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False Ad Clicks Cost Google 1 Billion Dollars A Year

Zonk posted more than 7 years ago | from the heaping-helping-of-fraud dept.

Google 233

Meshach writes "There is an interesting story at CBC which claims that Google loses one billion dollars per year to fraudulent ad clicks. The article contains an interesting description how how the company determines if a click is false. 'The company explained that it determines which clicks are invalid through a three-stage system. Most of the illegitimate clicks are automatically detected analyzed and filtered out in the first stage ... The second part uses automatic and manual analysis of the AdSense network to weed out false clicks before they are logged to an advertiser's account.'"

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Ledgerlines (2, Interesting)

suso (153703) | more than 7 years ago | (#20661149)

See, it all works out because they make it up from the interest on the money that they don't have to pay out to adwords accounts that aren't over $100 [roughtype.com] . Kinda like how a bank makes money.

Actually there was some other article I read recently about how much Google probably makes off of that, but I can't find it now.

Re:Ledgerlines (4, Insightful)

moderatorrater (1095745) | more than 7 years ago | (#20661231)

Assuming that each account has $99.99, and that Google can get a 10% interest rate with that money (they may have to pay out on it, after all, so they've got to keep it close to liquid), it would require 100 million such accounts. Somehow, I'm doubting that they make that much off of it.

Re:Ledgerlines (2, Funny)

Professor_UNIX (867045) | more than 7 years ago | (#20661317)

it would require 100 million such accounts. Somehow, I'm doubting that they make that much off of it.
Did you see Office Space or Superman 3? Yeah, it's like that. They take all the fractions of a cent and keep it for themselves.

Re:Ledgerlines (2, Interesting)

Rolgar (556636) | more than 7 years ago | (#20661621)

Banks only have to keep 10-12% of the funds available for withdrawal. The rest is invested/loaned out to make money.

Re:Ledgerlines (4, Insightful)

ajs (35943) | more than 7 years ago | (#20661403)

I'm often confused by why people think that there's some mystery cash floating around in Google's (or any other online advertiser's) pocket. There's an obvious need, when payments are tiny, to limit the frequency of transactions so that aggregation can happen. However, it's not like your Google AdSense account is a money market account with cash sitting in it, gathering interest. Google simply has a line-item in their budget for payables that cannot be issued yet because the transaction fees on cutting someone a check for $0.03 cost them more than the payment itself.

Re:Ledgerlines (-1)

afabbro (33948) | more than 7 years ago | (#20661973)

There's an obvious need,

Yes, it's called Google's profit. Why that should be of interest to anyone else, including their advertising customers, is not obvious.

Re:Ledgerlines (1)

ichigo 2.0 (900288) | more than 7 years ago | (#20661669)

No, banks make money by lending out more money than they have.

Well, that's what you get... (1)

Mr_eX9 (800448) | more than 7 years ago | (#20661181)

This comes with the territory of running an internet advertising service. Between accidental clicks and sites which 'farm' ad revenue, you stand to lose a chunk of money.

Upside down logic (5, Insightful)

Anonymous Coward | more than 7 years ago | (#20661215)

It's more like $1B dollars in fraud is not passed on to the advertiser. Many billions more probably are. Google isn't losing a thing.

Sure they are! (2, Funny)

Anonymous Coward | more than 7 years ago | (#20661369)

In the same way that the RIAA is losing quadrillions of dollars to music piracy.

Re:Upside down logic (3, Funny)

Original Replica (908688) | more than 7 years ago | (#20661717)

Yeah, I don't think Google is hurting for $$$ right now. One share is $535.27. http://www.googlestockquote.com/ [googlestockquote.com] I don't think they are actually hemoraging a billion a year, it's more like they are wishing all of those clicks were valid so they would have a billion more in profit. Well in that case, I lost $250,000,000 last week because of a faulty QuickPick in the Lotto.

Re:Upside down logic (4, Insightful)

vrtladept (674792) | more than 7 years ago | (#20661801)


Honestly I don't understand how they "loose" 1 Billion in ad revenue due to fraudulent clicks. In fact they don't loose anything. If the clicks were a fraud, then they weren't earned. This is the same kind of funny logic that is used to say that piracy costs billions. There some weird assumption that if this fraud click didn't happen that a legitimate click would happen. In a world with no scarcity ("selling" a click does not prevent selling another click). There is no loss due to clicks that shouldn't count.

Re:Upside down logic (1)

j79zlr (930600) | more than 7 years ago | (#20662165)

Actually since Google makes a profit on each click, it actually earns them money, not cost them money. In my fictitious example, as I know it, Google pays me as an adsense displaying webmaster $0.25 per click I generate from my site, and charges the advertiser $0.30 for that click. They then pocket the difference. Why would Google care if the clicks are fraudulent? Unless of course they are claiming that advertisers are leaving at the rate of $1 billion per year, which may be the case since I didn't RTFA.

Bad math, bad logic. (5, Insightful)

JoelKatz (46478) | more than 7 years ago | (#20661221)

The logic behind this story is bogus. The $1 billion in money that these fraudulent clicks cost Google doesn't exist. If not for the bogus clicks, these clicks wouldn't exist.

It's like a software company claiming that false orders cost them $10 billion dollars last year because they received an bogus order for 100,000,000 copies of a $100 product. Had they not received the bogus order, they would not be $10 billion richer.


