We've been paying attention to this topic, because as a host for google ads, we have a vested interest in the ads viability. As I've said before, google ads aren't buying me any suites at the Hotel Intercontinental in Amsterdam, but they do certainly pay a chunk of our hosting costs. However, some of the back and forth referenced in this WSJ article sounds like business rivalry, mixed with sour grapes.
WSJ.com - In 'Click Fraud,' Web Outfits Have A Costly Problem:
[Nathan McKelvey] had run into “click fraud,” a term the industry uses to describe someone clicking on a search ad with ill intent. A fraudulent clicker can exploit the way Web ads work to rack up fees for a business rival, boost the placement of his own ads or make money for himself. Some people even employ software that automatically clicks on ads multiple times.
Click fraud is the latest problem plaguing the Internet, alongside spam, identity theft and online-auction fraud. Some believe about 20% of clicks are from people not necessarily interested in the product advertised, and therefore in the industry's view, fraudulent; others say the problem is less severe. What's clear is that if left unchecked, click fraud could damage the credibility of Google, Yahoo and the search-ad industry that spurred their meteoric growth.
Click fraud is “the biggest threat to the Internet economy,” Google's chief financial officer, George Reyes, said during a December investors conference. “Something has to be done about this really, really quickly, because potentially it threatens our business model.” ...
During his sleuthing, Mr. McKelvey discovered that his industry was rife with click manipulation. He and others in the jet-charter brokerage field say Yahoo and Google have been slow to help and vague on how they're tackling the problem. Other critics say search companies aren't forthcoming enough about click fraud's scope.
Advertisers make bids to have their ads shown next to results for specific words. The highest bidder for a word or phrase generally finds its ad on top of the list. Advertisers then pay the search company a fee, which can be as high as the amount bid, every time someone clicks on their ad. Payments average about 50 cents a click but can reach about $90 for sought-after terms, such as those valuable to class-action lawyers, including “mesothelioma,” an asbestos-related cancer.Google and Yahoo also place these text ads on other Web sites. For each site, the ads are selected using a computerized analysis of its content, so a camera ad goes on a site that discusses cameras. Google pockets some of the ad revenue and hands over, on average, about 80% to the site that carries the ad.
In theory, advertisers pay only when a person specifically interested in their product clicks their ad. For marketers accustomed to guessing whether consumers see TV spots and print ads, search ads have been a revelation. Search companies earned about $4 billion in the U.S. last year from keyword-triggered text ads.
But the business assumes that the people clicking are interested in the ads. Yahoo, Google and their customers are learning that isn't always true. Google believes some offending clickers are trying to generate ad revenue for themselves. In November, it sued Auctions Expert International LLC for clicking on ads Google supplied to the company's site. The suit, filed in California Superior Court in Santa Clara, alleges that Google was conned into paying commissions to the Houston-based company. Auctions Expert and executives named in the suit couldn't be reached for comment. The defendants, who have been served with papers, haven't made any formal appearances in the case so far.
