CNBC's Google Clickfraud Video (GOOG)

A specter is haunting Google. Google derives the majority of its revenues from selling tiny text ads. Lots of internet publishers publish tiny text ads. Since advertising is sold on cost-per-click basis, the more clicks the more revenues for (GOOG) and publishers.

Some unscrupulous publishers have tried to accelerate the ad clicking process with click bots and other schemes. Google has a very logical reason to ignore clickfraud, since doing something about it would lower revenues and collapse the share price.
Depending on who you ask, click fraud is insignificant (Google's take) or upwards of 70% of Google's total ad sales. The problem and issues for abuse are well known in the webmaster community. Yet the broader world is mostly unaware of Google’s fraudulent profits.

Lots of Wall Street analysts, many of them working for companies that have extensive underwriting relationships with Google, continue to maintain buy and strong buy ratings on shares of GOOG. Many of them also engage in questionable revenue projections.

On Wednesday, CNBC did a feature on clickfraud. Now everyone on Wall Street knows about the issue and just how bad it is. I predict that real soon now, a wave of analyst reports will come out minimizing the issue and its impact on the demand for tiny text ads from Google. (Here's the video)

But if advertisers know that at least 70% of their ad spending on Google is wasted, how many will continue to buy ads?

Google insiders probably know about the problem as well, as collectively they have sold well over $3 billion worth of shares in the past six months. That is more stock than Enron insiders sold in the six years prior to bankruptcy. Sometimes the sheep do shear themselves.

Comments

[Saul Sterman:]

Below is the first response by Google to a series of e-mail correspondence between CrossProfit and Google. We have ceased advertising on Google as we are convinced that we are victims of click fraud. Google’s final 'conclusion' was the opposite.

>>&g...

Hello Saul,

Thank you for your email. I understand you are concerned about potential
invalid click activity in your account. In this response I would like to
1) explain the protection strategies we have in place to combat any
invalid clicks, 2) steps you can take to prevent invalid clicks and 3)
outline the information you can provide us to further investigate your
concerns.

1) HOW GOOGLE DETECTS INVALID CLICKS

Google's proprietary technology analyzes clicks in an attempt to determine
their validity. Our system looks for invalid clicks that fit a pattern
intended to artificially drive up an advertiser's clicks or a publisher's
earnings. The goals of our system are to automatically identify clicks
generated by unethical users and automated robots and to filter out these
clicks before they ever reach your reports. Google has three powerful
tools for protecting your clicks:

- Detection and filtering techniques: Each click on an AdWords ad is
examined by our system. Google looks at numerous data points for each
click, including the IP address, the time of the click, any duplicate
clicks, and various other click patterns. Our system then analyzes these
factors to try to isolate and filter out potentially invalid clicks.

- Advanced monitoring techniques: Google uses a number of unique and
innovative techniques for managing invalid click activity. We can't
disclose details about the software, except to say that we're constantly
working to expand and improve our technology.

- The Google team: In addition to our automated click protection
techniques, we have a team that uses specialized tools and techniques to
examine individual instances of invalid clicks. When our system detects
potentially invalid clicks, a member of this team examines the affected
account to glean important data about the source of the potentially
invalid clicks.

HOW GOOGLE HANDLES INVALID CLICKS

Google actively implements the techniques described above in order to
combat invalid click activity. Clicks that Google believes are invalid are
filtered from your reports. In addition, we apply the following policies
for the protection of AdWords advertisers:

- If we believe that you've been charged for invalid clicks in the past
two months, you'll receive a credit in your account. This credit will
appear as an 'Adjustment' on the 'Billing Summary' page of the 'My
Account' section in your AdWords account. (Other types of credits, such as
promotional credits and overdelivery credits, may also be labeled
'Adjustment.')

- Any advertiser or publisher participating in invalid click activity or
any related offense may be subject to legal prosecution and/or other
action. We will also take the appropriate action on any related
account(s).

2) PREVENTIVE MEASURES

Tracking URLs can help you identify all the traffic that comes from Google
(or other sources) to your website. Once you know the sources of your
clicks, it's easier to track which keywords generate sales and give you
the best return on investment. To learn more about using tracking URLs,
visit https://adwords.google...

If you believe your account reports reflect click activity that is more
extreme than ordinary user behavior or that exhibits strange patterns,
please visit
https://adwords.google... for
more information and instructions on how to contact us.

3) INFORMATION YOU CAN PROVIDE US TO INVESTIGATE FURTHER

We have a team that investigates invalid click activity on a case-by-case
basis. Including some or all of the following information may help
expedite their time-intensive investigation:

1. The campaign(s), Ad Group(s), and/or keyword(s) associated with the
suspicious clicks.
2. The date(s) and time(s) of the suspicious click activity.
3. Any data in your weblogs or reports that indicate suspicious IP
addresses, referrers, or requests.
4. A paragraph describing the trends in logs and/or reports that led
you to believe the click activity is invalid.

The verification and research process can be time consuming, and we
appreciate your patience while our investigation team reviews your
account. Please allow 3-5 business days for us to respond. If you have any
additional information, please be sure to let us know so we can include it
in our review.

I do hope you find this information helpful and that our protection
resources alleviate your concerns. However, if you are still concerned
that you are experiencing invalid clicks, please reply directly to this
message with the required information and I will escalate this matter to
our team.

We look forward to providing you with the most effective advertising
available.

Sincerely,

David
The Google UK AdWords Team


----------------

Original Message Follows:
----------------------...
From: [e-mail]
Subject: Possible click fraud
Date: Fri, 02 Jun 2006 15:56:06 -0000

apps5.oingo.com/apps/d......

Please make sure that we are not being victimized by this site.


Language: xx
AdsUserLocale: xxxxx
Source: xxx
topic: xxxx
Name: Saul C. Sterman
aw_user: xxx
AdWords_Email: [e-mail]
Customer_ID: xxx-xxx-xxxx

>>&g...

2006 Jun 15 04:40 PM