Re:Bad math, bad logic. (1)

p0tat03 (985078) | more than 7 years ago | (#20661261)

Who says they're not doing an analysis of caught vs. un-caught fraudulent clicks? If they have a decently accurate percentage figure for fake clicks that manage to pass their system, then that IS money lost, since it WAS paid out.

Re:Bad math, bad logic. (1)

rbanffy (584143) | more than 7 years ago | (#20661383)

"If they have a decently accurate percentage figure for fake clicks that manage to pass their system" then it's because they have a way to detect them.

It they can't detect them, this number is, at best, a guess.

Re:Bad math, bad logic. (2, Insightful)

p0tat03 (985078) | more than 7 years ago | (#20661477)

A cost-effective system might not be able to detect them, but there are ways to get a good idea about where this number may lie. 100% human-powered filtering of random clicksets? That would catch almost all fraudulent clicks, but be horrifyingly expensive to implement across the board, but by comparing results from a random human test to the machine system you can get some idea of how many you miss in the automated method.

This is also how we figure out QA numbers in manufacturing - not every bad device that goes out will be reported for warranty or otherwise exposed, so there are alternate ways to derive a good quality index out of mfg'ed goods.

Re:Bad math, bad logic. (2, Interesting)

JoelKatz (46478) | more than 7 years ago | (#20662021)

This is a nonsensical argument.

For example suppose they can afford to audit a random 1% of clicks they detect are bogus and 1% of clicks they detect are legitimate. Assume 1% is statistically significant. They can compute with known accuracy how many clicks fall into each of these categories:
1) Legitimate clicks detected as legitimate.
2) Bogus clicks detected as bogus.
3) Legitimate clicks detected as bogus.
4) Bogus clicks detected as legitimate.

Type 1 clicks, obviously, are great. Type 2 clicks don't harm Google significantly. Type 3 clicks are the big problem for Google as these result in lost revenue. Type 4 clicks result in income for Google but harm their reputation. Ultimately, this might be reflected in lower ad rates or fewer customers.

But your basic argument is flawed. They may be able to detect bogus clicks very reliable with a method that's impractical for use on a high percentage of clicks.

Re:Bad math, bad logic. (1, Insightful)

Anonymous Coward | more than 7 years ago | (#20661575)

But fake clicks that pass through the system are paid out by the advertiser, not Google.

Google does not charge its advertisers for clicks it determines to be invalid. For example, if 10 out of 100 clicks were excluded Google would not charge its advertisers for the invalid clicks, cutting into the company's revenue.

So what they are saying is that if it is an invalid click, they don't charge the AdWord owner. Right, that makes sense. Because of this they somehow lose money. Why, because they still pay the person who is displaying the advertisement? Nope, that's not the case. Infact, the persons AdSense account where the fraudulent clicks are coming from is banned.

So is it the bandwidth and processing power that incurs this hefty bill? I doubt. I can understand that the manual analysis they talk about in TFA could add to the bill, but 1 billion dollars.

To me, acting much like Dr. Evil, they decided to say 1 billion dollars because it sounded good.

Re:Bad math, bad logic. (5, Insightful)

karmatic (776420) | more than 7 years ago | (#20661577)

Actually, paid out, or not, makes no difference. Either way, it doesn't cost Google anything.

Let's take a look - clicks are either legit, or aren't.

Legit Click - Money comes from publisher (not Google), and Google gets a cut.
Bogus Click, Caught - No money changes hands. Without said bogus click, Google makes exactly the same amount of money.
Bogus Click, Not Caught - Money comes from publisher (not Google), and Google gets a cut (profit).

If you look the scenarios, the only for Google to "lose" money is to mis-detect a legit click as fraudulant, as the publisher gets a legit click for free. Google, of course, minimizes this likelihood, and makes sure it's more likely to have false negatives than false positives (I spend enough on Google, and do my own metrics to know this is the case).

Fraud costs _publishers_ money; it _makes_ Google money (up until the point when advertisers start jumping ship).

Re:Bad math, bad logic. (4, Insightful)

catbutt (469582) | more than 7 years ago | (#20661815)

I think you are failing to factor in that the amount google makes on ads is determined by the market rate. And the market rate takes into account whether or not the clicks are real or not, since if it doesn't produce sales equal to the amount they pay for the advertising, people won't pay for it, and the price therefore adjusts downward. Google doesn't necessarily make more or less money because of false clicks, they just are paid less per click, but there are more clicks.

You say "up to the point where advertisers start jumping ship". They don't "jump ship" per se, they just pay less.

Re:Bad math, bad logic. (1)

Ajehals (947354) | more than 7 years ago | (#20661803)

If so it would also mean that they charged advertisers for them, so they still aren't losing* anything.

*That's the apparently similar to "loosing" in case anyone is confused... :)

Re:Bad math, bad logic. (1)

penp (1072374) | more than 7 years ago | (#20661283)

Isn't that the same logic the RIAA uses?

"Hey, you didn't pay me the $15 bloated price for that CD of music you downloaded. Sure, you thought it was crappy and never listen to it anymore anyway, but I want my $15!"

Re:Bad math, bad logic. (1)

Otter (3800) | more than 7 years ago | (#20661497)

It's much more ridiculous than that. People who warez music and movies (because, as you say, they suck and that's why it's so important to steal them!) are at least substituting for *some* purchases. No clickfraudster would be clicking on ads manually if he had gone into another line of work instead.

