An Economists View on Click Fraud
In light of what Google CFO George Reyes said about click fraud threatening the G biz model Niki's thoughts on the subject make for a good read:
Firstly, click fraud is a bad thing that should be policed and eliminated by the engines and they have no excuse now that they have $50bn market valuations to hire scores of click fraud cops to eliminate it. But it will have zero impact on Google's revenue, or any other search company, and zero impact on the growth of that revenue.
Here's why. Click fraud is already priced into the cost per click. Marketers bid based upon how well the leads that Google and others send them convert into, in most cases, direct sales. That means that if one person out of every hundred buy, and they make $100 per sale then they will spend up to $1 per click. Now out of that 100 clicks, the fact that 50 (gross exageration used for effect!) of them are click fraud is irrelevant. If Google eliminates click fraud then that means that one person out of fifty will now buy, and so the marketer will be willing to pay up to $2 per click now.
The volume will decrease but the cost per click will rise to balance this.
He goes on to say that Reyes would be better off doing his accounting than spouting off about click fraud (paraphrased heh..).
So, is George Reyes just spouting off about stuff he doesn't understand? Probably not eh? If that's the case, why is he making these statements?