schmidt said the pay-per-click (PPC) model was “self correcting” when it came to click fraud. Even if there were no measures taken to detect it, Schmidt believes that:
Eventually, the price that the advertiser is willing to pay for the conversion will decline, because the advertiser will realize that these are bad clicks, in other words, the value of the ad declines, so over some amount of time, the system is in-fact, self-correcting. In fact, there is a perfect economic solution, which is to let it happen.
Mark Cuban, owner of blog search engine IceRocket, disagrees. Though Schmidt’s idea makes sense in theory, writes Cuban, it trickles down into a crumbly mess in reality. He notes how not all clicks lead directly to transactions, and at times aren’t intended to do so. Some times it is about branding, visibility, and saturation. In addition, this model may not affect memetic, faddish, or popular keywords.
In fact, its reasonable to presume that the “hotter” the sales of a product, the more vulnerable to click fraud the keywords related to that product are. If Corvettes are flying off the shelf, those pricing inquries are worth more and more because as long as inventory isnt constrained, the dealers are getting a ton of bids and are happily selling a ton of cars. They may bid up the price for Corvette related keywords knowing their product is hot as could be and they want to acquire as much market share for that product as is possible.
Smart clickfraudsters know this as well. They also know that a hot product makes for increased clicks, which in turn creates a greater buffer to hide behind which fraudulent clicks could be hidden.
Though Schmidt relegate the cost of click fraud to “the cost of doing business,” that cost passed on to advertisers has amounted to hundreds of millions of dollars. So far, then, self-correcting it is not.