What really sucks... (1)

Infonaut (96956) | more than 7 years ago | (#20661295)

... is that mainstream news outlets have become so completely brainless as to parrot statements like the ones in this story. Then they wonder why people are seeking alternative sources of information.

The logic behind this story is bogus. The $1 billion in money that these fraudulent clicks cost Google doesn't exist. If not for the bogus clicks, these clicks wouldn't exist.

Re:Bad math, bad logic. (1)

ortcutt (711694) | more than 7 years ago | (#20661321)

How dumb are reporters these days? Seriously, I fear for the future of the journalism. Also, whoever at Google is making claims like this should be fired for sheer stupidity.

Re:Bad math, bad logic. (1)

Kingrames (858416) | more than 7 years ago | (#20661339)

could be worse.

I'd hate to see a billion fraudulent chicks. ...except maybe on easter.

Re:Bad math, bad logic. (2, Informative)

daeg (828071) | more than 7 years ago | (#20661353)

Google could charge for the clicks. Then they'd make that $1 billion back.

However, they'd also stand to lose a lot of customers. Our AdWords bill is high enough for a small company, paying extra hundreds or thousands a year for fraudulent, worthless clicks would scare me the hell away from AdWords.

Much of AdWords' value to Google is in keeping a high number of subscribers to keep the bid prices up relatively high on popular keywords. Losing popular subscribers could send prices down, costing them even more money than from losing an individual customer.

Re:Bad math, bad logic. (3, Interesting)

bcc123 (550310) | more than 7 years ago | (#20661445)

ROFL. I don't see why the point of the article is so hard to grasp, but here is the explanation of the logic:

Google discards those clicks voluntarily. If they hadn't, they could be charging the advertisers for each such click, and would be making more money.

The logic is not bogus.

Re:Bad math, bad logic. (1)

cowscows (103644) | more than 7 years ago | (#20661689)

And that would drive the advertisers away, because nobody wants to pay for those fake clicks.

If you look at it a very specific way, you can frame the discussion so that it looks like it's costing google a billion dollars. But it's not really a meaningful or useful number, except that Google can say to potential advertising clients, "hey look how honest we are, you should use our advertising service."

Re:Bad math, bad logic. (1)

JoelKatz (46478) | more than 7 years ago | (#20662057)

"Google discards those clicks voluntarily. If they hadn't, they could be charging the advertisers for each such click, and would be making more money."

So, is Google stupid? No, of course not.

They are smart enough to know that if they charged for clicks they know are bogus, they would make *less* money. They'd have to charge less per ad, they'd lose customers, and so on.

These bogus clicks ARE NOT opportunities to make money. They're simply bogus.

There is no scenario where Google could convert these into revenue.

If you lose $1 billion due to something, that would have to mean that if not for that something, you'd make $1 billion more. If not for these fraudulent clicks, Google would make the same amount.

Yes, *IF* those fraudulent clicks were legitimate, Google would make $1 billion more. But they're simply aren't that many legitimate clicks, and that's not because of the fraudulent ones.

Re:Bad math, bad logic. (2, Interesting)

Anonymous Coward | more than 7 years ago | (#20661485)

The $1 billion does exist. Remember the order didn't come from the people clicking (who have no money) but from the advertizers (who do). But it's not fradulent clicks that cost google the money, it's their own identification of these fraudulent clicks. The statement by google is accurate:

"every percentage point of invalid clicks we throw out represents over $100 million [US per] year in potential revenue foregone,"

It is "potential revenue" because if they hadn't done the analysis, they could have charged advertizers an extra $1+ billion dollars. The + is for whatever extra money went to the website owners (zero if they weren't paid for the false clicks, + if they were). By detecting the false clicks, google quite directly makes less revenue than if they didn't detect the false clicks. Of course the problem is that advertizers won't renew the contract if google advertizing is ineffective, or if they feel cheated. So Google is saying "we could have made $1 billion more dollars, but we are good and threw out the bad clicks instead".

The interpretation by the writer is bogus as you say. The false clicks themselves only cost google extra work money, and whatever their reliable image is worth.

Re:Bad math, bad logic. (1)

DragonWriter (970822) | more than 7 years ago | (#20661647)

The $1 billion in money that these fraudulent clicks cost Google doesn't exist.

Yes, it does. It exists and remains in the hands of Google's advertisers who, if Google didn't work as hard as it does to identify fraudulent clicks, would be charged that amount.

Now, really, this doesn't mean Google is "losing" money, it means Google is spending money (both in terms of staff time and resources, and in terms of reduced effective advertising charges) to provide quality service (i.e., only charging for the meaningful clicks that advertisers are looking to get) to their paying customers.

Dont bother with TFA. The summary says it all. (2)

Aranykai (1053846) | more than 7 years ago | (#20661229)

Stupid articles that dont contain any actual information. Got me all excited to know how google filters the false clicks.

Doomed to repeat it (0)

Anonymous Coward | more than 7 years ago | (#20661239)

They learned nothing from the failed business model based on Internet ads before the dotcom bust. It's simply not a solid model to base one's business on.

Give it up. No one wants to deal with online ads.

Ads (5, Insightful)

Threni (635302) | more than 7 years ago | (#20661241)

I've been on the net for about 11 years now, and I've not one single time ever deliberately clicked on an ad because it was interesting. I've clicked on accident; I've clicked to allow a download to proceed, or to get a limited time pass to an otherwise charged-for service/site, and I've clicked just for a laugh to fool people into thinking I give a shit, but the day I start to get interested in and buy products based on commercials (online or elsewhere) instead of reading reviews, comparing alternatives and talking to friends/family who've bought something is the day you can take my brain out and give it to someone else.

