Click Fraud For Online Ads Quantified... Maybe

The San Francisco Chronicle published a story about click fraud, referencing a study from Outsell. According to excerpts from the study (the full study is available on the Outsell site for $495), internet advertisers lost $800mm last year to click fraud.

The eye-catching headline numbers include:

* 14.6% of all click throughs are fraudulent
* 3/4ths of advertisers have been victim of fraud at least once
* 27% of advertisers have reduced or outright stopped spending on click through advertising
* 7% of advertisers request a refund, with almost 5% being granted

I have no idea whether the data in the Outsell report is accurate. From what I understand, they compiled the data from a proprietary survey of 400+ advertisers, but I haven't seen their methodology detailed enough to speak on the statistical significance.

Regardless, this issue is tremendously important for the technology industry and can't be overestimated. Aside from the obvious Google (GOOG), Microsoft (MSFT) and Yahoo (YHOO) implications, the sheer magnitude of the online advertising spend trends has been the major driver behind the Web 2.0 movement.

Advertising business models have not only returned (remember the post-bubble days when advertising models were considered unfundable) but are thriving, with folks making hundreds of thousands of dollars on click-through ads for some of the more popular blogs, podcasts and vlogs.

As one might imagine, there's a litany of reactions from the blogosphere:

* Jeff Nolan wonders how much GYM (Google, Yahoo and Microsoft) really try to prevent click fraud.

* Search Engine Watch does a nice job of offering some counterpoints to the headline data.

Disclosure: At the time of this writing I, and/or funds I maintain discretionary control over, maintained a long equity position in MSFT but did not maintain a position (long or short) in either GOOG or YHOO.

Comments

[ragu sivanm...:]

Google and Click Fraud - What is Click Fraud -How Google manages Click Fraud
ragusivanmalai.blogspo.../

2006 Aug 09 05:02 PM