False Ad Clicks Cost Google 1 Billion Dollars A Year

Meshach writes "There is an interesting story at CBC which claims that Google loses one billion dollars per year to fraudulent ad clicks. The article contains an interesting description how how the company determines if a click is false. 'The company explained that it determines which clicks are invalid through a three-stage system. Most of the illegitimate clicks are automatically detected analyzed and filtered out in the first stage ... The second part uses automatic and manual analysis of the AdSense network to weed out false clicks before they are logged to an advertiser's account.'"

Comments

Upside down logic

[Anonymous Coward]

It's more like $1B dollars in fraud is not passed on to the advertiser. Many billions more probably are. Google isn't losing a thing.

Re:Upside down logic

[vrtladept]

Exactly.

Honestly I don't understand how they "loose" 1 Billion in ad revenue due to fraudulent clicks. In fact they don't loose anything. If the clicks were a fraud, then they weren't earned. This is the same kind of funny logic that is used to say that piracy costs billions. There some weird assumption that if this fraud click didn't happen that a legitimate click would happen. In a world with no scarcity ("selling" a click does not prevent selling another click). There is no loss due to clicks that shouldn't count.

Re:Upside down logic

[timeOday]

For google, click fraud is a quality control issue. It dissuades potential advertisers from paying google for clicks because they don't know how many of those clicks are worthless.

Saying click fraud costs google nothing is like saying bad transmissions cost Ford nothing because the customer eats it. People aren't stupid, so pretty soon things that decrease the utility of the product also hurt the market for the product.

Bad math, bad logic.

[JoelKatz]

The logic behind this story is bogus. The $1 billion in money that these fraudulent clicks cost Google doesn't exist. If not for the bogus clicks, these clicks wouldn't exist.

It's like a software company claiming that false orders cost them $10 billion dollars last year because they received an bogus order for 100,000,000 copies of a $100 product. Had they not received the bogus order, they would not be $10 billion richer.

Duh.

Re:Bad math, bad logic.

[karmatic]

Actually, paid out, or not, makes no difference. Either way, it doesn't cost Google anything.

Let's take a look - clicks are either legit, or aren't.

Legit Click - Money comes from publisher (not Google), and Google gets a cut.
Bogus Click, Caught - No money changes hands. Without said bogus click, Google makes exactly the same amount of money.
Bogus Click, Not Caught - Money comes from publisher (not Google), and Google gets a cut (profit).

If you look the scenarios, the only for Google to "lose" money is to mis-detect a legit click as fraudulant, as the publisher gets a legit click for free. Google, of course, minimizes this likelihood, and makes sure it's more likely to have false negatives than false positives (I spend enough on Google, and do my own metrics to know this is the case).

Fraud costs _publishers_ money; it _makes_ Google money (up until the point when advertisers start jumping ship).

Re:Bad math, bad logic.

[catbutt]

I think you are failing to factor in that the amount google makes on ads is determined by the market rate. And the market rate takes into account whether or not the clicks are real or not, since if it doesn't produce sales equal to the amount they pay for the advertising, people won't pay for it, and the price therefore adjusts downward. Google doesn't necessarily make more or less money because of false clicks, they just are paid less per click, but there are more clicks.

You say "up to the point where advertisers start jumping ship". They don't "jump ship" per se, they just pay less.

Re:Bad math, bad logic.

[moderatorrater]

To keep its lead in text ads and to avoid law suits, Google puts a lot of time and effort into catching fraud. That costs them money in development and the projects the developers could have done instead. Then there's the percentage they would have taken had that been a legitimate click which they no longer take because they have to nullify it. Then there's the lost bandwidth from having to serve out and record the click, plus the extra servers because of fraud. Let's not forget that they have to pay their lawyers to defend them from the lawsuits that would come whether google's at fault or not.

It's true that publishers lose more money from fraud than google does, but that doesn't mean it doesn't cost Google either.

Re:Ledgerlines

[moderatorrater]

Assuming that each account has $99.99, and that Google can get a 10% interest rate with that money (they may have to pay out on it, after all, so they've got to keep it close to liquid), it would require 100 million such accounts. Somehow, I'm doubting that they make that much off of it.

Ads

[Threni]

I've been on the net for about 11 years now, and I've not one single time ever deliberately clicked on an ad because it was interesting. I've clicked on accident; I've clicked to allow a download to proceed, or to get a limited time pass to an otherwise charged-for service/site, and I've clicked just for a laugh to fool people into thinking I give a shit, but the day I start to get interested in and buy products based on commercials (online or elsewhere) instead of reading reviews, comparing alternatives and talking to friends/family who've bought something is the day you can take my brain out and give it to someone else.

Re:Ads

[sampson7]

This is cruel.

My family runs a small business, http://www.beadstore.com./ We are not Apple or Microsoft. We do not gross anywhere near a million dollars a year. Each time you click on one of our ads you take somewhere between 5 cents to $1.00 directly out of our pocket.

Now we try to target our ads only to those who care about beads and jewelry and such -- but our ads sometimes display for completely random searches.

What on earth is possibly wrong with buying something off the internet? A Google search for "African King Beads" (including the quotes) and my store is the first hit.

I also happen to know many of the merchants listed on the right advertising for those key words; after all, the high end collectible bead family is relatively small. I would *never* click on one of their ads, because I know it costs them money every time I do. If I wouldn't do this to my competitors, why would you do it to a random stranger?

Re:Ledgerlines

[ajs]

I'm often confused by why people think that there's some mystery cash floating around in Google's (or any other online advertiser's) pocket. There's an obvious need, when payments are tiny, to limit the frequency of transactions so that aggregation can happen. However, it's not like your Google AdSense account is a money market account with cash sitting in it, gathering interest. Google simply has a line-item in their budget for payables that cannot be issued yet because the transaction fees on cutting someone a check for $0.03 cost them more than the payment itself.

Re:Ledgerlines

[DrSkwid]

People probably have that idea because every $0.01 of every click in your unpaid Adsense account was paid for, up front, by the advertisers, with real money.