Re:Ads (1)

Kingrames (858416) | more than 7 years ago | (#20661359)

"but the day I start to..."

*pulls out circular saw*

You didn't ACTUALLY specify that your brain could be removed only after said action. >:D

Re:Ads (3, Informative)

CrazyJim1 (809850) | more than 7 years ago | (#20661437)

You didn't ACTUALLY specify that your brain could be removed only after said action.

He has the special power of immunity to advertising. Sylar will be around to collect his brain soon enough.

Re:Ads (4, Insightful)

sampson7 (536545) | more than 7 years ago | (#20661469)

This is cruel.

My family runs a small business, http://www.beadstore.com./ [www.beadstore.com] We are not Apple or Microsoft. We do not gross anywhere near a million dollars a year. Each time you click on one of our ads you take somewhere between 5 cents to $1.00 directly out of our pocket.

Now we try to target our ads only to those who care about beads and jewelry and such -- but our ads sometimes display for completely random searches.

What on earth is possibly wrong with buying something off the internet? A Google search for "African King Beads" (including the quotes) and my store is the first hit.

I also happen to know many of the merchants listed on the right advertising for those key words; after all, the high end collectible bead family is relatively small. I would *never* click on one of their ads, because I know it costs them money every time I do. If I wouldn't do this to my competitors, why would you do it to a random stranger?

Re:Ads (1)

jombeewoof (1107009) | more than 7 years ago | (#20661777)

If I wouldn't do this to my competitors, why would you do it to a random stranger?
You seem like a relatively decent and honest person. Others, not quite so much.

consider this scenario
If I were to say pay someone $25 a day in cash to spend 3 hours "clicking ads" I could probably force a small company like yours out of business in just a few short weeks.
Build a small business out of this process, charging local small companies to sabotage their competitors, and have someone in a small country where $25 is a fairly large amount of money and you have a fairly decent reason why.

As a businessman, you cannot assume the other guy is as honest as you are, and I would expect something like this process goes on thousands of times a day throughout the world.
You have to decide if the advertisement is worth what you are paying.

It might not be the most honest business in the world, but I can think of other even worse things people are making money on, so I seriously doubt that it is not happening.

Re:Ads (1)

Larry Lightbulb (781175) | more than 7 years ago | (#20662041)

It's such a common thing that there's even parody sites such as http://www.clickmonkeys.com/ [clickmonkeys.com] about it.

Re:Ads (1)

Jarjarthejedi (996957) | more than 7 years ago | (#20661837)

The GP doesn't imply that anything is wrong with buying off the internet, he implies that buying based on ads is something stupid that he wouldn't do. Personally I agree with him on that, I'm one of the people unaffected by advertisements and so no matter how good an company or product is I'm not going to buy it based on an ad. I've only gotten interested in probably 10 products thanks to ads and I've only bought 1 item that I can remember where I originally heard of it from an ad (a christmas gift for someones).

Now, I don't agree with the whole 'click on random ads for no reason' thing. I'm not sure but I doubt the GP agrees with it either (I get the impression he does it once in a Blue Moon). I do, however, agree with the whole 'Click on ads from big name companies on sites you enjoy but whose sole source of income is advertising with no intent of purchasing'. While I wouldn't click on an ad for your company, as it would neither be featured on any of my favorite sites (no offense of course, most of my favorite sites are webcomics and I've never heard of a webcomic whose subject matter is remotely related to beads) nor is it a big name, I have been known to click on Ford, GM, Sony (*shivers involuntarily*) and other big name companies ads, then immediately close the link, just so my favorite website gets a buck. Is that right? Who knows, it has a benefit (comic artist gets payed) and a penalty (big name company loses money). Whether the good outweights the bad, visa versa, or some other combination applies is up to someone else.

I only click on ads when I know that the penalty for the company will be tiny (a dollar or 10 out of GM's wallet isn't going to bankrupt them) and the advantage for the advertiser great (they get paid).

Is that an ethical argument for ad blocking? (5, Funny)

lennier (44736) | more than 7 years ago | (#20661937)

I guess it never crossed my mind that by clicking on a banner ad I'd be causing economic harm. I thought the ad economy these days was all based on impressions, not clickthroughs.

Makes me want to protect the little guy by filtering out all ads before they display in my browser, just to be on the safe side. Don't want to hurt anyone by accidentally clicking... :)

Re:Ads (-1, Troll)

glwtta (532858) | more than 7 years ago | (#20661959)

Gee, I sure hope you get to plug your fucking bead store a couple more times in this thread.

Re:Ads (0)

Anonymous Coward | more than 7 years ago | (#20662065)

As one website owner once put it. "I know the advertisement linking to a paper on how D&D is devil worship is annoying. And while I could get rid of it, look at it this way, every time you click on it, they have to pay me money."

Re:Ads (1)

LizzyDragon (740435) | more than 7 years ago | (#20662143)

Forgive me if this sounds like an ignorant comment, but wouldn't be possible to set some kind of limit on the banner ads. That is, tell Google that you're willing to pay up to a total of $X per month for clicks. Once that limit is hit, Google wouldn't run any more ads for the store until the next month or you increase the limit. If it's not possible to do this, it might not be a bad idea to suggest to Google.

