Jeff Howes

Goldman: Google Price Target Intact Given Positive Click Fraud Results

Actually, Google did not say that the click fraud rate is 0.02% at all. What they said was "..less than 0.02% of all clicks are reactively detected as invalid". If you read their statement carefully you will discover that key information is missing, and without it, a calculation of the actual click fraud impact is impossible.

They define "reactively detected as invalid" as invalid clicks that were not caught by their filters, were billed to the advertiser, were then complained about by the advertiser, and finally, were determined to be invalid by Google upon further investigation. That is not hard to believe at all, because if Google did not detect a click as invalid the first time, the chances are that they will not consider it invalid upon a complaint either. They are still limited to their existing detection algorithms regardless of whether or not an advertiser is complaining.

Once you remove all of the potentially reportable clicks that are
never reported, you are most likely already well under 1% of total
billed traffic.

Next, out of the small number that ARE submitted by advertisers for
further review, you have the vast majority of those which are
declined by Google. This is a number that they do not seem to be
disclosing and without it, you cannot complete a calculation of their
0.02% claim. We know from our experience of filing claims that only a
small fraction of the reported invalid clicks that have previously
been billed are later refunded. Google has a series of standard,
canned response letters that lower level support staff use for the
first, second, and third inquires regarding specific cases. It seems
that only high volume customers even make it to the next level, where
a more knowledgeable rep will investigate the claim. At this level,
they will look at the traffic in more detail, but the most common
response is that "most" or all of the invalids were "already filtered
out" by their system. Yet, one of our biggest gripes is that they
will not provide a click log or list of exactly which clicks there
system has discounted, or not discounted (billed). Providing that
would make line-item reconciliation possible, but without it, one can
only guess at which clicks they are catching and which are slipping
through.

At this point, we have already eliminated most of the clicks from the
total; those which are not reported, those were have already been
filtered out, and those which are reported but declined.

Finally, and perhaps the largest unknown variable, are all of the
clicks that are both unreported AND undetected by Google. Note that
any such clicks would come out of the 90% that they claim are
"valid", and that however large the number of such clicks, it would
not affect the 0.02% figure, based on the way that it was worded.