Well, if you believe many click fraud experts (who by the way often have a vested interest in scaring advertisers because they sell click-fraud detection services), it would appear that the advertising world is about to come to an end. At iProceed, we conducted research into the extent of click fraud, and here are our findings:
- The advertisers would rather not have click fraud in a perfect world but they understand that advertising effectiveness is extremely low in all cases. In fact, in our analysis, we learned that advertisers found text links to have the highest ROI even if one considers the high-end estimate of click fraud (~20%). (Related link: Comparison of advertising costs)
- Advertisers understand that banner ads click rate is ~0.25%, the response rate on direct mail is ~3%, and most advertising in print and television media has not been producing a ROI for years now. The only advertising that really works is text links (in search results or as listings on a content rich website).
- Advertisers also understand that click fraud is a part of the cost of doing business as are product returns, shrinkage, damaged products, credit card fraud, etc. In fact, losses from click fraud are so insignificant that they might bother a small business owner (online advertising budget of $1,000 a month or less) but still produce a very high ROI for vast majority of advertisers who are increasingly losing faith in traditional advertising.
So why click fraud attracts so much attention?
- Like many other aspects of online world with poor understanding of technology among business leaders, scare tactics employed by some product/services providers appear to work. Click fraud detection, search engine optimization, network security, etc. are just a few examples.
- In the digital economy, we have come to expect almost perfect measurements and controls. When Google can target ads by zip code, we expect that there should be zero click fraud. We forget, though, that once an ad is published in a magazine, there is simply no way to measure how many people even saw the ad. In other words, technology has spoiled us and that is a good thing. As almost everyone agrees, companies like Google and Yahoo have done a terrific job of detecting fraud and acting on it. The way RFID technology will eliminate fraud in the retail sector, new technologies being developed will significantly eliminate click fraud.
As a management consultant, my advice to business leaders is to always check the credentials of a firm before believing any of the data and claims made by it. I would be very skeptical of data provided by a firm that is also pushing a solution for the problem at the same time. In fact, there are no independent studies done on click fraud yet and almost all the data out there is recycled information from companies that provide click fraud detection services.
Related article: Value of business analysis