Re:Ads (1)

Solder Fumes (797270) | more than 7 years ago | (#20662191)

That's pretty much the way Google has done it since day one.

Re:Ads (1)

lena_10326 (1100441) | more than 7 years ago | (#20661481)

I've been on the net for about 11 years now, and I've not one single time ever deliberately clicked on an ad because it was interesting
New computer users click on ads (as well as everything else on the screen). You have simply learned to ignore them. New users have not, which is why google makes money.

Re:Ads (-1, Troll)

Anonymous Coward | more than 7 years ago | (#20661491)

It's by accident, not on. You clicked by accident.

Re:Ads (2, Insightful)

swv3752 (187722) | more than 7 years ago | (#20661521)

I have clicked on adds to buy a product, but it was for products I was looking to buy anyways. I figure i can help support a site without costing me anything extra.

Who makes a higher quality car? (0)

Anonymous Coward | more than 7 years ago | (#20661571)

BMW or Toyota? Thanks to ads, most will say BMW even if they've never owned either. Having owned both, I can safely say it's the Toyota. BMWs stay in the shop more than they stay in your garage. They are expensive as hell to fix too. Toyotas are reliable and parts are cheap on the rare occasion that you need them. It's much easier to get laid driving a BMW though... shallow hoes.

Yes, but remember... (1)

gillbates (106458) | more than 7 years ago | (#20661597)

There are people on the net dumb enough to believe a distant, heretofore unknown relative needs their services to get a few million dollars out of their African country. And there are enough of them for this kind of fraud to cost Americans millions of dollars a year.

I'm not at all surprised.

Re:Ads (1)

pembo13 (770295) | more than 7 years ago | (#20661625)

Before Google Ads, I could have probably said the same, but I have come across some click worthy Google ads.

Re:Ads (1)

nscheffey (1158691) | more than 7 years ago | (#20661629)

So if I want to buy something, and I google the product and click a sponsored link, I'm an idiot? Chill out man.

Re:Ads (1)

cowscows (103644) | more than 7 years ago | (#20661633)

I wouldn't say that I'm particularly susceptible to being manipulated by advertisements, but even for someone like me who mostly ignores them, I would say that they manage to sometimes make me aware of products that I wouldn't otherwise know about.

But it's all about the venue and the relevance of the ad. The ads on Penny Arcade's website have showed me new games that I ended up spending some money on. The guys that run PA have said that they only accept advertisements for games that they think are of reasonable quality, and I believe them.

Other times, I've seen an ad that refers to something that I've been considering buying, and I've clicked on that ad as part of the product research that you mentioned. I've yet to see a banner ad that made me jump up and pull out my credit card, but an advertisement piquing your interest does not automatically make you a fool or a sheep.

Get the site kicked out of AdSense. (1)

MikeFM (12491) | more than 7 years ago | (#20661741)

One thing Google is bad about is they'll kick a site out of AdSense, with no way to appeal, if users come to your site and start making a lot of fraudulent ad clicks. You can effectively put a small site out of business doing this and Google doesn't even give a damn. They don't just not pay you for the clicks - they won't allow you to ever get paid for the clicks again. It really sucks too sense Google has kind of cornered the market so there are a lot fewer good options for earning ad revenue on your website than there used to be.

I like Google but I do think they are getting close to being a monopoly in advertising. They need to be careful they avoid being evil.

Re:Ads (0)

Anonymous Coward | more than 7 years ago | (#20661871)

I totally agree with you. I've been on the net for at least as long as you, and I rarely if ever click on ads. I rarely even READ them. I will admit I've clicked on them from time to time, but most of the time I find something interesting, I will copy the link and remove the referral crap, and just get to my site, without the site being charged for it. I'm running a website that is getting increasingly popular and our ad clicks are insanely high. I have no idea why people would click any of them but sure I'll take the extra pocket change. I honestly feel Google doesn't pay enough for what advertisers do. I want to be paid for views, and paid more for clicks than I already am.

I've bought one product off a banner ad (1)

lennier (44736) | more than 7 years ago | (#20661877)

Moonpod's "Starscape", saw in a /. banner ad, downloaded the demo, liked it, registered the full version, and I was very happy with it.

Also my current web host I found from a Google sponsored link. Sponsored links are useful when you're shopping, a bit like classified ads.

I've *clicked* on a fair few banner ads, mostly to find out what they are. But my clicks don't generally translate into intent to purchase.

Re:Ads (1)

Larry Lightbulb (781175) | more than 7 years ago | (#20662005)

I've clicked on plenty of ads, usually to read information.

Re:Ads (1)

KiloByte (825081) | more than 7 years ago | (#20662085)

It's worse than you think. I conslut sometimes for a couple of small ISPs, and when I take a look at their squid logs, I see that 1/3 of all freaking http requests are for ads. And don't forget that bandwidth is precious, same for screen real estate and human attention.

You may reply "but the ISP is paid for that anyway". Yes, but they have to deliver less real content for the same money while incurring more costs. So who loses? Customers and ISPs. Who wins? Advertisers. Guess where my sympathy is.

"False ad clicks" may cost Google 1 billion dollars a year, but ads in general cost the society at large many trillions dollars.

What the journalist really meant... (-1, Redundant)

Anonymous Coward | more than 7 years ago | (#20661249)

If those invalid clicks really counted, they would have brought in a big amount of money.
But since these are invalid clicks, then effectively no money was lost.

