My OperaClick fraud's insidious threat to the web
Sunday, March 19, 2006 2:50:29 PM
A New Case of Offering a Slice of Pie When There is No Pie
A "bunko game" is not a new Internet online passion. It is the act of swindling by some fraudulent scheme. Click fraud is a "bunko game" and Google just paid $90 million USD to settle a suit with advertisers who have claims about being cheated going back to 2002.
Click fraud could be a threat to any Internet web site or enterprise that depends on advertising supported search revenues. It isn't the web site operator who usually is the perpetrator of click fraud. Usually, they are the victim, along with the advertisers.
According to an article in the Washington Post this week, "The two most prevalent types of fraud are competitive sabotage -- rivals clicking to drive up ad costs for competitors -- and affiliate spam -- affiliates clicking on ads appearing on their own sites to boost their share of ad revenue from Google or Yahoo."
The Post article also notes, "Cynics fear that the search engines are too afraid of how much revenue they might lose to truly commit to fighting click fraud."
The problem has gotten so bad, and click fraud may be more prevelant than admitted by search engine giants like Google or Yahoo, that some analysts are concerned it could burst the current Internet boom like a birthday party balloon. If advertising click through rates cannot be trusted, then advertisers will either stop using Internet search as a medium or the market will shrink to those very large advertisers who have the resources to police their own click through rates. Either way the volume of Internet advertising, and the content that is supported by it, could shrink dramatically over a very short period. It won't take much for all the small 'mom-an-pop' advertisers in the so-caled "long tail" to turn tail and run away from having anything to do with Internet advertising.
Further, online content providers who previously relied on Internet advertising will either shift to a subscription business model (prepaid or pay-as-you go) or go out of business. If you think there is a "digital divide" now, just wait until free Internet web sites roll up their virtual sidewalks and ask for a cover charge at the door before you login.
Things that Go Bump in the Night
What does this mean for Opera? It certainly is something that likely keeps the the firm's top executives awake at night. Why? The reason is Opera changed revenue models in Fall 2005. It dropped licensing fees for the Opera desktop and shifted gears to gain revenues from click through advertising based on online search agreements with Google, Amazon, and others. Opera renegotiated its search as revenue contract with Google and dropped banner ads supporting the desktop browser. Browser searches now default to Google search where Opera is paid with a higher AdWords revenue share than before.
Opera's "mini software for mobile devices has a similar revenue producing deal with Google. Google supplies the default search function for Opera Software's mobile browser software.
The very real threat to Opera is that click fraud could undercut critical revenues for the firm. With total revenues of just $23M in 2005 Opera cannot afford to see its search revenue returns sliced and diced by scam artists. Opera isn't alone in this boat. Mozilla's Firefox, which reportedly had $70M in search advertising revenues in 2005 faces a similar threat. While the two organization are competitors for search revenues, they have in common a heavy reliance on Google, Amazon, and other search giants for click through rates.
Is Google's Success Threatened by Click Fraud?
This isn't a problem that Opera can solve by itself. Opera relies on Goolge for revenues and that's where the problem really lives. First of all, Google, which denied at its annual meeting earlier this month that click faud was a problem, needs to get its head out of the sand and address the problem head on. BusinessWeek ripped Google for not doing enough to stop the problem. A very real threat is that Wall Street analysts might take a second look at Goolge's stock price if they believe revenues are undercut by click fraud.
It is understandable why Google sought to minimize the problem at its annual meeting. Click fraud is the monster under the bed, the boogie man in the closet, and very much the firm's worst nightmare. The issue is how much of Google's $6B in search revenues comes from click fraud. Google has a lot more to lose than Opera, but then the entire Internet has a lot to lose if Google's success turns out to be built on a house of cards. This is a case where the players need to get their act together and solve the problem.
Here's the rest of the story . . .
&*&*&*
In Game of Click and Mouse, Advertisers Come Up Empty
By Leslie Walker
Washington Post
Thursday, March 16, 2006; Page D01
. . . click fraud may be far more common than search engines are willing to admit. Over the past year, click fraud has mushroomed into a problem so thorny that some analysts fear that it could bring the high-flying Internet economy to its knees.
