Dealing with ‘click fraud’

Last month the newswires were abuzz with news that Google Inc has agreed to settle a lawsuit that alleged that the online search engine leader overcharged thousands of advertisers who paid for bogus sales referrals termed “click fraud”. Google agreed to an out-of-court settlement by committing $90 million to many advertisers who had used Google’s network during the last four years. The lawsuit, filed by Lane’s Gifts & Collectibles on behalf of all Google advertisers, revolves around one of the most sensitive subjects facing Google and Yahoo Inc today.

Years ago I had seen advertisements on the net that said you could make money by merely surfing on certain sites. I instinctively knew that this was a scam but did not link this to click fraud. Now of course we know that scam artists repeatedly click on specific advertising links even though they have no intention of buying anything-driving up advertising costs for companies that pay for each click by a prospective customer. Yahoo!, which was also named in the lawsuit, has decided to fight the allegations.

From Google’s perspective it serves no purpose to open the can of worms. The price to be paid is a meagre 0.8% of revenues it collected over the same four-year period. Even here, a significant portion of the settlement would go towards the plaintiff’s legal fees and not to the advertisers who did not get value in the first place. And the settlement was in the form of credits that can be set off against future advertisements, available to a broad pool of the innumerable marketers who ran ads that might have been affected by fraud over the said period of four years!

Advertising Age, sometime ago reported that the combined advertising revenues of Google and Yahoo! last year rivalled the combined prime time ad revenues of America’s three big TV networks—ABC, CBS and NBC. Google topped the list with $6 billion in online advertising revenue, Yahoo! clocked $4.6 billion and Microsoft’s MSN internet unit generated $1.4 billion.

Now look at the impact of internet at another level. CBS ties up with Yahoo! to feature 60 Minutes, its long running news programme in Yahoo!—its website draws an estimated 126 million users per month, while 60 Minutes show in CBS had an average weekly viewership of 14 million people. Imagine the impact this combined audience delivery would make on the ad revenues.

In India too, quite a few heartening trends have been put out by the Internet & Mobile Association of India (IAMAI). One survey indicated that the online population in the country is poised to grow to 100 million from the current 38.5 million users by the turn of this decade. An estimated 4.6 million Indian internet users bank online and the number is expected to soar to over 16 million, inclusive of internet and mobile banking, by 2007-08.

Internet advertising is projected to grow at 50%—to Rs 750 crore by 2010 from the current level of about Rs 100 crore. In 2010, it will be the fourth largest media after TV, print, and out-of-home. Radio, with all the expansion that is taking place, would be only the fifth medium.

The traditional cinema medium, which saw a revival, would still be lagging behind despite the delivery of commercials for this medium through the internet.

The other day I was with a media owner who pro-udly told me that Google gives him approximately Rs 1 lakh every day based on click through delivered by online editions of his publications. With increasing growth in the medium, there is little doubt that two things would happen: He will get more income from Google and there will be many click frauds that would be brewing!