Great job Lou...

thats a change (0)

Anonymous Coward | more than 7 years ago | (#20661253)

googles ads being abused by false clicks is hardly new, although when i first heard of it google was actually benefitting from it and the compagnies advertising with google were the ones getting duped.

RIAA math is being used (4, Funny)

El_Smack (267329) | more than 7 years ago | (#20661257)

From TFA "Google does not charge its advertisers for clicks it determines to be invalid. For example, if 10 out of 100 clicks were excluded Google would not charge its advertisers for the invalid clicks, cutting into the company's revenue."

Someone is counting invalid clicks as lost revenue, rather than counting them as, well... invalid? Who at the Googleplex used to work in the music/movie industry?

Actually even worse... (2, Insightful)

moosehooey (953907) | more than 7 years ago | (#20661833)

This is actually even worse. It could be argued that someone might buy a CD or a movie if they were unable to pirate it. But, you can't say that google would get more legitimate clicks if they could eliminate the fake ones.

Re:Actually even worse... (2, Insightful)

DragonWriter (970822) | more than 7 years ago | (#20661899)

But, you can't say that google would get more legitimate clicks if they could eliminate the fake ones.

You could say Google would charge advertisers more in total, given its rates, if it didn't detect as many of the fake ones, though.

Re:RIAA math is being used (1)

tgatliff (311583) | more than 7 years ago | (#20661897)

Well they could have also worked for the BSA... You know, the "Bogus Statistics Association"...

Google does not "lose" 1 Billion per year (4, Interesting)

VidEdit (703021) | more than 7 years ago | (#20661263)

Google doesn't get to charge for fraudulent clicks. That isn't the same as "loosing" $1,000,000,000.

Google isn't out any cash for the fraud, it is people who **buy** Google ads and pay per click who potentially loose money to fraudulent clicks, not Google. And there no way that Google can catch all click fraud, so it is **inevitable** that at least some advertisers will be charged for fraudulent clicks.

Nice post. Way to make Google look like the victim when they aren't the ones who actually pay for fraudulent clicks.

I, for one (-1, Offtopic)

Anonymous Coward | more than 7 years ago | (#20661279)

In Soviet Russia, the ads click on you!

I, for one, welcome our ad clicking overlords.

Lost money? (1)

cortesoft (1150075) | more than 7 years ago | (#20661305)

Saying that Google loses 1 Billion dollars a year is a little misleading. They didn't lose the money; they never were supposed to have it in the first place. From the article, it seems that it is more like the fraudulent clicks add up to 1 Billion dollars worth a year, but no one 'loses' that money. They don't pay it to the websites that generate the false clicks, nor do they charge advertisers for it (at least the ones they detect, which seems to be where they are calculating the 1 billion dollars from). It is silly to say that the amount of money generated from those clicks is money to lose; it is money they never earned in the first place. If there were no fraudulent clicks, that billion dollars wouldn't suddenly be in Google's pockets. It is more accurate to say that if they charged advertisers for illegitimate clicks, they could make a billion dollars more.

How much in USD? (5, Funny)

bidule (173941) | more than 7 years ago | (#20661307)

What is the exchange rate from RIAA dollars to USD? Because it seems they are using the same monetary units.

Re:How much in USD? (1)

ceoyoyo (59147) | more than 7 years ago | (#20661581)

I believe the numeral zero features prominently in that number. In fact, I think you can express it using only zeros.

Click fraud isn't costing Google $1B (2, Insightful)

MacDork (560499) | more than 7 years ago | (#20661313)

Click fraud is only inflating the number of clicks made by $1B. Roughly 10% according to the article. Sounds suspiciously low to me. Spam certainly comprises greater than 10% of all email sent, why are click fraud rates so low?

There's definitely some problems... (2, Informative)

Creamsickle (792801) | more than 7 years ago | (#20661327)

The small company I work for has about $1M in sales annually, and we spend almost $250,000 a year on Google Adwords. Roughly 85% of our sales come from Google. We're getting a conversion rate that is less then one percent and it's gotten worse over time. If it continues to drop, we'll have no choice but reduce our adwords cost-per-click limit and take our advertising dollars elsewhere. No matter how you spell it, that means problems for the G00Gmeister.

Re:There's definitely some problems... (1)

MikeDataLink (536925) | more than 7 years ago | (#20661599)

What company do you work for? I'd like to visit their site.

What kind of company can spend 25% on advertising (0)

Anonymous Coward | more than 7 years ago | (#20661749)

Are you guys selling a virtual product? If not then how do you pay for R&D, salaries, material costs, etc?

Re:There's definitely some problems... (1)

Zerimar (1124785) | more than 7 years ago | (#20661781)

Remember that eBay has also dramatically scaled back their advertising on Google and is still doing very well. Of course, the name recognition for eBay is probably far greater than that of your small company, but it does go to show that there *could* be rough seas ahead for Google.

A Merchant's Perspective & Article Critique. (3, Interesting)

sampson7 (536545) | more than 7 years ago | (#20661329)

Google loses nothing as a result of clicks it determines to be fraudulent, other than its time and a little server space. On the balance sheet, it's simply as if those clicks never happened. No out of pocket expenses are incurred by google. Eliminating every fraudulent click out there would not increase Google's bottom line one iota, other than its incremental costs of dealing with this fraud.