[snip]
If revenue from paid links suddenly were to shrink or dry up, you could kiss a lot of Web sites goodbye.
Google has repeatedly pooh-poohed click fraud, contending that it is a minor annoyance that it has under control with automated detection technology. At a meeting with analysts two weeks ago, chief executive Eric Schmidt said click fraud "is not a material issue." Co-founder Sergey Brin said such cases amount to "a small fraction" of Google's ad clicks.
But six days later, Google surprised analysts when it agreed to settle an Arkansas class-action lawsuit by setting aside $90 million worth of ad credits to advertisers that can show invalid click charges dating to 2002.
[snip]
Some analysts worry that Google is rushing to establish a legal precedent that could undermine a more serious click-fraud suit pending in federal court in California. That suit, which alleges that Google knows that click fraud is rampant and has not taken significant steps to prevent it, will be considered for class-action status at a hearing in May.
[snip]
For $29 or so, anyone can buy fake traffic generator software such as Smart HitBot, Fake Hits Genie and Fakezilla, programs that can send bogus traffic to any Web page or ad.
But click-fraudsters have to watch out because more and more electronic sleuths are trying to catch them. Start-ups with names like Click Tracy, Click Detective and WhosClickingWho analyze traffic and tell advertisers about suspicious activity, such as a surfer in Malaysia repeatedly clicking on ads for a dentist in Baltimore.
Established Web analytic firms are adding fraud-detection capabilities, too. ClickTracks, for example, recently started a service that analyzes 20 variables surrounding each click and compares them with historical data to determine which are legitimate.
Jessie Stricchiola, president of Internet ad consultancy Alchemist Media Inc., said the big stumbling block that search engines face in combating fraud is lack of access to evidence that could prove it -- namely, what customers do after clicking on ads. Bogus visitors almost never buy anything, while a certain percentage of legitimate customers do. Advertisers, however, are reluctant to share sales data with the search engines.
Stricchiola is pushing for standards in Internet ad auditing. She recently teamed with Fair Isaac Corp. to study whether its formulas for detecting credit card fraud might help identify click-fraud.
A "bunko game" is not a new Internet online passion. It is the act of swindling by some fraudulent scheme. Click fraud is a "bunko game" and Google just paid $90 million USD to settle a suit with advertisers who have claims about being cheated going back to 2002.
Click fraud could be a threat to any Internet web site or enterprise that depends on advertising supported search revenues. It isn't the web site operator who usually is the perpetrator of click fraud. Usually, they are the victim, along with the advertisers.
According to an article in the Washington Post this week, "The two most prevalent types of fraud are competitive sabotage -- rivals clicking to drive up ad costs for competitors -- and affiliate spam -- affiliates clicking on ads appearing on their own sites to boost their share of ad revenue from Google or Yahoo."
The Post article also notes, "Cynics fear that the search engines are too afraid of how much revenue they might lose to truly commit to fighting click fraud."
The problem has gotten so bad, and click fraud may be more prevelant than admitted by search engine giants like Google or Yahoo, that some analysts are concerned it could burst the current Internet boom like a birthday party balloon. If advertising click through rates cannot be trusted, then advertisers will either stop using Internet search as a medium or the market will shrink to those very large advertisers who have the resources to police their own click through rates. Either way the volume of Internet advertising, and the content that is supported by it, could shrink dramatically over a very short period. It won't take much for all the small 'mom-an-pop' advertisers in the so-caled "long tail" to turn tail and run away from having anything to do with Internet advertising.
Further, online content providers who previously relied on Internet advertising will either shift to a subscription business model (prepaid or pay-as-you go) or go out of business. If you think there is a "digital divide" now, just wait until free Internet web sites roll up their virtual sidewalks and ask for a cover charge at the door before you login.
Things that Go Bump in the Night
What does this mean for Opera? It certainly is something that likely keeps the the firm's top executives awake at night. Why? The reason is Opera changed revenue models in Fall 2005. It dropped licensing fees for the Opera desktop and shifted gears to gain revenues from click through advertising based on online search agreements with Google, Amazon, and others. Opera renegotiated its search as revenue contract with Google and dropped banner ads supporting the desktop browser. Browser searches now default to Google search where Opera is paid with a higher AdWords revenue share than before.
