Explain The Problem Posed To Google By Click Fraud And Evaluate Its Response.

Explain the problem posed to Google by 'click fraud', and evaluate its response.

Introduction

'Click fraud' is a term used to describe when someone clicks on a search ad with some level of 'ill intent' and it is emerging as a prevailing and costly problem on the internet, particularly for the search-ad industry. Internet search companies are the main force responsible for combating this type of fraud, yet they also contrarily profit from it. Therefore, it is forseeable that while Google has some of the means, the company may not necessarily have the incentive to completely stop click fraud, considering a very high proportion of its revenue originates from advertising revenue. As a leader of this industry, Google's standards are significant and will influence the emergence of standards in this industry. From its beginnings in 2002, the affiliated internet ad company of Google, AdWords, has began to evolve from a stance of protecting its click fraud response methods to sharing with its advertisers and developing some standards for managing these problems.

The problem posed to Google by 'click fraud'

The problem faced by Google comes from a large market of profitable gain in the industry for the various types of click fraud, which endangers the company's business model and damages its reputation. At the same time, it provides a source of revenue, which the company will inevitably profit from as long as it cannot completely combat the problem.

There are two main types of click fraud. Competitive click fraud occurs when competitors click on another company's advertisement to raise their marketing costs rather than to obtain information. This can be a major problem for small businesses, particularly when the advertisement has a high cost per click (Miller, 2005).

There is also network or affiliate fraud, which occurs when a syndication partner (a small publisher or search engine) seeks to increase the number of clicks on paid listings in their own sites in order to increase their revenue. The partners come from Google's AdSense networks, which functions by paying websites a commission to display relevant advertisements, usually with the heading "Ads by Google" (Freeman, 2005). These can even be extraneous web addresses like "insurance1472.com", which use "paid to read" (and click) rings of users around the world or robots that systematically produce hits (Batelle, 2005, p.187).

Both of these types of fraud pose an ethical and economic dilemma for Google. Internet advertising is expanding more rapidly than any other part of the advertising industry, with an expected growth from $12.5 billion in 2005 to $29 billion in 2010, and this is in the U.S. alone (Grow and Elgin, 2006, p.2). The company like other major search engines, has some incentive to tolerate the fraud as they subsequently profit from it in this booming industry, with 99% of Google's revenue coming from advertising (Miller, 2005). It is also very expensive for Google to effectively fight it because of the wide-spread nature of Google's AdSense distribution (Batelle, 2005, p.187). At the same time, Google's reputation for internet advertising is suffering, and the revenue may decline if click fraud is seen to be a persistent and widespread issue (Delaney, 2005, p.1).

Google's response to click fraud

Google's response until recently has been defensive of its ability to protect advertisers against click fraud, yet very reticent on its methods. In this regard, the information has remained very unbalanced with Google holding it all but unwilling to share it. This has caused frustration among the advertising community, particularly amongst those who believe themselves to be victims of click fraud. In many cases if an advertiser were unknowingly faced with an invalid click activity by a third party, Google would send a refund but refuse to disclose any more details (Delaney, 2005). It has argued that it needed to do this to ensure the integrity of this protection. The only information Google would disclose is that it uses oa system to filter out fraudulent clicks and a team of specialists to respond to customer inquiries of click fraud, which is very minimal at that (Vise, 2005, p.248). This has even driven some advertisers to seek external parties to investigate their accounts with Google or reduce their pay-per-click budgets because of suspected fraud concerns (Grow and Elgin, 2006). While Google has rationalised its reason for not exchanging information it has consequently lowered the faith of the advertisers and been detrimental to its reputation.

Advertisers were also unaware of the rate of click fraud at Google, which gave them no signal to relate to, and further lowered trust. In response to this lack of information several research companies released their own estimates of the rate at Google. One firm Outsell estimated 14.6% of clicks fraudulent, while Click Defense assessed the rate to be as high as 38% (Krol, 2006; Miller, 2005). Following some recent improvements to its system a more recent measure by NETexponent believed it to be less than 5 per cent, lower than the industry average (Nuttall, 2006). While many of these firms could be acting opportunistically to gain business, Google could not validly dispute these figures when they were unwilling to share their own. Also, this would cause some advertisers to question Google's incentives, considering it costs the company resources to fight click fraud and it profits from its existence concurrently. This was additionally destructive to Google's reputation.

Finally during 2006, in response to user demands, Google released some valuable details, tools and figures about its click fraud system to its consumers. Firstly it described in detail its response to click fraud or invalid clicks as a "three stage system": real-time filters, offline analysis and reactive investigations. The first two are "proactive", in that Google attempts to respond through these methods without the advertiser's involvement. The third is "reactive" and is a response to advertiser inquiries regarding click fraud (Ghosemajumder, 2007).

The proactive methods are Google's main defence against click fraud. On the "Inside AdWords" blog it thoroughly explains the function of this without giving the intricate details which might jeapordise the integrity of its system. It also provides troubleshooting steps when its users are encountered with such problems as "There are discrepancies in my web logs" and "My competitors are clicking on my ads" (Julian, 2007). Further, it provides