Saturday, May 8, 2004

Fuss About Fraud in Online Advertising

An article about fraudulent clicks on search ads and contextual ads in the Times of India has stirred up some concern about the effectiveness of online ads. The concerned parties fear that the current ad systems are too easy to fool with 'link pumping', that is, having people or programs click on ads with the sole purpose of driving up the number of clicks. The fraudulent clicks drive up the cost of a campaign without supplying any useful leads. With paid ads on search engine listings, the only beneficiaries of such link pumping would be search advertising service companies that get paid a percentage of a campaign's cost, or possibly some party who wants to make the advertiser 'pay'--a nasty competitor perhaps. With contextual ads (e.g., AdSense or ContentMatch), the Website owner gets paid for clicks on the ads that are placed on his or her site, so there is an incentive for this segment to invite link pumping, too.

However, the fuss will probably not hamper the growth in online advertising. In fact, the critical attention can help strengthen the still immature industry by helping the providers of online advertising services refine their technology for placing ads, as well as the tools for tracking ads and managing the overall campaign. We're still in the 'pay-per-click' (PPC) phase of contextual ads--a step beyond the original banner ads where costs were based on eyeballs that viewed the page on which the ad was placed--but still a less-than-perfect method for tracking the quality of leads. The major online ad networks are adding campaign management tools and new competitors that provide specialized advertising services are emerging to provide more controlled environments. Some growing pains are to be expected; and some fraud, too. But, it's no reason to indict a segment that is growing at 'Google-like' rates and which is providing real results to large and small advertisers.

As for the article that helped spark the ad fraud discussion, one thing is certain: The Times of India is getting a lot of hits from online marketing analysts. I bet they are hoping that visitors click on their PPC ads!
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