The San Francisco Chronicle published a story today 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, the 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. Either way though, this issue is tremendously important for the technology industry and can't be overestimated. Aside from the obvious Google, Microsoft and Yahoo 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 wonders how much GYM (Google, Yahoo and Microsoft) really tries to prevent click fraud?
- Search Engine Watch does a nice job of offering some counterpoints to the headline data
Note: 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.
GYM click fraud advertising google yahoo microsoft sfchronicle outsell woodrow
Did you purchase the report?
Just wondering.
By the way, don't I look stupid coming out with a BUY on YHOO on 7/14/06 only to downgrade the stock to a HOLD today. Surprised that only 3 others downgraded the stock (rochdale, JP Morgan, Pac Crest).
How is everything else going?
Posted by: Brian Bolan | July 19, 2006 at 07:24 PM
In the advertsing world you have to look at click fraud through the lens of every other form of fraud in audience capture. (I don't know the terms of art.)
I do know that magzaine circulation figures make the figures you mentioned look like rounding errors. I haven't done it, but I'd bet you'll see interesting stuff (including some fraud accusations and potential indictments if you type "circulation fraud" inot a search engine.
Same thing goes for television audience capture.
Options gifting, payoffs and honorairia (spelling) to doctors conducting clincial testing, press releases spinning wool into gold, yada yada yada....
Isn't everything some form of manipulation?
Posted by: trader_dave | July 06, 2006 at 04:24 AM