We merchants/advertizers are the ones screwed. Google says that 10 percent of clicks are fraudulent? I have zero idea if this is an over-estimate, under-estimate, or dead-on accurate. However, I do know that google has very little incentive to "mark down" my bill every month. My family runs a small business -- http://www.beadstore.com/ [beadstore.com] -- and sometimes advertise on google. How many of those clicks I pay for each month are fraudulent? Who knows. I certainly can't tell.

This isn't to say that I distrust Google. The fact is, that when we advertise, our sales go up. So something is working. Advertising on Google makes a bigger difference than any of our other venues. But those numbers suggesting that 30 percent of our advertising budget may be/once was/is potentially lost to fraud? That is truly scary.

Re:A Merchant's Perspective & Article Critique (1)

rbanffy (584143) | more than 7 years ago | (#20661431)

OTOH, I still don't know how and why they declared my site had invalid clicks and, because of it, my AdSense account would be terminated.

As far as I know, it could even be a well intentioned friend who liked the articles and clicked on all ads to help me.

Anyway, because of that, Google probably spared its advertisers a couple cents a day.

Re:A Merchant's Perspective & Article Critique (1)

Larry Lightbulb (781175) | more than 7 years ago | (#20661961)

Only a guess, as their methods are secret, but it seems that having a noticable number of addresses always clicking some adverts is a red flag. Of course, if you have a site which has low traffic and a high percentage are repeat visitors, then that's just the sort of clicking you're bound to get.

Re:A Merchant's Perspective & Article Critique (0)

Anonymous Coward | more than 7 years ago | (#20661697)

Income statement, not "balance sheet". Jesus fuck, people, learn what terms mean before incorporating them into posts.

So now you Slashvertise? (0)

Anonymous Coward | more than 7 years ago | (#20662037)

Yeah, but how is that relevant to this story? Now, it appears that you Slashvertise instead of paying Google :-)

Re:A Merchant's Perspective & Article Critique (1)

hoppo (254995) | more than 7 years ago | (#20662099)

You do not get "screwed" by fraudulent clicks by any means. The entire premise of pay-per-click, AdWords, and any other performance-based advertising is that you the advertiser have the information available to you to determine what traffic you receive from the ad system is worth. The amount of "fraud" is irrelevant -- you know what you spend, and you know the return you get from that expenditure. If it makes sense based on your ROI to keep spending, you do so. If not, you cease or alter your advertising. If Google screens out more "fraud," the bids will rise, as each individual click becomes more valuable. If it screens less, bids will drop. The end result will be that your total spend remains constant in either scenario.

Music Industry Math (1)

Frogbert (589961) | more than 7 years ago | (#20661335)

Is this billion dollar loss calculated the same way mp3 downloading costs are?

Founders: Click Fraud Is Google's Greatest Threat (3, Informative)

MichaelCrawford (610140) | more than 7 years ago | (#20661455)

A while back I read that one of Google's founders said that click fraud is the greatest threat to google's business. This is because Black Hats publish websites with AdSense, then fraudulently click the ads on their own pages. They get paid by Google, and the merchants who placed the ads through AdWords Select pay for the fraudulent clicks, but don't enjoy the increased sales that advertising can bring.

a way better system (2, Insightful)

ILuvRamen (1026668) | more than 7 years ago | (#20661465)

My web host has a nearly perfect system. If someone clicks on the "hey, buy a package from my hosting company" link a cookie is generated. If he buys a web package from that computer before that cookie expires in 60 days or whatever, I get $100. That's right $100 in cash, not hosting credit, an actual check for $100. Yeah some people have cookies disabled but there's other methods that would work better. So basically that purchase based system removes 100% of false clicks and still leaves in like 99% of valid customers. Seems fair to me and the people who let the ads on their website stand to make a way bigger amount of money if they bring valid customers cuz it's basically a large commission on sales. The only problem is if the ad company keeps serving up crappy ads for products nobody would ever buy you don't make any money but you wouldn't make very much on that type of ad through clicks either.

Re:a way better system (1)

Larry Lightbulb (781175) | more than 7 years ago | (#20662097)

Google is trying a pay-per-action type of advertising - it's pretty much like Amazon and other affiliates do where the cost is when something is bought.

Wait, if they KNOW they are bogus, why pay? (0)

Anonymous Coward | more than 7 years ago | (#20661513)

If Google can prove they are bogus, why do they waste $1B paying loosers?

And if they can't prove it, how do we know the $1B number isn't made up?

grr (1)

thatskinnyguy (1129515) | more than 7 years ago | (#20661555)

Google loses one billion dollars per year to fraudulent ad clicks.
Sure, make me feel like a criminal for using the back button to get out of somewhere I didn't want to be in the first place!

"loses one billion dollars" (0)

Anonymous Coward | more than 7 years ago | (#20661627)

cost Google 1 Billion Dollars a year
My goodness! And where, pray tell, did those billion dollars go? How were they disbursed? I mean, a billion dollars is a lot of paper. One would think that it would be fairly easy to trace the whereabouts of missing billions... unless... OH MY GOD IS BLACKWATER INVOLVED?

Genius idea, (0, Troll)

tomstdenis (446163) | more than 7 years ago | (#20661683)

Why not just associate ad clicks with google accounts. E.g. I sign in for gmail, then do a google search, see and ad and click on it.

Surely those must count as "real clicks" as oppose to random anonymous clicks. Why not charge more for those?

Oh and feel free to use that idea Google. Just doing my bit.

