Google CEO says “Suck it Up”
The Google CEO is now saying that click fraud isn’t a big problem; it’ll fix itself. I agree with him, but not for the reasons stated. I think he tries to come off as being honest, but is rather deceptive. His claims:
- It’s still worth it for advertisers to do business with us. Click fraud is part of the “cost of doing business with Google”, and ROI is better than print advertising. True, but at this point it’s an unpredictable cost of doing business.
- The market will correct itself (or, it’s not our problem). Advertisers will pay less when they realize the clicks are bogus. This contradicts the first point. The fact is, advertisers haven’t been leaving Google, even though clickfraud has become rampant. The only way it will affect Google is when advertisers have alternate choices (i.e. when Google has competition).
- We don’t “like” clickfraud, and it’s fun to beat the hackers, so our engineers sometimes fight clickfraud. OK, so clickfraud is perpetrated by evildoers, and we don’t like it (but we like the revenue it brings us). As long as it’s fun, we’ll battle the fraudsters. Thankfully, clickfraud has gotten HUGE since we started fighting it, so there is plenty more fun (and revenue) to be had!
Until Google has credible competition, I don’t see how clickfraud does anything but help Google.
July 9th, 2006 at 10:18 am
Eric Schmidt: Let it happen
Donna Bogatin of ZDNet has a nifty little quote from Google CEO Eric Schmidt on click fraud. In that quote, Eric says that the “perfect economic solution” is to just let click fraud “happen”. He claims that the PPC market wi…
July 9th, 2006 at 2:22 pm
Good point… I actually thought the same thing about AdSense (the other half of the AdWords equation) a while back regarding made for Adsense (MFA) sites which dilute the accuracy of their search results, see http://jasonkolb.typepad.com/weblog/2006/05/web_20_may_save.html. It sounds like a very similar situation, where Google is actually making money off the fraud and is thus not really trying very hard to fix it.
I have the sneaking suspicion that Google actually has the capability to stop this fraud but won’t push the button until they’re forced to. It just makes them too much money. I wonder how far Google’s profits would fall if they were to shut off all of the fraud happening with Adsense and Adwords.
July 10th, 2006 at 10:56 am
Jason,
I have seen estimates of anywhere from 30% to 70% being fraud. But I have to stress that I don’t think Google is necessarily doing anything wrong here. The most basic underlying tenet of free market economy is that a seller should charge as much money as the market will bear. In fact, you could argue that it is *unethical* to charge based on some other factor, such as cost. So when Google claims to charge on a per-click basis, that is somewhat deceptive (and could be unethical if it were true). Google is not really selling “clicks” (the advertiser does not get value from “clicks”, they get value from buyers viewing their product and being informed about opportunity therein. So if the advertiser still sees significant value for spending a certain sum of money and getting a certain amount of business in return, it is still an ethical transaction. Google could either eliminate clickfraud, and charge more; or they could tolerate clickfraud and share a bit of the “money the market is willing to pay” with hackers. But in either case, it is obvious that the “market is willing to pay”. Eliminating clickfraud will not reduce the amount advertisers are willing to pay — only competition can do that.
July 13th, 2006 at 4:27 am
I take exception to Google not doing anything wrong. I have a similar issue with eBay, who does not take responsibility for fraud within their application, either.
When these companies are knowingly profiting directly from those crimes, they should be just as liable to pay for those crimes. At the root of this is the knowledge that a crime is being committed. Since Google has confirmed that it exists, they also know that they are profiting from it.
That means they are knowingly accepting stolen money in my book.
Doug
July 13th, 2006 at 2:03 pm
Hmm, eBay spends a HUGE amount of money fighting fraud. Their business dynamics are a bit different, so I’m not saying they are “better” that Google; but it’s not fair to say that they don’t care about fraud.
In fact, PayPal profits from fraud in an indirect sense, and in a way that is completely ethical, IMO. Basically, think of what you would do if you didn’t have PayPal. You would e-mail or telephone with a merchant; arrange for credit card or western union transfer, and wait for your goods. Or you would remit money on scores of different web sites with no unified seller rating system. Any dispute would be handled/ignored by local authorities on each side, and you would have little recourse to alert other potential buyers if the seller ripped you off. PayPal adds some level of anti-fraud technology, seller ratings, consistent user interface for remitting payments, and so on.
So the point is that fraud is rampant, and is a growth industry — services like PayPal capitalize on this, because the fraud would be even worse if you didn’t go with PayPal. And there is competition in this space, so they have an incentive to keep fraud down..
July 20th, 2006 at 7:03 am
Readers should check out google’s blogged response here: http://googleblog.blogspot.com/2006/07/let-click-fraud-happen-uh-no.html
Seems to me Schmidt’s comments have been unreasonably taken out of context. Schmidts opening comment was “Let’s imagine for purposes of argument that click fraud were not policed by Google and it were rampant …”. It’s clearly a hyperthetical paradigm, and not a statement of intent.