Killing click-fraud (and the competition) with one stone

There's growing angst over click fraud -- how it will impact advertisers and the big cost-per-click networks, especially Google.

Good coverage is at the Got Ads? blog ("Google is very susceptible to the click fraud meme") and SiliconValleyWatcher ("But the competitive battle [between Google and Yahoo] could be tempered by click-fraud, a growing problem that threatens both companies")

I think the worry is misplaced -- at least as far as the top operators are concerned. There's a straightforward solution to click fraud that falls somewhere between ridiculously simple and diabolically clever. Namely:

Offer a money-back-guarantee, no-questions-asked, on every click delivered. "Pay for only the clicks you like," Google could say.

Each click would get a unique ID, and any advertiser could get a refund on any set of clicks just for asking. There's already evidence many such refunds are happening, but via a case-by-case appeal process which requires logs or other evidence to be presented. This just needs to become routine, automatic, and expected.

So what's to stop an advertiser from refusing to pay for all clicks?

The catch is, in response to your requests for refunds, Google will "down-weight" (or curtail altogether) your ad placements in exactly those "places" which generated unwanted clicks. If you choose to pay for no clicks, your ad soon stops running everywhere. It's in your interest to pay for the clicks that were truly valuable, so your ads continue to run in exactly the right and honest "places".

(The definition of "place" here is intentionally vague and fluid: it might be particular websites, IP ranges, browser behavioral profiles, whatever.)

At the far extreme, this becomes Cost-Per-Action (CPA) or commission-like advertising, but it'd be up to every advertiser how far along this continuum they want to move. Do they want to pay only for clicks that actually convert? They can, but they may then have to bid a lot higher for their ads to still get scheduled in random new places, if they're rejecting most of the clicks they get. Other advertisers may be happy with a spray-and-pray approach, only asking for refunds on the clicks that generate the most shallow or suspicious prospect web visits.

One unified system can accomodate many preferences -- it just needs to send everyone whatever kind of clicks they're most comfortable paying for, and drop the rest as chaff.

Once this guarantee and feedback mechanism is in place, click fraud -- to either impoverish a competitor or enrich a dishonest content site -- will become much harder, maybe even impossible, to pull off. Any flow of clicks that doesn't deliver value to advertisers will just be written off.

Google is uniquely positioned to implement and benefit from such a policy. They already rank AdWords ads not by raw bid, but by actual profitability over time. They already reserve for themself overwhelming placement discretion, and keep raw performance, price, and payout rates to themselves. All they ask of advertisers is, "are you getting sufficient value for value paid?" -- and that'd be the core proposition at the heart of a pay-per-click-you-like system, too. (Pay no attention to the half-million computers behind the curtain.)

The patterns of unpaid-for clicks would become just another massive and valuable data stream for Google to mine, along with web crawls, query logs, toolbar data, per-browser/per-IP address web-trail info, and whatever other tricks they have up their sleeves. Their core competence is discovering patterns that reveal implied value in giant dynamic datasets, and there's market power in having the biggest dataset.

So the day Google adopts this kind of policy, click fraud ceases being a major problem for them and starts to be a giant club they can use to beat off their smaller competitors. Who else will have as large and detailed a map of which clicks are wanted? And once you've been with Google for a while, and fed it months of data about the clicks you like and don't, switching to any other advertiser would involve a big cost and efficiency hit while the patterns are relearned.

Mmm, economies of scale and customer lock-in. Call it Pay Per Wanted Click (PPWC)/Cost Per Wanted Click (CPWC) advertising. And if Google doesn't eventually do this, someone else looking to leapfrog them will.

Technorati Tags: google, clickfraud, yahoo, payperclick, costperclick, adsense, advertising

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