Opera's "mini software for mobile devices has a similar revenue producing deal with Google. Google supplies the default search function for Opera Software's mobile browser software.
The very real threat to Opera is that click fraud could undercut critical revenues for the firm. With total revenues of just $23M in 2005 Opera cannot afford to see its search revenue returns sliced and diced by scam artists. Opera isn't alone in this boat. Mozilla's Firefox, which reportedly had $70M in search advertising revenues in 2005 faces a similar threat. While the two organization are competitors for search revenues, they have in common a heavy reliance on Google, Amazon, and other search giants for click through rates.
Is Google's Success Threatened by Click Fraud?
This isn't a problem that Opera can solve by itself. Opera relies on Goolge for revenues and that's where the problem really lives. First of all, Google, which denied at its annual meeting earlier this month that click faud was a problem, needs to get its head out of the sand and address the problem head on. BusinessWeek ripped Google for not doing enough to stop the problem. A very real threat is that Wall Street analysts might take a second look at Goolge's stock price if they believe revenues are undercut by click fraud.
It is understandable why Google sought to minimize the problem at its annual meeting. Click fraud is the monster under the bed, the boogie man in the closet, and very much the firm's worst nightmare. The issue is how much of Google's $6B in search revenues comes from click fraud. Google has a lot more to lose than Opera, but then the entire Internet has a lot to lose if Google's success turns out to be built on a house of cards. This is a case where the players need to get their act together and solve the problem.
Here's the rest of the story . . .
&*&*&*
In Game of Click and Mouse, Advertisers Come Up Empty
By Leslie Walker
Washington Post
Thursday, March 16, 2006; Page D01
. . . click fraud may be far more common than search engines are willing to admit. Over the past year, click fraud has mushroomed into a problem so thorny that some analysts fear that it could bring the high-flying Internet economy to its knees.
[snip]
If revenue from paid links suddenly were to shrink or dry up, you could kiss a lot of Web sites goodbye.
Google has repeatedly pooh-poohed click fraud, contending that it is a minor annoyance that it has under control with automated detection technology. At a meeting with analysts two weeks ago, chief executive Eric Schmidt said click fraud "is not a material issue." Co-founder Sergey Brin said such cases amount to "a small fraction" of Google's ad clicks.
But six days later, Google surprised analysts when it agreed to settle an Arkansas class-action lawsuit by setting aside $90 million worth of ad credits to advertisers that can show invalid click charges dating to 2002.
[snip]
Some analysts worry that Google is rushing to establish a legal precedent that could undermine a more serious click-fraud suit pending in federal court in California. That suit, which alleges that Google knows that click fraud is rampant and has not taken significant steps to prevent it, will be considered for class-action status at a hearing in May.
[snip]
For $29 or so, anyone can buy fake traffic generator software such as Smart HitBot, Fake Hits Genie and Fakezilla, programs that can send bogus traffic to any Web page or ad.
But click-fraudsters have to watch out because more and more electronic sleuths are trying to catch them. Start-ups with names like Click Tracy, Click Detective and WhosClickingWho analyze traffic and tell advertisers about suspicious activity, such as a surfer in Malaysia repeatedly clicking on ads for a dentist in Baltimore.
Established Web analytic firms are adding fraud-detection capabilities, too. ClickTracks, for example, recently started a service that analyzes 20 variables surrounding each click and compares them with historical data to determine which are legitimate.
Jessie Stricchiola, president of Internet ad consultancy Alchemist Media Inc., said the big stumbling block that search engines face in combating fraud is lack of access to evidence that could prove it -- namely, what customers do after clicking on ads. Bogus visitors almost never buy anything, while a certain percentage of legitimate customers do. Advertisers, however, are reluctant to share sales data with the search engines.
Stricchiola is pushing for standards in Internet ad auditing. She recently teamed with Fair Isaac Corp. to study whether its formulas for detecting credit card fraud might help identify click-fraud.
