Pay Per Click Advertising Can Be Very Risky Business

Bogus”visitors” to a pay-per-click ad represent click fraud. This is a serious scam that threatens the viability of this pay per click advertising business that has been enormously profitable for each the main search engine operators, namely Google, Yahoo/Overture, and MSN.

Click fraud has different types, but the final result is generally the same. Advertisers are billed for fruitless traffic generated by someone who repeatedly clicks on an advertiser’s ad with no intention of buying anything.

The search engine advertising market is currently about $3.8 billion per year and estimates vary widely on how much click fraud is really going on. Certainly, the search engine operators would prefer to downplay the magnitude of this issue. Some industry experts claim that a little click fraud exists but that it is overblown by advertiser paranoia, while others estimate that ten to twenty percent of all clicks are false (made by someone with no valid interest in the ad itself).

Virtually everyone involved with pay per click advertising sees click fraud and knows it is there, but nobody is quite certain what to do about it.

Both Google and Yahoo/Overture acknowledge that the click fraud problem exists, but claim improved internal controls will prevent the issue from escalating. Their stated position appears to be that they’re worried about click fraud, but it isn’t a material issue up to now. Both of them are touting their increasing internal activities aimed at detecting and combating click fraud.

Such reassurances from search engine companies certainly are not surprising, given how much they stand to lose if advertisers cut back on advertising spending. The stakes are enormous and the search engine companies are actively engaged in people relations campaigns. Industry research firm eMarketer expects $7.4 billion to be spent on internet search engine advertising by 2008, up from only $108.5 million back in 2000.

Marketing on search engines has become a fast-spreading trend as an increasing number of marketers have realized substantially higher returns on search engine ads than on more traditional marketing campaigns conducted through print media.

Most pay per click advertisers set a spending limit and once the spending limit is reached, the ads cease to appear at the search results. Click fraud is a really unethical competitive tactic where someone clicks on a competitor’s ad until the spending limit is reached and the ad then disappears from the search outcomes. It appears that it is merely a matter of time before some advertisers become so exasperated with click fraud that they file a class-action lawsuit against a significant search engine.

If you use pay-per-click advertising it would be smart to carefully monitor your traffic to find out whether you’re the victim of fraud. In any case, it is probably safe to state that pay per click advertisers will have to take a certain level of click fraud as just a cost of doing business.

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