That's OK! (0)

Anonymous Coward | more than 7 years ago | (#20661791)

They probably gain a billion a year on spotty conversion assignment. Just because a consumer searched Google to find how to buy a product, doesn't mean Google's ad led to that purchase. If you buy search advertising from Google, be aware that their conversion rates are highly inflated.

Walmart loses $XXXX per year on broken merchendise (1)

netsavior (627338) | more than 7 years ago | (#20661839)

Walmart's shelves are too close together so they can fit more stuff in the stores... because of that they deal with a lot of broken merchendise. Does this mean their business model is broken?
no, it just means that their business model plans on some loss.

Er...no (0)

Anonymous Coward | more than 7 years ago | (#20662223)

You're on the exact right notion, but miss the point entirely. In your WalMart example, there's some known expected rate of loss. In online advertising, there's an expected "conversion rate" for people coming through the ad--they know not everyone will buy, but there's a certain percentage they expect will, and that will pay for the ad. The people who don't buy can be likened to broken merchandise--the advertiser incurs a cost but doesn't get a sale. It's loss, and it's expected. And if that was all people were worried about, you'd be right that companies should just factor it in as a "cost of doing business."

But that's not what people see as a problem here. The problem is that, by adding clicks without any intention to buy, someone running a "click fraud" campaign increases the advertiser's costs without increasing their sales. In your example, this would be like a competitor being able to, say, double the rate at which WalMart's stock breaks, and WalMart having no way to stop it. It's not that there IS waste, it's that someone can (at fairly low cost) increase someone else's "waste" by forcing them to pay for advertisements that are shown to no one.

Boo Hoo (0, Troll)

synonymous (707504) | more than 7 years ago | (#20661851)

Sob Sob Hoo.

False Ad Clicks Cost Me $100 A Year (1)

Larry Lightbulb (781175) | more than 7 years ago | (#20661913)

It's not really Google who are losing anything; the losers are the advertisers who pay out for invalid clicks that aren't caught, and the small web sites who get their sites closed because their traffic is anomalous.

Is anything really lost here? (0)

Anonymous Coward | more than 7 years ago | (#20662007)

When the RIAA claims they're losing revenue due to people not buying CDs, everyone calls bullshit, but when someone claims that Google is losing money due to people not clicking on ads legitimately...

Well I'm doing my part to save them money... (1)

sqrt(2) (786011) | more than 7 years ago | (#20662013)

...by not displaying the ads at all! No false clicks from me. Are you guys doing your part too? [customizegoogle.com]

Yeah, it's probably true and it sucks (1)

dbmasters (796248) | more than 7 years ago | (#20662083)

The worst part is for publisher that get their accounts closed for invalid clicks that they didn't do and have no control of. Obviously it's stupid to click on one's own ads, that's a banning waiting to happen, but there have been many cases recently in the AdSense support forum, that some of the more outspoken jackass publishers that actually answer a lot of questions for people have been targeted by people they have helped (and generally offended while doing so) for clickbombing their ads on their sites and results in a banning of their accounts. I watched it happen at least 5 or 6 times in the last month. I used to help at the AdSense support forum, being and active AdSenser myself, but kind of got scared away in fear of myself offending someone with a little honesty and having them clickbomb me.

The sad fact is, AdSense has no real alternative, I have used many systems and none even compare to AdSense in terms of revenue, though many claim to...the AdWords/AdSense system has it's flaws, but it's still the best there is.

The one thing AdSense could do to better their system is do what many ad systems do, have tighter requirements on who they allow to join their network, and approve per domain...not allow one account to add domains at will, but run each domain through an approval process.

Sigh.... (0)

Anonymous Coward | more than 7 years ago | (#20662167)

Your flawed business model being exposed != fraud.

Sorry, you can pay a commission on sales through google referrals. You can simply pay for placement and let the clicks fall where they may. But no. A system has been set up where you've elected to pay by the number of times a certain link is clicked.

Sorry, but if I decide to set up a robot on my home computer that goes to the same URL every minute, that's not fraud. The fact that the owner of the URL has contracted with an advertising provider to pay them every time the URL is accessed isn't my fault, and isn't my problem. "Click fraud" isn't fraud.

Now, it can be reasonably argued that the way google and advertisers business agreements are set up was on the expectation that there was a certain percentage of click throughs that would be "qualified" traffic that will end up buying something. But if that's the case, WRITE IT INTO THE BLOODY CONTRACT! It's not my fault you're paying based on the expectation that one click in 500 will convert, and you're only getting 1 in 1000. Those 999 people aren't comitting fraud. They're just not buying.

And, yes, I know that some companies are exploting these flawed agreements to force their competitors to pay "too much" because they have such "pay by the click" agreements. But the solution is to fix the bloody system, not rail about "click fraud." Sorry, but me going to a website and not buying something isn't fraud. Me going to a site not intending to buy isn't fraud. I suppose it's a waste of resources, but don't come crying about how you're paying someone on the assumption I'd buy something, and I'm not.

I know the "fraudsters" use robots, but that's not convincing either. If your agreement is this easy to exploit, YOU need to fix YOUR AGREEMENT. Don't call it fraud.

Can't see ads (0)

Anonymous Coward | more than 7 years ago | (#20662215)

I would love to click on some Ads to buy useless products but since Adblock Plus is installed on my Ubuntu FF I don't see them anymore and worst of all I surf faster than ever.

Time to go back to IE and Windows.
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