Google’s $90 Million Click Fraud Lawsuit

I’m happy to bring you a “guest article” today from a friend and Internet Marketer, Perry Marshall.  I had the privelege of meeting Perry over a year ago at a conference I was attending.  He is very well versed in Google AdWords and Google AdSense, and had this to say today in a post he sent to his subscribers.  You may have already gotten it, and if so, this is a repeat of what Perry had to say today about Google’s Click Fraud lawsuit. 

How big of a deal is click fraud?  A lot of people ask me about this.

Last week Google agreed to settle a class action lawsuit for $90 million for click fraud.  They’re going to give advertisers a credit for future clicks, based on improper charges going back to 2002.

Ninety million bucks sounds like a lot of money, but compared to well over ten billion dollars of clicks they’ve sold since AdWords started, this is spare change.  It’s less than 1%.

A lot of people are paranoid about click fraud. I haven’t talked about it a great deal, so let’s talk about this right now.

How are click prices determined in the first place?  By advertisers’ bids.  And how are bids determined?

Well obviously a lot of people determine their bid prices by guessing a number and then bidding.  But the *right* way to determine your bids is to figure out how much a click is worth in the first place, by tracking conversion of sales or sales leads.  Then pay accordingly.

Are you doing that?

If you’re not, you’re losing WAY more money than click fraud would ever cost you.  A few months ago I read an article in the Wall Street Journal about click fraud.  They were interviewing this guy who sold private airplanes, and he was complaining that he didn’t know what he was getting for his Google AdWords investment, he’d seen signs of click fraud and his faith in the whole system was being shaken.

It seemed pretty clear that this guy had no idea what his cost per lead and his sales conversion was.  So he was throwing darts in a blizzard.  Sort of like a store owner who never takes inventory, complaining about shoplifting.

Also of Interest  Interruptions: Are You a Victim?

Let me repeat: If you’re not tracking conversion of clicks to sales leads or sales, it’s costing you WAY more money than click fraud.

Last year I had what amounted to a click fraud problem on one certain keyword.  For about 3-4 days I had 3X the normal amount of traffic.  But you know what happened?  

My Click Thru Rate went up, my ad moved from the #3 position to the #1 position and once it was in #1, Google started charging me less for clicks because of the high CTR.  I got 4X the traffic but it only cost twice as much.  The cost per click went from 19 cents to 7 cents.

Again, for those few days I was spending twice the money as before.  But not 4X.  Google’s CTR formula inherently gives you discounts for click fraud.  Not a total solution, but it does help.

If you’ve paid much attention to this you see that Google doesn’t say very much about it.  Why?  Because they just can’t.  If they told everyone what techniques they use to detect it, people who do click fraud would find more ways to get around it. 

What I can tell you is that if someone clicks on your ad twice or more in 30 days, you only get charged one time.  The most obvious kinds of click fraud, like your competitor repeatedly clicking on your ad, are easily detected and you don’t get charged. 

Furthermore, AdSense advertisers who get caught for click fraud get clicked out.


Article by Perry Marshall.
Perry S. Marshall & Associates
1131 Lake St #295 | Oak Park IL 60301 USA

Have a great Tuesday!



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